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Advanced Intellectual Property/Cyberlaw

This seminar offers students with an interest in intellectual property and/or cyberlaw the opportunity to explore and research an advanced topic in-depth.

Although the focus of class discussion will be on the effects of new technologies, students may write a research paper on any topic related to intellectual property law or cyberlaw. Class discussion will address the many challenges that the Internet poses for traditional copyright, patent and trademark law as well as other non-intellectual property areas of law associated with the internet.

We will discuss a number of policy questions such as whether new legislation is needed to address rights in digital music and motion pictures, whether patent protection for standards on which the Internet relies is appropriate, and how trademark law should apply to commercial online identity. Either Intellectual Property or Cyberlaw are prerequisites for taking this class.

  • 1 [This resource no longer exists on H2O because its owner deleted it.]

  • 2 Week 2: Secondary Liability

    • 2.1 Metro-Goldwyn-Mayer, Inc. v. Grokster

      1

      545 U.S. 913
      125 S. Ct. 2764
      162 L. Ed. 2d 781

      METRO-GOLDWYN-MAYER STUDIOS INC. ET AL.
      v.
      GROKSTER, LTD., ET AL.

      No. 04-480.
      Supreme Court of United States.
      Argued March 29, 2005.
      Decided June 27, 2005.

      2

      Respondent companies distribute free software that allows computer users to share electronic files through peer-to-peer networks, so called because the computers communicate directly with each other, not through central servers. Although such networks can be used to share any type of digital file, recipients of respondents' software have mostly used them to share copyrighted music and video files without authorization. Seeking damages and an injunction, a group of movie studios and other copyright holders (hereinafter MGM) sued respondents for their users' copyright infringements, alleging that respondents knowingly and intentionally distributed their software to enable users to infringe copyrighted works in violation of the Copyright Act.

      3

      Discovery revealed that billions of files are shared across peer-to-peer networks each month. Respondents are aware that users employ their software primarily to download copyrighted files, although the decentralized networks do not reveal which files are copied, and when. Respondents have sometimes learned about the infringement directly when users have e-mailed questions regarding copyrighted works, and respondents have replied with guidance. Respondents are not merely passive recipients of information about infringement. The record is replete with evidence that when they began to distribute their free software, each of them clearly voiced the objective that recipients use the software to download copyrighted works and took active steps to encourage infringement. After the notorious file-sharing service, Napster, was sued by copyright holders for facilitating copyright infringement, both respondents promoted and marketed themselves as Napster alternatives. They receive no revenue from users, but, instead, generate income by selling advertising space, then streaming the advertising to their users. As the number of users increases, advertising opportunities are worth more. There is no evidence that either respondent made an effort to filter copyrighted material from users' downloads or otherwise to impede the sharing of copyrighted files.

      4

      While acknowledging that respondents' users had directly infringed MGM's copyrights, the District Court nonetheless granted respondents summary judgment as to liability arising from distribution of their software. [545 U.S. 914] The Ninth Circuit affirmed. It read Sony Corp. of America v. Universal City Studios, Inc., 464 U. S. 417, as holding that the distribution of a commercial product capable of substantial noninfringing uses could not give rise to contributory liability for infringement unless the distributor had actual knowledge of specific instances of infringement and failed to act on that knowledge. Because the appeals court found respondents' software to be capable of substantial noninfringing uses and because respondents had no actual knowledge of infringement owing to the software's decentralized architecture, the court held that they were not liable. It also held that they did not materially contribute to their users' infringement because the users themselves searched for, retrieved, and stored the infringing files, with no involvement by respondents beyond providing the software in the first place. Finally, the court held that respondents could not be held liable under a vicarious infringement theory because they did not monitor or control the software's use, had no agreed-upon right or current ability to supervise its use, and had no independent duty to police infringement.

      5

      Held: One who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, going beyond mere distribution with knowledge of third-party action, is liable for the resulting acts of infringement by third parties using the device, regardless of the device's lawful uses. Pp. 928-941.

      6

      (a) The tension between the competing values of supporting creativity through copyright protection and promoting technological innovation by limiting infringement liability is the subject of this case. Despite offsetting considerations, the argument for imposing indirect liability here is powerful, given the number of infringing downloads that occur daily using respondents' software. When a widely shared product is used to commit infringement, it may be impossible to enforce rights in the protected work effectively against all direct infringers, so that the only practical alternative is to go against the device's distributor for secondary liability on a theory of contributory or vicarious infringement. One infringes contributorily by intentionally inducing or encouraging direct infringement, and infringes vicariously by profiting from direct infringement while declining to exercise the right to stop or limit it. Although "[t]he Copyright Act does not expressly render anyone liable for [another's] infringement," Sony, 464 U. S., at 434, these secondary liability doctrines emerged from common law principles and are well established in the law, e. g., id., at 486. Pp. 928-931.

      7

      (b) Sony addressed a claim that secondary liability for infringement can arise from the very distribution of a commercial product. There, [545 U.S. 915] copyright holders sued Sony, the manufacturer of videocassette recorders, claiming that it was contributorily liable for the infringement that occurred when VCR owners taped copyrighted programs. The evidence showed that the VCR's principal use was "time-shifting," i. e., taping a program for later viewing at a more convenient time, which the Court found to be a fair, noninfringing use. 464 U. S., at 423-424. Moreover, there was no evidence that Sony had desired to bring about taping in violation of copyright or taken active steps to increase its profits from unlawful taping. Id., at 438. On those facts, the only conceivable basis for liability was on a theory of contributory infringement through distribution of a product. Id., at 439. Because the VCR was "capable of commercially significant noninfringing uses," the Court held that Sony was not liable. Id., at 442. This theory reflected patent law's traditional staple article of commerce doctrine that distribution of a component of a patented device will not violate the patent if it is suitable for use in other ways. 35 U. S. C. § 271(c). The doctrine absolves the equivocal conduct of selling an item with lawful and unlawful uses and limits liability to instances of more acute fault. In this case, the Ninth Circuit misread Sony to mean that when a product is capable of substantial lawful use, the producer cannot be held contributorily liable for third parties' infringing use of it, even when an actual purpose to cause infringing use is shown, unless the distributors had specific knowledge of infringement at a time when they contributed to the infringement and failed to act upon that information. Sony did not displace other secondary liability theories. Pp. 931-934.

      8

      (c) Nothing in Sony requires courts to ignore evidence of intent to promote infringement if such evidence exists. It was never meant to foreclose rules of fault-based liability derived from the common law. 464 U. S., at 439. Where evidence goes beyond a product's characteristics or the knowledge that it may be put to infringing uses, and shows statements or actions directed to promoting infringement, Sony's staple-article rule will not preclude liability. At common law a copyright or patent defendant who "not only expected but invoked [infringing use] by advertisement" was liable for infringement. Kalem Co. v. Harper Brothers, 222 U. S. 55, 62-63. The rule on inducement of infringement as developed in the early cases is no different today. Evidence of active steps taken to encourage direct infringement, such as advertising an infringing use or instructing how to engage in an infringing use, shows an affirmative intent that the product be used to infringe, and overcomes the law's reluctance to find liability when a defendant merely sells a commercial product suitable for some lawful use. A rule that premises liability on purposeful, culpable expression and conduct [545 U.S. 916] does nothing to compromise legitimate commerce or discourage innovation having a lawful promise. Pp. 934-937.

      9

      (d) On the record presented, respondents' unlawful objective is unmistakable. The classic instance of inducement is by advertisement or solicitation that broadcasts a message designed to stimulate others to commit violations. MGM argues persuasively that such a message is shown here. Three features of the evidence of intent are particularly notable. First, each of the respondents showed itself to be aiming to satisfy a known source of demand for copyright infringement, the market comprising former Napster users. Respondents' efforts to supply services to former Napster users indicate a principal, if not exclusive, intent to bring about infringement. Second, neither respondent attempted to develop filtering tools or other mechanisms to diminish the infringing activity using their software. While the Ninth Circuit treated that failure as irrelevant because respondents lacked an independent duty to monitor their users' activity, this evidence underscores their intentional facilitation of their users' infringement. Third, respondents make money by selling advertising space, then by directing ads to the screens of computers employing their software. The more their software is used, the more ads are sent out and the greater the advertising revenue. Since the extent of the software's use determines the gain to the distributors, the commercial sense of their enterprise turns on high-volume use, which the record shows is infringing. This evidence alone would not justify an inference of unlawful intent, but its import is clear in the entire record's context. Pp. 937-940.

      10

      (e) In addition to intent to bring about infringement and distribution of a device suitable for infringing use, the inducement theory requires evidence of actual infringement by recipients of the device, the software in this case. There is evidence of such infringement on a gigantic scale. Because substantial evidence supports MGM on all elements, summary judgment for respondents was error. On remand, reconsideration of MGM's summary judgment motion will be in order. Pp. 940-941.

      11

      380 F. 3d 1154, vacated and remanded.

      12

      SOUTER, J., delivered the opinion for a unanimous Court. GINSBURG, J., filed a concurring opinion, in which REHNQUIST, C. J., and KENNEDY, J., joined, post, p. 942. BREYER, J., filed a concurring opinion, in which STEVENS and O'CONNOR, JJ., joined, post, p. 949.

      13

      CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

      14

      Donald B. Verrilli, Jr., argued the cause for petitioners. With him on the briefs for the motion picture studio and recording company petitioners were Ian Heath Gershengorn, [545 U.S. 917] William M. Hohengarten, Steven B. Fabrizio, Thomas J. Perrelli, Matthew J. Oppenheim, David E. Kendall, Thomas G. Hentoff, Kenneth W. Starr, Russell J. Frackman, George M. Borkowski, Robert M. Schwartz, Gregory P. Goeckner, Dean C. Garfield, Elaine J. Goldenberg, Matthew Hersh, Steven M. Marks, and Stanley Pierre-Louis. Carey R. Ramos, Peter L. Felcher, Aidan Synnott, Theodore K. Cheng, Kelli L. Sager, Andrew J. Thomas, Jeffrey H. Blum, and Jeffrey L. Fisher filed briefs for the songwriter and music publisher petitioners.

      15

      Acting Solicitor General Clement argued the cause for the United States as amicus curiae urging reversal. With him on the brief were Assistant Attorney General Keisler, Deputy Solicitor General Hungar, Douglas H. Hallward-Driemeier, Anthony A. Yang, David O. Carson, and John M. Whealan.

      16

      Richard G. Taranto argued the cause for respondents. With him on the brief were H. Bartow Farr III, Cindy A. Cohn, Fred Von Lohmann, Michael H. Page, Mark A. Lemley, Charles S. Baker, and Matthew A. Neco.[*]

      17

      [545 U.S. 918] JUSTICE SOUTER delivered the opinion of the Court.

      18

      The question is under what circumstances the distributor of a product capable of both lawful and unlawful use is liable [545 U.S. 919] for acts of copyright infringement by third parties using the product. We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.

      19
      I
      20
      A
      21

      Respondents, Grokster, Ltd., and StreamCast Networks, Inc., defendants in the trial court, distribute free software products that allow computer users to share electronic files through peer-to-peer networks, so called because users' computers communicate directly with each other, not through [545 U.S. 920] central servers. The advantage of peer-to-peer networks over information networks of other types shows up in their substantial and growing popularity. Because they need no central computer server to mediate the exchange of information or files among users, the high-bandwidth communications capacity for a server may be dispensed with, and the need for costly server storage space is eliminated. Since copies of a file (particularly a popular one) are available on many users' computers, file requests and retrievals may be faster than on other types of networks, and since file exchanges do not travel through a server, communications can take place between any computers that remain connected to the network without risk that a glitch in the server will disable the network in its entirety. Given these benefits in security, cost, and efficiency, peer-to-peer networks are employed to store and distribute electronic files by universities, government agencies, corporations, and libraries, among others.[1]

      22

      Other users of peer-to-peer networks include individual recipients of Grokster's and StreamCast's software, and although the networks that they enjoy through using the software can be used to share any type of digital file, they have prominently employed those networks in sharing copyrighted music and video files without authorization. A group of copyright holders (MGM for short, but including motion picture studios, recording companies, songwriters, and music publishers) sued Grokster and StreamCast for their users' copyright infringements, alleging that they [545 U.S. 921] knowingly and intentionally distributed their software to enable users to reproduce and distribute the copyrighted works in violation of the Copyright Act, 17 U. S. C. § 101 et seq. (2000 ed. and Supp. II).[2] MGM sought damages and an injunction.

      23

      Discovery during the litigation revealed the way the software worked, the business aims of each defendant company, and the predilections of the users. Grokster's eponymous software employs what is known as FastTrack technology, a protocol developed by others and licensed to Grokster. StreamCast distributes a very similar product except that its software, called Morpheus, relies on what is known as Gnutella technology.[3] A user who downloads and installs either software possesses the protocol to send requests for files directly to the computers of others using software compatible with FastTrack or Gnutella. On the FastTrack network opened by the Grokster software, the user's request goes to a computer given an indexing capacity by the software and designated a supernode, or to some other computer with comparable power and capacity to collect temporary indexes of the files available on the computers of users connected to it. The supernode (or indexing computer) searches its own index and may communicate the search request to other supernodes. If the file is found, the supernode discloses its location to the computer requesting it, and the requesting user can download the file directly from the computer located. The copied file is placed in a designated sharing folder on the requesting user's computer, where it is available for other users to download in turn, along with any other file in that folder.[545 U.S. 922] In the Gnutella network made available by Morpheus, the process is mostly the same, except that in some versions of the Gnutella protocol there are no supernodes. In these versions, peer computers using the protocol communicate directly with each other. When a user enters a search request into the Morpheus software, it sends the request to computers connected with it, which in turn pass the request along to other connected peers. The search results are communicated to the requesting computer, and the user can download desired files directly from peers' computers. As this description indicates, Grokster and StreamCast use no servers to intercept the content of the search requests or to mediate the file transfers conducted by users of the software, there being no central point through which the substance of the communications passes in either direction.[4]

      24

      Although Grokster and StreamCast do not therefore know when particular files are copied, a few searches using their software would show what is available on the networks the software reaches. MGM commissioned a statistician to conduct a systematic search, and his study showed that nearly 90% of the files available for download on the FastTrack system were copyrighted works.[5] Grokster and StreamCast dispute this figure, raising methodological problems and arguing that free copying even of copyrighted works may be authorized by the rightholders. They also argue that potential noninfringing uses of their software are significant in kind, even if infrequent in practice. Some musical performers, for example, have gained new audiences by distributing [545 U.S. 923] their copyrighted works for free across peer-to-peer networks, and some distributors of unprotected content have used peer-to-peer networks to disseminate files, Shakespeare being an example. Indeed, StreamCast has given Morpheus users the opportunity to download the briefs in this very case, though their popularity has not been quantified.

      25

      As for quantification, the parties' anecdotal and statistical evidence entered thus far to show the content available on the FastTrack and Gnutella networks does not say much about which files are actually downloaded by users, and no one can say how often the software is used to obtain copies of unprotected material. But MGM's evidence gives reason to think that the vast majority of users' downloads are acts of infringement, and because well over 100 million copies of the software in question are known to have been downloaded, and billions of files are shared across the FastTrack and Gnutella networks each month, the probable scope of copyright infringement is staggering.

      26

      Grokster and StreamCast concede the infringement in most downloads, Brief for Respondents 10, n. 6, and it is uncontested that they are aware that users employ their software primarily to download copyrighted files, even if the decentralized FastTrack and Gnutella networks fail to reveal which files are being copied, and when. From time to time, moreover, the companies have learned about their users' infringement directly, as from users who have sent e-mail to each company with questions about playing copyrighted movies they had downloaded, to whom the companies have responded with guidance.[6] App. 559-563, 808-816, 939-954. And MGM notified the companies of 8 million copyrighted files that could be obtained using their software.

      27

      Grokster and StreamCast are not, however, merely passive recipients of information about infringing use. The record is replete with evidence that from the moment Grokster [545 U.S. 924] and StreamCast began to distribute their free software, each one clearly voiced the objective that recipients use it to download copyrighted works, and each took active steps to encourage infringement.

      28

      After the notorious file-sharing service, Napster, was sued by copyright holders for facilitation of copyright infringement, A&M Records, Inc. v. Napster, Inc., 114 F. Supp. 2d 896 (ND Cal. 2000), aff'd in part, rev'd in part, 239 F. 3d 1004 (CA9 2001), StreamCast gave away a software program of a kind known as OpenNap, designed as compatible with the Napster program and open to Napster users for downloading files from other Napster and OpenNap users' computers. Evidence indicates that "[i]t was always [StreamCast's] intent to use [its OpenNap network] to be able to capture email addresses of [its] initial target market so that [it] could promote [its] StreamCast Morpheus interface to them," App. 861; indeed, the OpenNap program was engineered "`to leverage Napster's 50 million user base,'" id., at 746.

      29

      StreamCast monitored both the number of users downloading its OpenNap program and the number of music files they downloaded. Id., at 859, 863, 866. It also used the resulting OpenNap network to distribute copies of the Morpheus software and to encourage users to adopt it. Id., at 861, 867, 1039. Internal company documents indicate that StreamCast hoped to attract large numbers of former Napster users if that company was shut down by court order or otherwise, and that StreamCast planned to be the next Napster. Id., at 861. A kit developed by StreamCast to be delivered to advertisers, for example, contained press articles about StreamCast's potential to capture former Napster users, id., at 568-572, and it introduced itself to some potential advertisers as a company "which is similar to what Napster was," id., at 884. It broadcast banner advertisements to users of other Napster-compatible software, urging them to adopt its OpenNap. Id., at 586. An internal e-mail from a company executive stated: "`We have put this network in [545 U.S. 925] place so that when Napster pulls the plug on their free service . . . or if the Court orders them shut down prior to that . . . we will be positioned to capture the flood of their 32 million users that will be actively looking for an alternative.'" Id., at 588-589, 861.

      30

      Thus, StreamCast developed promotional materials to market its service as the best Napster alternative. One proposed advertisement read: "Napster Inc. has announced that it will soon begin charging you a fee. That's if the courts don't order it shut down first. What will you do to get around it?" Id., at 897. Another proposed ad touted StreamCast's software as the "#1 alternative to Napster" and asked "[w]hen the lights went off at Napster . . . where did the users go?" Id., at 836 (ellipsis in original).[7] StreamCast even planned to flaunt the illegal uses of its software; when it launched the OpenNap network, the chief technology officer of the company averred that "[t]he goal is to get in trouble with the law and get sued. It's the best way to get in the new[s]." Id., at 916.

      31

      The evidence that Grokster sought to capture the market of former Napster users is sparser but revealing, for Grokster launched its own OpenNap system called Swaptor and inserted digital codes into its Web site so that computer users using Web search engines to look for "Napster" or "[f]ree file sharing" would be directed to the Grokster Web site, where they could download the Grokster software. Id., at 992-993. And Grokster's name is an apparent derivative of Napster.

      32

      StreamCast's executives monitored the number of songs by certain commercial artists available on their networks, and an internal communication indicates they aimed to have a larger number of copyrighted songs available on their networks [545 U.S. 926] than other file-sharing networks. Id., at 868. The point, of course, would be to attract users of a mind to infringe, just as it would be with their promotional materials developed showing copyrighted songs as examples of the kinds of files available through Morpheus. Id., at 848. Morpheus in fact allowed users to search specifically for "Top 40" songs, id., at 735, which were inevitably copyrighted. Similarly, Grokster sent users a newsletter promoting its ability to provide particular, popular copyrighted materials. Brief for Motion Picture Studio and Recording Company Petitioners 7-8.

      33

      In addition to this evidence of express promotion, marketing, and intent to promote further, the business models employed by Grokster and StreamCast confirm that their principal object was use of their software to download copyrighted works. Grokster and StreamCast receive no revenue from users, who obtain the software itself for nothing. Instead, both companies generate income by selling advertising space, and they stream the advertising to Grokster and Morpheus users while they are employing the programs. As the number of users of each program increases, advertising opportunities become worth more. Cf. App. 539, 804. While there is doubtless some demand for free Shakespeare, the evidence shows that substantive volume is a function of free access to copyrighted work. Users seeking Top 40 songs, for example, or the latest release by Modest Mouse, are certain to be far more numerous than those seeking a free Decameron, and Grokster and StreamCast translated that demand into dollars.

      34

      Finally, there is no evidence that either company made an effort to filter copyrighted material from users' downloads or otherwise impede the sharing of copyrighted files. Although Grokster appears to have sent e-mails warning users about infringing content when it received threatening notice from the copyright holders, it never blocked anyone from continuing to use its software to share copyrighted files. [545 U.S. 927] Id., at 75-76. StreamCast not only rejected another company's offer of help to monitor infringement, id., at 928-929, but blocked the Internet Protocol addresses of entities it believed were trying to engage in such monitoring on its networks, id., at 917-922.

      35
      B
      36

      After discovery, the parties on each side of the case crossmoved for summary judgment. The District Court limited its consideration to the asserted liability of Grokster and StreamCast for distributing the current versions of their software, leaving aside whether either was liable "for damages arising from past versions of their software, or from other past activities." 259 F. Supp. 2d 1029, 1033 (CD Cal. 2003). The District Court held that those who used the Grokster and Morpheus software to download copyrighted media files directly infringed MGM's copyrights, a conclusion not contested on appeal, but the court nonetheless granted summary judgment in favor of Grokster and StreamCast as to any liability arising from distribution of the then-current versions of their software. Distributing that software gave rise to no liability in the court's view, because its use did not provide the distributors with actual knowledge of specific acts of infringement. Case No. CV 01 08541 SVW (PJWx) (CD Cal., June 18, 2003), App. 1213.

      37

      The Court of Appeals affirmed. 380 F. 3d 1154 (CA9 2004). In the court's analysis, a defendant was liable as a contributory infringer when it had knowledge of direct infringement and materially contributed to the infringement. But the court read Sony Corp. of America v. Universal City Studios, Inc., 464 U. S. 417 (1984), as holding that distribution of a commercial product capable of substantial noninfringing uses could not give rise to contributory liability for infringement unless the distributor had actual knowledge of specific instances of infringement and failed to act on that knowledge. The fact that the software was capable of substantial noninfringing uses in the Ninth Circuit's view meant [545 U.S. 928] that Grokster and StreamCast were not liable, because they had no such actual knowledge, owing to the decentralized architecture of their software. The court also held that Grokster and StreamCast did not materially contribute to their users' infringement because it was the users themselves who searched for, retrieved, and stored the infringing files, with no involvement by the defendants beyond providing the software in the first place.

      38

      The Ninth Circuit also considered whether Grokster and StreamCast could be liable under a theory of vicarious infringement. The court held against liability because the defendants did not monitor or control the use of the software, had no agreed-upon right or current ability to supervise its use, and had no independent duty to police infringement. We granted certiorari. 543 U. S. 1032 (2004).

      39
      II
      40
      A
      41

      MGM and many of the amici fault the Court of Appeals's holding for upsetting a sound balance between the respective values of supporting creative pursuits through copyright protection and promoting innovation in new communication technologies by limiting the incidence of liability for copyright infringement. The more artistic protection is favored, the more technological innovation may be discouraged; the administration of copyright law is an exercise in managing the tradeoff. See Sony Corp. v. Universal City Studios, supra, at 442; see generally Ginsburg, Copyright and Control Over New Technologies of Dissemination, 101 Colum. L. Rev. 1613 (2001); Lichtman & Landes, Indirect Liability for Copyright Infringement: An Economic Perspective, 16 Harv. J. L. & Tech. 395 (2003).

      42

      The tension between the two values is the subject of this case, with its claim that digital distribution of copyrighted material threatens copyright holders as never before, because every copy is identical to the original, copying is easy, [545 U.S. 929] and many people (especially the young) use file-sharing software to download copyrighted works. This very breadth of the software's use may well draw the public directly into the debate over copyright policy, Peters, Brace Memorial Lecture: Copyright Enters the Public Domain, 51 J. Copyright Soc. 701, 705-717 (2004) (address by Register of Copyrights), and the indications are that the ease of copying songs or movies using software like Grokster's and Napster's is fostering disdain for copyright protection, Wu, When Code Isn't Law, 89 Va. L. Rev. 679, 724-726 (2003). As the case has been presented to us, these fears are said to be offset by the different concern that imposing liability, not only on infringers but on distributors of software based on its potential for unlawful use, could limit further development of beneficial technologies. See, e. g., Lemley & Reese, Reducing Digital Copyright Infringement Without Restricting Innovation, 56 Stan. L. Rev. 1345, 1386-1390 (2004); Brief for Innovation Scholars and Economists as Amici Curiae 15-20; Brief for Emerging Technology Companies as Amici Curiae 19-25; Brief for Intel Corporation as Amicus Curiae 20-22.[8]

      43

      The argument for imposing indirect liability in this case is, however, a powerful one, given the number of infringing downloads that occur every day using StreamCast's and Grokster's software. When a widely shared service or product is used to commit infringement, it may be impossible to [545 U.S. 930] enforce rights in the protected work effectively against all direct infringers, the only practical alternative being to go against the distributor of the copying device for secondary liability on a theory of contributory or vicarious infringement. See In re Aimster Copyright Litigation, 334 F. 3d 643, 645-646 (CA7 2003).

      44

      One infringes contributorily by intentionally inducing or encouraging direct infringement, see Gershwin Pub. Corp. v. Columbia Artists Management, Inc., 443 F. 2d 1159, 1162 (CA2 1971), and infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it, Shapiro, Bernstein & Co. v. H. L. Green Co., 316 F. 2d 304, 307 (CA2 1963).[9] Although "[t]he Copyright Act does not expressly render anyone liable for infringement committed by another," Sony Corp. v. Universal City Studios, 464 U. S., at 434, these doctrines of secondary liability emerged from common law principles and are well established in the law, id., at 486 (Blackmun, J., dissenting); Kalem Co. v. Harper Brothers, 222 U. S. 55, 62-63 (1911); Gershwin Pub. Corp. v. Columbia Artists Management, [545 U.S. 931] supra, at 1162; 3 M. Nimmer & D. Nimmer, Copyright § 12.04[A] (2005).

      45
      B
      46

      Despite the currency of these principles of secondary liability, this Court has dealt with secondary copyright infringement in only one recent case, and because MGM has tailored its principal claim to our opinion there, a look at our earlier holding is in order. In Sony Corp. v. Universal City Studios, supra, this Court addressed a claim that secondary liability for infringement can arise from the very distribution of a commercial product. There, the product, novel at the time, was what we know today as the videocassette recorder or VCR. Copyright holders sued Sony as the manufacturer, claiming it was contributorily liable for infringement that occurred when VCR owners taped copyrighted programs because it supplied the means used to infringe, and it had constructive knowledge that infringement would occur. At the trial on the merits, the evidence showed that the principal use of the VCR was for "`time-shifting,'" or taping a program for later viewing at a more convenient time, which the Court found to be a fair, not an infringing, use. Id., at 423-424. There was no evidence that Sony had expressed an object of bringing about taping in violation of copyright or had taken active steps to increase its profits from unlawful taping. Id., at 438. Although Sony's advertisements urged consumers to buy the VCR to "`record favorite shows'" or "`build a library'" of recorded programs, id., at 459 (Blackmun, J., dissenting), neither of these uses was necessarily infringing, id., at 424, 454-455.

      47

      On those facts, with no evidence of stated or indicated intent to promote infringing uses, the only conceivable basis for imposing liability was on a theory of contributory infringement arising from its sale of VCRs to consumers with knowledge that some would use them to infringe. Id., at 439. But because the VCR was "capable of commercially significant noninfringing uses," we held the manufacturer [545 U.S. 932] could not be faulted solely on the basis of its distribution. Id., at 442.

      48

      This analysis reflected patent law's traditional staple article of commerce doctrine, now codified, that distribution of a component of a patented device will not violate the patent if it is suitable for use in other ways. 35 U. S. C. § 271(c); Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U. S. 476, 485 (1964) (noting codification of cases); id., at 486, n. 6 (same). The doctrine was devised to identify instances in which it may be presumed from distribution of an article in commerce that the distributor intended the article to be used to infringe another's patent, and so may justly be held liable for that infringement. "One who makes and sells articles which are only adapted to be used in a patented combination will be presumed to intend the natural consequences of his acts; he will be presumed to intend that they shall be used in the combination of the patent." New York Scaffolding Co. v. Whitney, 224 F. 452, 459 (CA8 1915); see also James Heekin Co. v. Baker, 138 F. 63, 66 (CA8 1905); Canda v. Michigan Malleable Iron Co., 124 F. 486, 489 (CA6 1903); Thomson-Houston Electric Co. v. Ohio Brass Co., 80 F. 712, 720-721 (CA6 1897); Red Jacket Mfg. Co. v. Davis, 82 F. 432, 439 (CA7 1897); Holly v. Vergennes Machine Co., 4 F. 74, 82 (CC Vt. 1880); Renwick v. Pond, 20 F. Cas. 536, 541 (No. 11,702) (CC SDNY 1872).

      49

      In sum, where an article is "good for nothing else" but infringement, Canda v. Michigan Malleable Iron Co., supra, at 489, there is no legitimate public interest in its unlicensed availability, and there is no injustice in presuming or imputing an intent to infringe, see Henry v. A. B. Dick Co., 224 U. S. 1, 48 (1912), overruled on other grounds, Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U. S. 502 (1917). Conversely, the doctrine absolves the equivocal conduct of selling an item with substantial lawful as well as unlawful uses, and limits liability to instances of more acute [545 U.S. 933] fault than the mere understanding that some of one's products will be misused. It leaves breathing room for innovation and a vigorous commerce. See Sony Corp. v. Universal City Studios, 464 U. S., at 442; Dawson Chemical Co. v. Rohm & Haas Co., 448 U. S. 176, 221 (1980); Henry v. A. B. Dick Co., supra, at 48.

      50

      The parties and many of the amici in this case think the key to resolving it is the Sony rule and, in particular, what it means for a product to be "capable of commercially significant noninfringing uses." Sony Corp. v. Universal City Studios, supra, at 442. MGM advances the argument that granting summary judgment to Grokster and StreamCast as to their current activities gave too much weight to the value of innovative technology, and too little to the copyrights infringed by users of their software, given that 90% of works available on one of the networks was shown to be copyrighted. Assuming the remaining 10% to be its noninfringing use, MGM says this should not qualify as "substantial," and the Court should quantify Sony to the extent of holding that a product used "principally" for infringement does not qualify. See Brief for Motion Picture Studio and Recording Company Petitioners 31. As mentioned before, Grokster and StreamCast reply by citing evidence that their software can be used to reproduce public domain works, and they point to copyright holders who actually encourage copying. Even if infringement is the principal practice with their software today, they argue, the noninfringing uses are significant and will grow.

      51

      We agree with MGM that the Court of Appeals misapplied Sony, which it read as limiting secondary liability quite beyond the circumstances to which the case applied. Sony barred secondary liability based on presuming or imputing intent to cause infringement solely from the design or distribution of a product capable of substantial lawful use, which the distributor knows is in fact used for infringement. The [545 U.S. 934] Ninth Circuit has read Sony's limitation to mean that whenever a product is capable of substantial lawful use, the producer can never be held contributorily liable for third parties' infringing use of it; it read the rule as being this broad, even when an actual purpose to cause infringing use is shown by evidence independent of design and distribution of the product, unless the distributors had "specific knowledge of infringement at a time at which they contributed to the infringement, and failed to act upon that information." 380 F. 3d, at 1162 (internal quotation marks and brackets omitted). Because the Circuit found the StreamCast and Grokster software capable of substantial lawful use, it concluded on the basis of its reading of Sony that neither company could be held liable, since there was no showing that their software, being without any central server, afforded them knowledge of specific unlawful uses.

      52

      This view of Sony, however, was error, converting the case from one about liability resting on imputed intent to one about liability on any theory. Because Sony did not displace other theories of secondary liability, and because we find below that it was error to grant summary judgment to the companies on MGM's inducement claim, we do not revisit Sony further, as MGM requests, to add a more quantified description of the point of balance between protection and commerce when liability rests solely on distribution with knowledge that unlawful use will occur. It is enough to note that the Ninth Circuit's judgment rested on an erroneous understanding of Sony and to leave further consideration of the Sony rule for a day when that may be required.

      53
      C
      54

      Sony's rule limits imputing culpable intent as a matter of law from the characteristics or uses of a distributed product. But nothing in Sony requires courts to ignore evidence of intent if there is such evidence, and the case was never meant to foreclose rules of fault-based liability derived from [545 U.S. 935] the common law.[10] Sony Corp. v. Universal City Studios, supra, at 439 ("If vicarious liability is to be imposed on Sony in this case, it must rest on the fact that it has sold equipment with constructive knowledge" of the potential for infringement). Thus, where evidence goes beyond a product's characteristics or the knowledge that it may be put to infringing uses, and shows statements or actions directed to promoting infringement, Sony's staple-article rule will not preclude liability.

      55

      The classic case of direct evidence of unlawful purpose occurs when one induces commission of infringement by another, or "entic[es] or persuad[es] another" to infringe, Black's Law Dictionary 790 (8th ed. 2004), as by advertising. Thus at common law a copyright or patent defendant who "not only expected but invoked [infringing use] by advertisement" was liable for infringement "on principles recognized in every part of the law." Kalem Co. v. Harper Brothers, 222 U. S., at 62-63 (copyright infringement). See also Henry v. A. B. Dick Co., 224 U. S., at 48-49 (contributory liability for patent infringement may be found where a good's "most conspicuous use is one which will coöperate in an infringement when sale to such user is invoked by advertisement" of the infringing use); Thomson-Houston Electric Co. v. Kelsey Electric R. Specialty Co., 75 F. 1005, 1007-1008 (CA2 1896) (relying on advertisements and displays to find defendant's "willingness . . . to aid other persons in any attempts which they may be disposed to make towards [patent] infringement"); Rumford Chemical Works v. Hecker, 20 F. Cas. 1342, 1346 (No. 12,133) (CC NJ 1876) (demonstrations of infringing activity along with "avowals of the [infringing] purpose and use for which it was made" supported liability for patent infringement).

      56

      [545 U.S. 936] The rule on inducement of infringement as developed in the early cases is no different today.[11] Evidence of "active steps . . . taken to encourage direct infringement," Oak Industries, Inc. v. Zenith Electronics Corp., 697 F. Supp. 988, 992 (ND Ill. 1988), such as advertising an infringing use or instructing how to engage in an infringing use, show an affirmative intent that the product be used to infringe, and a showing that infringement was encouraged overcomes the law's reluctance to find liability when a defendant merely sells a commercial product suitable for some lawful use, see, e. g., Water Technologies Corp. v. Calco, Ltd., 850 F. 2d 660, 668 (CA Fed. 1988) (liability for inducement where one "actively and knowingly aid[s] and abet[s] another's direct infringement" (emphasis deleted)); Fromberg, Inc. v. Thornhill, 315 F. 2d 407, 412-413 (CA5 1963) (demonstrations by sales staff of infringing uses supported liability for inducement); Haworth Inc. v. Herman Miller Inc., 37 USPQ 2d 1080, 1090 (WD Mich. 1994) (evidence that defendant "demonstrate[d] and recommend[ed] infringing configurations" of its product could support inducement liability); Sims v. Mack Trucks, Inc., 459 F. Supp. 1198, 1215 (ED Pa. 1978) (finding inducement where the use "depicted by the defendant in its promotional film and brochures infringes the . . . patent"), overruled on other grounds, 608 F. 2d 87 (CA3 1979). Cf. W. Keeton, D. Dobbs, R. Keeton, & D. Owen, Prosser and Keeton on Law of Torts 37 (5th ed. 1984) ("There is a definite tendency to impose greater responsibility upon a defendant whose conduct was intended to do harm, or was morally wrong").

      57

      For the same reasons that Sony took the staple-article doctrine of patent law as a model for its copyright safe-harbor rule, the inducement rule, too, is a sensible one for copyright. We adopt it here, holding that one who distributes a device with the object of promoting its use to infringe copyright, as [545 U.S. 937] shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties. We are, of course, mindful of the need to keep from trenching on regular commerce or discouraging the development of technologies with lawful and unlawful potential. Accordingly, just as Sony did not find intentional inducement despite the knowledge of the VCR manufacturer that its device could be used to infringe, 464 U. S., at 439, n. 19, mere knowledge of infringing potential or of actual infringing uses would not be enough here to subject a distributor to liability. Nor would ordinary acts incident to product distribution, such as offering customers technical support or product updates, support liability in themselves. The inducement rule, instead, premises liability on purposeful, culpable expression and conduct, and thus does nothing to compromise legitimate commerce or discourage innovation having a lawful promise.

      58
      III
      59
      A
      60

      The only apparent question about treating MGM's evidence as sufficient to withstand summary judgment under the theory of inducement goes to the need on MGM's part to adduce evidence that StreamCast and Grokster communicated an inducing message to their software users. The classic instance of inducement is by advertisement or solicitation that broadcasts a message designed to stimulate others to commit violations. MGM claims that such a message is shown here. It is undisputed that StreamCast beamed onto the computer screens of users of Napster-compatible programs ads urging the adoption of its OpenNap program, which was designed, as its name implied, to invite the custom of patrons of Napster, then under attack in the courts for facilitating massive infringement. Those who accepted StreamCast's OpenNap program were offered software to perform the same services, which a factfinder could conclude [545 U.S. 938] would readily have been understood in the Napster market as the ability to download copyrighted music files. Grokster distributed an electronic newsletter containing links to articles promoting its software's ability to access popular copyrighted music. And anyone whose Napster or free file-sharing searches turned up a link to Grokster would have understood Grokster to be offering the same file-sharing ability as Napster, and to the same people who probably used Napster for infringing downloads; that would also have been the understanding of anyone offered Grokster's suggestively named Swaptor software, its version of OpenNap. And both companies communicated a clear message by responding affirmatively to requests for help in locating and playing copyrighted materials.

      61

      In StreamCast's case, of course, the evidence just described was supplemented by other unequivocal indications of unlawful purpose in the internal communications and advertising designs aimed at Napster users ("When the lights went off at Napster . . . where did the users go?" App. 836 (ellipsis in original)). Whether the messages were communicated is not to the point on this record. The function of the message in the theory of inducement is to prove by a defendant's own statements that his unlawful purpose disqualifies him from claiming protection (and incidentally to point to actual violators likely to be found among those who hear or read the message). See supra, at 935-937. Proving that a message was sent out, then, is the preeminent but not exclusive way of showing that active steps were taken with the purpose of bringing about infringing acts, and of showing that infringing acts took place by using the device distributed. Here, the summary judgment record is replete with other evidence that Grokster and StreamCast, unlike the manufacturer and distributor in Sony, acted with a purpose to cause copyright violations by use of software suitable for illegal use. See supra, at 924-927.

      62

      [545 U.S. 939] Three features of this evidence of intent are particularly notable. First, each company showed itself to be aiming to satisfy a known source of demand for copyright infringement, the market comprising former Napster users. StreamCast's internal documents made constant reference to Napster, it initially distributed its Morpheus software through an OpenNap program compatible with Napster, it advertised its OpenNap program to Napster users, and its Morpheus software functions as Napster did except that it could be used to distribute more kinds of files, including copyrighted movies and software programs. Grokster's name is apparently derived from Napster, it too initially offered an OpenNap program, its software's function is likewise comparable to Napster's, and it attempted to divert queries for Napster onto its own Web site. Grokster and StreamCast's efforts to supply services to former Napster users, deprived of a mechanism to copy and distribute what were overwhelmingly infringing files, indicate a principal, if not exclusive, intent on the part of each to bring about infringement.

      63

      Second, this evidence of unlawful objective is given added significance by MGM's showing that neither company attempted to develop filtering tools or other mechanisms to diminish the infringing activity using their software. While the Ninth Circuit treated the defendants' failure to develop such tools as irrelevant because they lacked an independent duty to monitor their users' activity, we think this evidence underscores Grokster's and StreamCast's intentional facilitation of their users' infringement.[12]

      64

      Third, there is a further complement to the direct evidence of unlawful objective. It is useful to recall that StreamCast [545 U.S. 940] and Grokster make money by selling advertising space, by directing ads to the screens of computers employing their software. As the record shows, the more the software is used, the more ads are sent out and the greater the advertising revenue becomes. Since the extent of the software's use determines the gain to the distributors, the commercial sense of their enterprise turns on high-volume use, which the record shows is infringing.[13] This evidence alone would not justify an inference of unlawful intent, but viewed in the context of the entire record its import is clear.

      65

      The unlawful objective is unmistakable.

      66
      B
      67

      In addition to intent to bring about infringement and distribution of a device suitable for infringing use, the inducement theory of course requires evidence of actual infringement by recipients of the device, the software in this case. As the account of the facts indicates, there is evidence of infringement on a gigantic scale, and there is no serious issue of the adequacy of MGM's showing on this point in order to survive the companies' summary judgment requests. Although [545 U.S. 941] an exact calculation of infringing use, as a basis for a claim of damages, is subject to dispute, there is no question that the summary judgment evidence is at least adequate to entitle MGM to go forward with claims for damages and equitable relief.

      68

      * * *

      69

      In sum, this case is significantly different from Sony and reliance on that case to rule in favor of StreamCast and Grokster was error. Sony dealt with a claim of liability based solely on distributing a product with alternative lawful and unlawful uses, with knowledge that some users would follow the unlawful course. The case struck a balance between the interests of protection and innovation by holding that the product's capability of substantial lawful employment should bar the imputation of fault and consequent secondary liability for the unlawful acts of others.

      70

      MGM's evidence in this case most obviously addresses a different basis of liability for distributing a product open to alternative uses. Here, evidence of the distributors' words and deeds going beyond distribution as such shows a purpose to cause and profit from third-party acts of copyright infringement. If liability for inducing infringement is ultimately found, it will not be on the basis of presuming or imputing fault, but from inferring a patently illegal objective from statements and actions showing what that objective was.

      71

      There is substantial evidence in MGM's favor on all elements of inducement, and summary judgment in favor of Grokster and StreamCast was error. On remand, reconsideration of MGM's motion for summary judgment will be in order.

      72

      The judgment of the Court of Appeals is vacated, and the case is remanded for further proceedings consistent with this opinion.

      73

      It is so ordered.

      74

      [545 U.S. 942] JUSTICE GINSBURG, with whom THE CHIEF JUSTICE and JUSTICE KENNEDY join, concurring.

      75

      I concur in the Court's decision, which vacates in full the judgment of the Court of Appeals for the Ninth Circuit, ante, at 941, and write separately to clarify why I conclude that the Court of Appeals misperceived, and hence misapplied, our holding in Sony Corp. of America v. Universal City Studios, Inc., 464 U. S. 417 (1984). There is here at least a "genuine issue as to [a] material fact," Fed. Rule Civ. Proc. 56(c), on the liability of Grokster or StreamCast, not only for actively inducing copyright infringement, but also, or alternatively, based on the distribution of their software products, for contributory copyright infringement. On neither score was summary judgment for Grokster and StreamCast warranted.

      76

      At bottom, however labeled, the question in this case is whether Grokster and StreamCast are liable for the direct infringing acts of others. Liability under our jurisprudence may be predicated on actively encouraging (or inducing) infringement through specific acts (as the Court's opinion develops) or on distributing a product distributees use to infringe copyrights, if the product is not capable of "substantial" or "commercially significant" noninfringing uses. Sony, 464 U. S., at 442; see also 3 M. Nimmer & D. Nimmer, Nimmer on Copyright § 12.04[A][2] (2005). While the two categories overlap, they capture different culpable behavior. Long coexisting, both are now codified in patent law. Compare 35 U. S. C. § 271(b) (active inducement liability) with § 271(c) (contributory liability for distribution of a product not "suitable for substantial noninfringing use").

      77

      In Sony, 464 U. S. 417, the Court considered Sony's liability for selling the Betamax videocassette recorder. It did so enlightened by a full trial record. Drawing an analogy to the staple article of commerce doctrine from patent law, [545 U.S. 943] the Sony Court observed that the "sale of an article . . . adapted to [a patent] infringing use" does not suffice "to make the seller a contributory infringer" if the article "is also adapted to other and lawful uses." Id., at 441 (quoting Henry v. A. B. Dick Co., 224 U. S. 1, 48 (1912), overruled on other grounds, Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U. S. 502, 517 (1917)).

      78

      "The staple article of commerce doctrine" applied to copyright, the Court stated, "must strike a balance between a copyright holder's legitimate demand for effective—not merely symbolic—protection of the statutory monopoly, and the rights of others freely to engage in substantially unrelated areas of commerce." Sony, 464 U. S., at 442. "Accordingly," the Court held, "the sale of copying equipment, like the sale of other articles of commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes. Indeed, it need merely be capable of substantial noninfringing uses." Ibid. Thus, to resolve the Sony case, the Court explained, it had to determine "whether the Betamax is capable of commercially significant noninfringing uses." Ibid.

      79

      To answer that question, the Court considered whether "a significant number of [potential uses of the Betamax were] noninfringing." Ibid. The Court homed in on one potential use—private, noncommercial time-shifting of television programs in the home (i. e., recording a broadcast TV program for later personal viewing). Time-shifting was noninfringing, the Court concluded, because in some cases trial testimony showed it was authorized by the copyright holder, id., at 443-447, and in others it qualified as legitimate fair use, id., at 447-455. Most purchasers used the Betamax principally to engage in time-shifting, id., at 421, 423, a use that "plainly satisfie[d]" the Court's standard, id., at 442. Thus, there was no need in Sony to "give precise content to the question of how much [actual or potential] use is commercially [545 U.S. 944] significant." Ibid.[14] Further development was left for later days and cases.

      80

      The Ninth Circuit went astray, I will endeavor to explain, when that court granted summary judgment to Grokster and StreamCast on the charge of contributory liability based on distribution of their software products. Relying on its earlier opinion in A&M Records, Inc. v. Napster, Inc., 239 F. 3d 1004 (CA9 2001), the Court of Appeals held that "if substantial noninfringing use was shown, the copyright owner would be required to show that the defendant had reasonable knowledge of specific infringing files." 380 F. 3d 1154, 1161 (CA9 2004). "A careful examination of the record," the [545 U.S. 945] court concluded, "indicates that there is no genuine issue of material fact as to noninfringing use." Ibid. The appeals court pointed to the band Wilco, which made one of its albums available for free downloading, to other recording artists who may have authorized free distribution of their music through the Internet, and to public domain literary works and films available through Grokster's and StreamCast's software. Ibid. Although it acknowledged petitioners' (hereinafter MGM) assertion that "the vast majority of the software use is for copyright infringement," the court concluded that Grokster's and StreamCast's proffered evidence met Sony's requirement that "a product need only be capable of substantial noninfringing uses." 380 F. 3d, at 1162.[15]

      81

      This case differs markedly from Sony. Cf. Peters, Brace Memorial Lecture: Copyright Enters the Public Domain, 51 J. Copyright Soc. 701, 724 (2004) ("The Grokster panel's reading of Sony is the broadest that any court has given it . . . ."). Here, there has been no finding of any fair use and little beyond anecdotal evidence of noninfringing uses. In finding the Grokster and StreamCast software products capable of substantial noninfringing uses, the District Court and the Court of Appeals appear to have relied largely on declarations submitted by the defendants. These declarations include assertions (some of them hearsay) that a number of copyright owners authorize distribution of their works on the Internet and that some public domain material is available through peer-to-peer networks including those accessed through Grokster's and StreamCast's software. 380 F. 3d, at 1161; 259 F. Supp. 2d 1029, 1035-1036 (CD Cal. 2003); App. 125-171.

      82

      [545 U.S. 946] The District Court declared it "undisputed that there are substantial noninfringing uses for Defendants' software," thus obviating the need for further proceedings. 259 F. Supp. 2d, at 1035. This conclusion appears to rest almost entirely on the collection of declarations submitted by Grokster and StreamCast. Ibid. Review of these declarations reveals mostly anecdotal evidence, sometimes obtained secondhand, of authorized copyrighted works or public domain works available online and shared through peer-to-peer networks, and general statements about the benefits of peer-to-peer technology. See, e. g., Decl. of Janis Ian ¶ 13, App. 128 ("P2P technologies offer musicians an alternative channel for promotion and distribution."); Decl. of Gregory Newby ¶ 12, id., at 136 ("Numerous authorized and public domain Project Gutenberg eBooks are made available on Morpheus, Kazaa, Gnutella, Grokster, and similar software products."); Decl. of Aram Sinnreich ¶ 6, id., at 151 ("file sharing seems to have a net positive impact on music sales"); Decl. of John Busher ¶ 8, id., at 166 ("I estimate that Acoustica generates sales of between $1,000 and $10,000 per month as a result of the distribution of its trialware software through the Gnutella and FastTrack Networks."); Decl. of Patricia D. Hoekman ¶¶ 3-4, id., at 169-170 (search on Morpheus for "President Bush speeches" found several video recordings, searches for "Declaration of Independence" and "Bible" found various documents and declarant was able to download a copy of the Declaration); Decl. of Sean L. Mayers ¶ 11, id., at 67 ("Existing open, decentralized peer-to-peer file-sharing networks . . . offer content owners distinct business advantages over alternate online distribution technologies."). Compare Decl. of Brewster Kahle ¶ 20, id., at 142 ("Those who download the Prelinger films . . . are entitled to redistribute those files, and the Archive welcomes their redistribution by the Morpheus-Grokster-KaZaa community of users."), with Deposition of Brewster Kahle (Sept. 18, [545 U.S. 947] 2002), id., at 396-403 (testifying that he has no knowledge of any person downloading a Prelinger film using Morpheus, Grokster, or KaZaA). Compare also Decl. of Richard Prelinger ¶ 17, id., at 147 ("[W]e welcome further redistribution of the Prelinger films . . . by individuals using peer-to-peer software products like Morpheus, KaZaA and Grokster."), with Deposition of Richard Prelinger (Oct. 1, 2002), id., at 410-411 ("Q. What is your understanding of Grokster? A. I have no understanding of Grokster. . . . Q. Do you know whether any user of the Grokster software has made available to share any Prelinger film? A. No."). See also Deposition of Aram Sinnreich (Sept. 25, 2002), id., at 390 (testimony about the band Wilco based on "[t]he press and industry news groups and scuttlebutt."). These declarations do not support summary judgment in the face of evidence, proffered by MGM, of overwhelming use of Grokster's and StreamCast's software for infringement.[16]

      83

      [545 U.S. 948] Even if the absolute number of noninfringing files copied using the Grokster and StreamCast software is large, it does not follow that the products are therefore put to substantial noninfringing uses and are thus immune from liability. The number of noninfringing copies may be reflective of, and dwarfed by, the huge total volume of files shared. Further, the District Court and the Court of Appeals did not sharply distinguish between uses of Grokster's and StreamCast's software products (which this case is about) and uses of peer-to-peer technology generally (which this case is not about).

      84

      In sum, when the record in this case was developed, there was evidence that Grokster's and StreamCast's products were, and had been for some time, overwhelmingly used to infringe, ante, at 922-924; App. 434-439, 476-481, and that this infringement was the overwhelming source of revenue from the products, ante, at 925-926; 259 F. Supp. 2d, at 1043-1044. Fairly appraised, the evidence was insufficient to demonstrate, beyond genuine debate, a reasonable prospect that substantial or commercially significant noninfringing uses were likely to develop over time. On this record, the District Court should not have ruled dispositively on the contributory infringement charge by granting summary judgment to Grokster and StreamCast.[17]

      85

      If, on remand, the case is not resolved on summary judgment in favor of MGM based on Grokster and StreamCast actively inducing infringement, the Court of Appeals, I [545 U.S. 949] would emphasize, should reconsider, on a fuller record, its interpretation of Sony's product distribution holding.

      86

      ---------------

      87

      JUSTICE BREYER, with whom JUSTICE STEVENS and JUSTICE O'CONNOR join, concurring.

      88

      I agree with the Court that the distributor of a dual-use technology may be liable for the infringing activities of third parties where he or she actively seeks to advance the infringement. Ante, at 919. I further agree that, in light of our holding today, we need not now "revisit" Sony Corp. of America v. Universal City Studios, Inc., 464 U. S. 417 (1984). Ante, at 934. Other Members of the Court, however, take up the Sony question: whether Grokster's product is "capable of `substantial' or `commercially significant' noninfringing uses." Ante, at 942 (GINSBURG, J., concurring) (quoting Sony, supra, at 442). And they answer that question by stating that the Court of Appeals was wrong when it granted summary judgment on the issue in Grokster's favor. Ante, at 944. I write to explain why I disagree with them on this matter.

      89
      I
      90

      The Court's opinion in Sony and the record evidence (as described and analyzed in the many briefs before us) together convince me that the Court of Appeals' conclusion has adequate legal support.

      91
      A
      92

      I begin with Sony's standard. In Sony, the Court considered the potential copyright liability of a company that did not itself illegally copy protected material, but rather sold a machine—a videocassette recorder (VCR)—that could be used to do so. A buyer could use that machine for non-infringing purposes, such as recording for later viewing (sometimes called "`time-shifting,'" Sony, 464 U. S., at 421) uncopyrighted television programs or copyrighted programs with a copyright holder's permission. The buyer could use [545 U.S. 950] the machine for infringing purposes as well, such as building libraries of taped copyrighted programs. Or, the buyer might use the machine to record copyrighted programs under circumstances in which the legal status of the act of recording was uncertain (i. e., where the copying may, or may not, have constituted a "fair use," id., at 425-426). Sony knew many customers would use its VCRs to engage in unauthorized copying and "`library-building.'" Id., at 458-459 (Blackmun, J., dissenting). But that fact, said the Court, was insufficient to make Sony itself an infringer. And the Court ultimately held that Sony was not liable for its customers' acts of infringement.

      93

      In reaching this conclusion, the Court recognized the need for the law, in fixing secondary copyright liability, to "strike a balance between a copyright holder's legitimate demand for effective—not merely symbolic—protection of the statutory monopoly, and the rights of others freely to engage in substantially unrelated areas of commerce." Id., at 442. It pointed to patent law's "staple article of commerce" doctrine, ibid., under which a distributor of a product is not liable for patent infringement by its customers unless that product is "unsuited for any commercial noninfringing use." Dawson Chemical Co. v. Rohm & Haas Co., 448 U. S. 176, 198 (1980). The Court wrote that the sale of copying equipment, "like the sale of other articles of commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes. Indeed, it need merely be capable of substantial noninfringing uses." Sony, 464 U. S., at 442 (emphasis added). The Court ultimately characterized the legal "question" in the particular case as "whether [Sony's VCR] is capable of commercially significant noninfringing uses" (while declining to give "precise content" to these terms). Ibid. (emphasis added).

      94

      It then applied this standard. The Court had before it a survey (commissioned by the District Court and then prepared by the respondents) showing that roughly 9% of all [545 U.S. 951] VCR recordings were of the type—namely, religious, educational, and sports programming—owned by producers and distributors testifying on Sony's behalf who did not object to time-shifting. See Brief for Respondents, O. T. 1983, No. 81-1687, pp. 52-53; see also Sony, supra, at 424 (7.3% of all Sony VCR use is to record sports programs; representatives of the sports leagues do not object). A much higher percentage of VCR users had at one point taped an authorized program, in addition to taping unauthorized programs. And the plaintiffs—not a large class of content providers as in this case—owned only a small percentage of the total available unauthorized programming. See ante, at 947, n. 3 (GINSBURG, J., concurring). But of all the taping actually done by Sony's customers, only around 9% was of the sort the Court referred to as authorized.

      95

      The Court found that the magnitude of authorized programming was "significant," and it also noted the "significant potential for future authorized copying." 464 U. S., at 444. The Court supported this conclusion by referencing the trial testimony of professional sports league officials and a religious broadcasting representative. Id., at 444, and n. 24. It also discussed (1) a Los Angeles educational station affiliated with the Public Broadcasting Service that made many of its programs available for home taping, and (2) Mr. Rogers' Neighborhood, a widely watched children's program. Id., at 445. On the basis of this testimony and other similar evidence, the Court determined that producers of this kind had authorized duplication of their copyrighted programs "in significant enough numbers to create a substantial market for a noninfringing use of the" VCR. Id., at 447, n. 28 (emphasis added).

      96

      The Court, in using the key word "substantial," indicated that these circumstances alone constituted a sufficient basis for rejecting the imposition of secondary liability. See id., at 456 ("Sony demonstrated a significant likelihood that substantial numbers of copyright holders" would not object [545 U.S. 952] to time-shifting (emphasis added)). Nonetheless, the Court buttressed its conclusion by finding separately that, in any event, un-authorized time-shifting often constituted not infringement, but "fair use." Id., at 447-456.

      97
      B
      98

      When measured against Sony's underlying evidence and analysis, the evidence now before us shows that Grokster passes Sony's test—that is, whether the company's product is capable of substantial or commercially significant noninfringing uses. Id., at 442. For one thing, petitioners' (hereinafter MGM) own expert declared that 75% of current files available on Grokster are infringing and 15% are "likely infringing." See App. 436-439, ¶¶ 6-17 (Decl. of Dr. Ingram Olkin); cf. ante, at 922 (opinion of the Court). That leaves some number of files near 10% that apparently are noninfringing, a figure very similar to the 9% or so of authorized time-shifting uses of the VCR that the Court faced in Sony.

      99

      As in Sony, witnesses here explained the nature of the noninfringing files on Grokster's network without detailed quantification. Those files include:

      100

      —Authorized copies of music by artists such as Wilco, Janis Ian, Pearl Jam, Dave Matthews, John Mayer, and others. See App. 152-153, ¶¶ 9-13 (Decl. of Aram Sinnreich) (Wilco's "lesson has already been adopted by artists still signed to their major labels"); id., at 170, ¶¶ 5-7 (Decl. of Patricia D. Hoekman) (locating "numerous audio recordings" that were authorized for swapping); id., at 74, ¶ 10 (Decl. of Daniel B. Rung) (describing Grokster's partnership with a company that hosts music from thousands of independent artists)

      101

      —Free electronic books and other works from various online publishers, including Project Gutenberg. See id., at 136, ¶ 12 (Decl. of Gregory Newby) ("Numerous authorized and public domain Project Gutenberg eBooks are made available" on Grokster. Project Gutenberg "welcomes this widespread [545 U.S. 953] sharing . . . using these software products[,] since they assist us in meeting our objectives"); id., at 159-160, ¶ 32 (Decl. of Sinnreich)

      102

      —Public domain and authorized software, such as WinZip 8.1. Id., at 170, ¶ 8 (Decl. of Hoekman); id., at 165, ¶¶ 4-7 (Decl. of John Busher)

      103

      —Licensed music videos and television and movie segments distributed via digital video packaging with the permission of the copyright holder. Id., at 70, ¶ 24 (Decl. of Sean L. Mayers).

      104

      The nature of these and other lawfully swapped files is such that it is reasonable to infer quantities of current lawful use roughly approximate to those at issue in Sony. At least, MGM has offered no evidence sufficient to survive summary judgment that could plausibly demonstrate a significant quantitative difference. See ante, at 922 (opinion of the Court); see also Brief for Motion Picture Studio and Recording Company Petitioners i (referring to "at least 90% of the total use of the services"); but see ante, at 947, n. 3 (GINSBURG, J., concurring). To be sure, in quantitative terms these uses account for only a small percentage of the total number of uses of Grokster's product. But the same was true in Sony, which characterized the relatively limited authorized copying market as "substantial." (The Court made clear as well in Sony that the amount of material then presently available for lawful copying—if not actually copied— was significant, see 464 U. S., at 444, and the same is certainly true in this case.)

      105

      Importantly, Sony also used the word "capable," asking whether the product is "capable of" substantial noninfringing uses. Its language and analysis suggest that a figure like 10%, if fixed for all time, might well prove insufficient, but that such a figure serves as an adequate foundation where there is a reasonable prospect of expanded legitimate uses over time. See ibid. (noting a "significant potential for future authorized copying"). And its language also indicates [545 U.S. 954] the appropriateness of looking to potential future uses of the product to determine its "capability."

      106

      Here the record reveals a significant future market for noninfringing uses of Grokster-type peer-to-peer software. Such software permits the exchange of any sort of digital file—whether that file does, or does not, contain copyrighted material. As more and more uncopyrighted information is stored in swappable form, it seems a likely inference that lawful peer-to-peer sharing will become increasingly prevalent. See, e. g., App. 142, ¶ 20 (Decl. of Brewster Kahle) ("[T]he [Internet Archive] welcomes [the] redistribution [of authorized films] by the Morpheus-Grokster-KaZaa community of users"); id., at 166, ¶ 8 (Decl. of Busher) (sales figures of $1,000 to $10,000 per month through peer-to-peer networks "will increase in the future as Acoustica's trialware is more widely distributed through these networks"); id., at 156-163, ¶¶ 21-40 (Decl. of Sinnreich).

      107

      And that is just what is happening. Such legitimate noninfringing uses are coming to include the swapping of: research information (the initial purpose of many peer-to-peer networks); public domain films (e. g., those owned by the Prelinger Archive); historical recordings and digital educational materials (e. g., those stored on the Internet Archive); digital photos (OurPictures, for example, is starting a P2P photo-swapping service); "shareware" and "freeware" (e. g., Linux and certain Windows software); secure licensed music and movie files (Intent MediaWorks, for example, protects licensed content sent across P2P networks); news broadcasts past and present (the BBC Creative Archive lets users "rip, mix and share the BBC"); user-created audio and video files (including "podcasts" that may be distributed through P2P software); and all manner of free "open content" works collected by Creative Commons (one can search for Creative Commons material on StreamCast). See Brief for Distributed Computing Industry Association as Amicus Curiae 15-26; Merges, A New Dynamism in the Public Domain, 71 [545 U.S. 955] U. Chi. L. Rev. 183 (2004). I can find nothing in the record that suggests that this course of events will not continue to flow naturally as a consequence of the character of the software taken together with the foreseeable development of the Internet and of information technology. Cf. ante, at 920 (opinion of the Court) (discussing the significant benefits of peer-to-peer technology).

      108

      There may be other now-unforeseen noninfringing uses that develop for peer-to-peer software, just as the homevideo rental industry (unmentioned in Sony) developed for the VCR. But the foreseeable development of such uses, when taken together with an estimated 10% noninfringing material, is sufficient to meet Sony's standard. And while Sony considered the record following a trial, there are no facts asserted by MGM in its summary judgment filings that lead me to believe the outcome after a trial here could be any different. The lower courts reached the same conclusion.

      109

      Of course, Grokster itself may not want to develop these other noninfringing uses. But Sony's standard seeks to protect not the Groksters of this world (which in any event may well be liable under today's holding), but the development of technology more generally. And Grokster's desires in this respect are beside the point.

      110
      II
      111

      The real question here, I believe, is not whether the record evidence satisfies Sony. As I have interpreted the standard set forth in that case, it does. And of the Courts of Appeals that have considered the matter, only one has proposed interpreting Sony more strictly than I would do—in a case where the product might have failed under any standard. In re Aimster Copyright Litigation, 334 F. 3d 643, 653 (CA7 2003) (defendant "failed to show that its service is ever used for any purpose other than to infringe" copyrights (emphasis added)); see Matthew Bender & Co. v. West Pub. Co., 158 [545 U.S. 956] F. 3d 693, 706-707 (CA2 1998) (court did not require that noninfringing uses be "predominant," it merely found that they were predominant, and therefore provided no analysis of Sony's boundaries); but see ante, at 944, n. 1 (GINSBURG, J., concurring); see also A&M Records, Inc. v. Napster, Inc., 239 F. 3d 1004, 1020 (CA9 2001) (discussing Sony); Cable/Home Communication Corp. v. Network Productions, Inc., 902 F. 2d 829, 842-847 (CA11 1990) (same); Vault Corp. v. Quaid Software, Ltd., 847 F. 2d 255, 262 (CA5 1988) (same); cf. Dynacore Holdings Corp. v. U. S. Philips Corp., 363 F. 3d 1263, 1275 (CA Fed. 2004) (same); see also Doe v. GTE Corp., 347 F. 3d 655, 661 (CA7 2003) ("A person may be liable as a contributory infringer if the product or service it sells has no (or only slight) legal use").

      112

      Instead, the real question is whether we should modify the Sony standard, as MGM requests, or interpret Sony more strictly, as I believe JUSTICE GINSBURG'S approach would do in practice. Compare ante, at 944-948 (concurring opinion) (insufficient evidence in this case of both present lawful uses and of a reasonable prospect that substantial noninfringing uses would develop over time), with Sony, 464 U. S., at 442-447 (basing conclusion as to the likely existence of a substantial market for authorized copying upon general declarations, some survey data, and common sense).

      113

      As I have said, Sony itself sought to "strike a balance between a copyright holder's legitimate demand for effective— not merely symbolic—protection of the statutory monopoly, and the rights of others freely to engage in substantially unrelated areas of commerce." Id., at 442. Thus, to determine whether modification, or a strict interpretation, of Sony is needed, I would ask whether MGM has shown that Sony incorrectly balanced copyright and new-technology interests. In particular: (1) Has Sony (as I interpret it) worked to protect new technology? (2) If so, would modification or strict interpretation significantly weaken that protection? (3) If [545 U.S. 957] so, would new or necessary copyright-related benefits outweigh any such weakening?

      114
      A
      115

      The first question is the easiest to answer. Sony's rule, as I interpret it, has provided entrepreneurs with needed assurance that they will be shielded from copyright liability as they bring valuable new technologies to market.

      116

      Sony's rule is clear. That clarity allows those who develop new products that are capable of substantial noninfringing uses to know, ex ante, that distribution of their product will not yield massive monetary liability. At the same time, it helps deter them from distributing products that have no other real function than—or that are specifically intended for—copyright infringement, deterrence that the Court's holding today reinforces (by adding a weapon to the copyright holder's legal arsenal).

      117

      Sony's rule is strongly technology protecting. The rule deliberately makes it difficult for courts to find secondary liability where new technology is at issue. It establishes that the law will not impose copyright liability upon the distributors of dual-use technologies (who do not themselves engage in unauthorized copying) unless the product in question will be used almost exclusively to infringe copyrights (or unless they actively induce infringements as we today describe). Sony thereby recognizes that the copyright laws are not intended to discourage or to control the emergence of new technologies, including (perhaps especially) those that help disseminate information and ideas more broadly or more efficiently. Thus Sony's rule shelters VCRs, typewriters, tape recorders, photocopiers, computers, cassette players, compact disc burners, digital video recorders, MP3 players, Internet search engines, and peer-to-peer software. But Sony's rule does not shelter descramblers, even if one could theoretically use a descrambler in a noninfringing way. 464 [545 U.S. 958] U. S., at 441-442. Compare Cable/Home Communication Corp., supra, at 837-850 (developer liable for advertising television signal descrambler), with Vault Corp., supra, at 262 (primary use infringing but a substantial noninfringing use).

      118

      Sony's rule is forward looking. It does not confine its scope to a static snapshot of a product's current uses (thereby threatening technologies that have undeveloped future markets). Rather, as the VCR example makes clear, a product's market can evolve dramatically over time. And Sony—by referring to a capacity for substantial noninfringing uses—recognizes that fact. Sony's word "capable" refers to a plausible, not simply a theoretical, likelihood that such uses will come to pass, and that fact anchors Sony in practical reality. Cf. Aimster, 334 F. 3d, at 651.

      119

      Sony's rule is mindful of the limitations facing judges where matters of technology are concerned. Judges have no specialized technical ability to answer questions about present or future technological feasibilility or commercial viability where technology professionals, engineers, and venture capitalists themselves may radically disagree and where answers may differ depending upon whether one focuses upon the time of product development or the time of distribution. Consider, for example, the question whether devices can be added to Grokster's software that will filter out infringing files. MGM tells us this is easy enough to do, as do several amici that produce and sell the filtering technology. See, e. g., Brief for Motion Picture Studio and Recording Company Petitioners 11; Brief for Audible Magic Corp. et al. as Amici Curiae 3-10. Grokster says it is not at all easy to do, and not an efficient solution in any event, and several apparently disinterested computer science professors agree. See Brief for Respondents 31; Brief for Computer Science Professor Harold Abelson et al. as Amici Curiae 6-10, 14-18. Which account should a judge credit? Sony says that the judge will not necessarily have to decide.

      120

      [545 U.S. 959] Given the nature of the Sony rule, it is not surprising that in the last 20 years, there have been relatively few contributory infringement suits—based on a product distribution theory—brought against technology providers (a small handful of federal appellate court cases and perhaps fewer than two dozen District Court cases in the last 20 years). I have found nothing in the briefs or the record that shows that Sony has failed to achieve its innovation-protecting objective.

      121
      B
      122

      The second, more difficult, question is whether a modified Sony rule (or a strict interpretation) would significantly weaken the law's ability to protect new technology. JUSTICE GINSBURG'S approach would require defendants to produce considerably more concrete evidence—more than was presented here—to earn Sony's shelter. That heavier evidentiary demand, and especially the more dramatic (case-by-case balancing) modifications that MGM and the Government seek, would, I believe, undercut the protection that Sony now offers.

      123

      To require defendants to provide, for example, detailed evidence—say, business plans, profitability estimates, projected technological modifications, and so forth—would doubtless make life easier for copyright holder plaintiffs. But it would simultaneously increase the legal uncertainty that surrounds the creation or development of a new technology capable of being put to infringing uses. Inventors and entrepreneurs (in the garage, the dorm room, the corporate lab, or the boardroom) would have to fear (and in many cases endure) costly and extensive trials when they create, produce, or distribute the sort of information technology that can be used for copyright infringement. They would often be left guessing as to how a court, upon later review of the product and its uses, would decide when necessarily rough estimates amounted to sufficient evidence. They would have no way to predict how courts would weigh the respective [545 U.S. 960] values of infringing and noninfringing uses; determine the efficiency and advisability of technological changes; or assess a product's potential future markets. The price of a wrong guess—even if it involves a good-faith effort to assess technical and commercial viability—could be large statutory damages (not less than $750 and up to $30,000 per infringed work). 17 U. S. C. § 504(c)(1). The additional risk and uncertainty would mean a consequent additional chill of technological development.

      124
      C
      125

      The third question—whether a positive copyright impact would outweigh any technology-related loss—I find the most difficult of the three. I do not doubt that a more intrusive Sony test would generally provide greater revenue security for copyright holders. But it is harder to conclude that the gains on the copyright swings would exceed the losses on the technology roundabouts.

      126

      For one thing, the law disfavors equating the two different kinds of gain and loss; rather, it leans in favor of protecting technology. As Sony itself makes clear, the producer of a technology which permits unlawful copying does not himself engage in unlawful copying—a fact that makes the attachment of copyright liability to the creation, production, or distribution of the technology an exceptional thing. See 464 U. S., at 431 (courts "must be circumspect" in construing the copyright laws to preclude distribution of new technologies). Moreover, Sony has been the law for some time. And that fact imposes a serious burden upon copyright holders like MGM to show a need for change in the current rules of the game, including a more strict interpretation of the test. See, e. g., Brief for Motion Picture Studio and Recording Company Petitioners 31 (Sony should not protect products when the "primary or principal" use is infringing).

      127

      In any event, the evidence now available does not, in my view, make out a sufficiently strong case for change. To say [545 U.S. 961] this is not to doubt the basic need to protect copyrighted material from infringement. The Constitution itself stresses the vital role that copyright plays in advancing the "useful Arts." Art. I, § 8, cl. 8. No one disputes that "reward to the author or artist serves to induce release to the public of the products of his creative genius." United States v. Paramount Pictures, Inc., 334 U. S. 131, 158 (1948). And deliberate unlawful copying is no less an unlawful taking of property than garden-variety theft. See, e. g., 18 U. S. C. § 2319 (2000 ed. and Supp. II) (criminal copyright infringement); § 1961(1)(B) (2000 ed., Supp. II) (copyright infringement can be a predicate act under the Racketeer Influenced and Corrupt Organizations Act); § 1956(c)(7)(D) (2000 ed., Supp. II) (money laundering includes the receipt of proceeds from copyright infringement). But these highly general principles cannot by themselves tell us how to balance the interests at issue in Sony or whether Sony's standard needs modification. And at certain key points, information is lacking.

      128

      Will an unmodified Sony lead to a significant diminution in the amount or quality of creative work produced? Since copyright's basic objective is creation and its revenue objectives but a means to that end, this is the underlying copyright question. See Twentieth Century Music Corp. v. Aiken, 422 U. S. 151, 156 (1975) ("Creative work is to be encouraged and rewarded, but private motivation must ultimately serve the cause of promoting broad public availability of literature, music, and the other arts"). And its answer is far from clear.

      129

      Unauthorized copying likely diminishes industry revenue, though it is not clear by how much. Compare S. Liebowitz, Will MP3 Downloads Annihilate the Record Industry? The Evidence So Far 2 (June 2003), http://www.utdallas.edu/~liebowit/intprop/records.pdf (all Internet materials as visited June 24, 2005, and available in Clerk of Court's case file)

      130

      [545 U.S. 962] (file sharing has caused a decline in music sales), and Press Release, Informa Telecoms & Media, Steady Download Growth Defies P2P (Dec. 6, 2004), http://www.informatm.com (citing Informa Media Group Report, Music on the Internet (5th ed. 2004)) (estimating total lost sales to the music industry in the range of $2 billion annually), with F. Oberholzer & K. Strumpf, The Effect of File Sharing on Record Sales: An Empirical Analysis 24 (Mar. 2004), www.unc.edu/~cigar/papers/FileSharing_March2004.pdf (academic study concluding that "file sharing has no statistically significant effect on purchases of the average album"), and D. McGuire, Study: File-Sharing No Threat to Music Sales (Mar. 29, 2004), http://www.washingtonpost.com/ac2/wp-dyn/A34300-2004Mar29?language=printer (discussing mixed evidence).

      131

      The extent to which related production has actually and resultingly declined remains uncertain, though there is good reason to believe that the decline, if any, is not substantial. See, e. g., M. Madden, Pew Internet & American Life Project, Artists, Musicians, and the Internet 21 (Dec. 5, 2004), http://www.pewinternet.org/pdfs/PIP_Artists. Musicians_Report.pdf (nearly 70% of musicians believe that file sharing is a minor threat or no threat at all to creative industries); Benkler, Sharing Nicely: On Shareable Goods and the Emergence of Sharing as a Modality of Economic Production, 114 Yale L. J. 273, 351-352 (2004) ("Much of the actual flow of revenue to artists—from performances and other sources—is stable even assuming a complete displacement of the CD market by peer-to-peer distribution . . . . [I]t would be silly to think that music, a cultural form without which no human society has existed, will cease to be in our world [because of illegal file swapping]").

      132

      More importantly, copyright holders at least potentially have other tools available to reduce piracy and to abate whatever threat it poses to creative production. As today's opinion makes clear, a copyright holder may proceed against [545 U.S. 963] a technology provider where a provable specific intent to infringe (of the kind the Court describes) is present. Ante, at 941. Services like Grokster may well be liable under an inducement theory.

      133

      In addition, a copyright holder has always had the legal authority to bring a traditional infringement suit against one who wrongfully copies. Indeed, since September 2003, the Recording Industry Association of America (RIAA) has filed "thousands of suits against people for sharing copyrighted material." Walker, New Movement Hits Universities: Get Legal Music, Washington Post, Mar. 17, 2005, p. E1. These suits have provided copyright holders with damages; have served as a teaching tool, making clear that much file sharing, if done without permission, is unlawful; and apparently have had a real and significant deterrent effect. See, e. g., L. Rainie, M. Madden, D. Hess, & G. Mudd, Pew Internet Project and comScore Media Metrix Data Memo: The state of music downloading and file-sharing online 2, 4, 6, 10 (Apr. 2004), http://www.pewinternet.org/pdfs/PIP_Filesharing_April_04.pdf (number of people downloading files fell from a peak of roughly 35 million to roughly 23 million in the year following the first suits; 38% of current downloaders report downloading fewer files because of the suits); M. Madden & L. Rainie, Pew Internet Project Data Memo: Music and video downloading moves beyond P2P, p. 7 (Mar. 2005), http://www. pewinternet.org/pdfs/PIP_Filesharing_March05.pdf (number of downloaders has "inched up" but "continues to rest well below the peak level"); Note, Costs and Benefits of the Recording Industry's Litigation Against Individuals, 20 Berkeley Tech. L. J. 571 (2005); but see Evangelista, File Sharing; Downloading Music and Movie Files is as Popular as Ever, San Francisco Chronicle, Mar. 28, 2005, p. E1 (referring to the continuing "tide of rampant copyright infringement," while noting that the RIAA says it believes the "campaign of lawsuits and public education has at least contained the problem").

      134

      [545 U.S. 964] Further, copyright holders may develop new technological devices that will help curb unlawful infringement. Some new technology, called "digital `watermarking'" and "digital fingerprint[ing]," can encode within the file information about the author and the copyright scope and date, which "fingerprints" can help to expose infringers. RIAA Reveals Method to Madness, Wired News (Aug. 28, 2003), http:// www.wired.com/news/digiwood/0,1412,60222,00.html; Besek, Anti-Circumvention Laws and Copyright: A Report from the Kernochan Center for Law, Media and the Arts, 27 Colum. J. L. & Arts 385, 391, 451 (2004). Other technology can, through encryption, potentially restrict users' ability to make a digital copy. See J. Borland, Tripping the Rippers, C/net News.com (Sept. 28, 2001), http://news.com.com/ Tripping+the+rippers/2009-1023_3-273619.html; but see Brief for Bridgemar Services, Ltd. d/b/a iMesh.com as Amicus Curiae 5-8 (arguing that peer-to-peer service providers can more easily block unlawful swapping).

      135

      At the same time, advances in technology have discouraged unlawful copying by making lawful copying (e. g., downloading music with the copyright holder's permission) cheaper and easier to achieve. Several services now sell music for less than $1 per song. (Walmart.com, for example, charges $0.88 each.) Consequently, many consumers initially attracted to the convenience and flexibility of services like Grokster are now migrating to lawful paid services (services with copying permission) where they can enjoy at little cost even greater convenience and flexibility without engaging in unlawful swapping. See Wu, When Code Isn't Law, 89 Va. L. Rev. 679, 731-735 (2003) (noting the prevalence of technological problems on unpaid swapping sites); K. Dean, P2P Tilts Toward Legitimacy, Wired News (Nov. 24, 2004), http://www.wired.com/news/ digiwood/0,1412,65836,00.html; Madden & Rainie, March 2005 Data Memo, supra, at 6-8 (percentage of current downloaders who have used paid services rose from 24% to 43% in a year; number using free services fell from 58% to 41%).

      136

      [545 U.S. 965] Thus, lawful music downloading services—those that charge the customer for downloading music and pay royalties to the copyright holder—have continued to grow and to produce substantial revenue. See Brief for Internet Law Faculty as Amicus Curiae 5-20; Bruno, Digital Entertainment: Piracy Fight Shows Encouraging Signs (Mar. 5, 2005), available at LEXIS, News Library, Billboard File (in 2004, consumers worldwide purchased more than 10 times the number of digital tracks purchased in 2003; global digital music market of $330 million in 2004 expected to double in 2005); Press Release, Informa Telecoms & Media, Steady Download Growth Defies P2P (global digital revenues will likely exceed $3 billion in 2010); Ashton, [International Federation of the Phonographic Industry] Predicts Downloads Will Hit the Mainstream, Music Week, Jan. 29, 2005, p. 6 (legal music sites and portable MP3 players "are helping to transform the digital music market" into "an everyday consumer experience"). And more advanced types of non-music-oriented peer-to-peer networks have also started to develop, drawing in part on the lessons of Grokster.

      137

      Finally, as Sony recognized, the legislative option remains available. Courts are less well suited than Congress to the task of "accommodat[ing] fully the varied permutations of competing interests that are inevitably implicated by such new technology." Sony, 464 U. S., at 431; see, e. g., Audio Home Recording Act of 1992, 106 Stat. 4237 (adding 17 U. S. C., ch. 10); Protecting Innovation and Art While Preventing Piracy: Hearing before the Senate Committee on the Judiciary, 108th Cong., 2d Sess. (2004).

      138

      I do not know whether these developments and similar alternatives will prove sufficient, but I am reasonably certain that, given their existence, a strong demonstrated need for modifying Sony (or for interpreting Sony's standard more strictly) has not yet been shown. That fact, along with the added risks that modification (or strict interpretation) would impose upon technological innovation, leads me to the conclusion that we should maintain Sony, reading its standard as I [545 U.S. 966] have read it. As so read, it requires affirmance of the Ninth Circuit's determination of the relevant aspects of the Sony question.

      139

      * * *

      140

      For these reasons, I disagree with JUSTICE GINSBURG, but I agree with the Court and join its opinion.

      141

      Notes:

      142

      [*] Briefs of amici curiae urging reversal were filed for the State of Utah et al. by Mark Shurtleff, Attorney General of Utah, and by the Attorneys General for their respective jurisdictions as follows: Troy King of Alabama, Gregg Renkes of Alaska, Terry Goddard of Arizona, Mike Beebe of Arkansas, M. Jane Brady of Delaware, Charles J. Crist, Jr., of Florida, Thurbert E. Baker of Georgia, Douglas B. Moylan of Guam, Mark J. Bennett of Hawaii, Lawrence G. Wasden of Idaho, Lisa Madigan of Illinois, Steve Carter of Indiana, Phill Kline of Kansas, Gregory D. Stumbo of Kentucky, Charles C. Foti, Jr., of Louisiana, Thomas F. Reilly of Massachusetts, Michael A. Cox of Michigan, Mike Hatch of Minnesota, Jim Hood of Mississippi, Jeremiah W. (Jay) Nixon of Missouri, Mike McGrath of Montana, Jon Bruning of Nebraska, Brian Sandoval of Nevada, Peter C. Harvey of New Jersey, Patricia A. Madrid of New Mexico, Roy Cooper of North Carolina, Wayne Stenehjem of North Dakota, Jim Petro of Ohio, W. A. Drew Edmondson of Oklahoma, Thomas W. Corbett, Jr., of Pennsylvania, Patrick Lynch of Rhode Island, Henry McMaster of South Carolina, Lawrence E. Long of South Dakota, Paul G. Summers of Tennessee, Greg Abbott of Texas, William H. Sorrell of Vermont, Jerry Kilgore of Virginia, Darrell V. McGraw, Jr., of West Virginia, and Peg Lautenschlager of Wisconsin; for the American Federation of Musicians of the United States and Canada et al. by George H. Cohen, Patricia Polach, and Laurence Gold; for the American Society of Composers, Authors and Publishers et al. by I. Fred Koenigsberg, Michael E. Salzman, and Marvin L. Berenson; for Americans for Tax Reform by Carter G. Phillips, Alan Charles Raul, Jay T. Jorgensen, and Eric A. Shumsky; for the Commissioner of Baseball et al. by Robert Alan Garrett and Hadrian R. Katz; for Defenders of Property Rights by Theodore B. Olson, Thomas H. Dupree, Jr., Matthew D. McGill, Nancie G. Marzulla, and Roger Marzulla; for International Rights Owners by Christopher Wolf; for Kids First Coalition et al. by Viet D. Dinh; for Law Professors et al. by James Gibson; for Macrovision Corp. by Geoffrey L. Beauchamp, Kelly G. Huller, and James H. Salter; for Napster, LLC, et al. by Barry I. Slotnick; for the National Academy of Recording Arts & Sciences, Inc., et al. by Jon A. Baumgarten and Jay L. Cooper; for the National Association of Broadcasters by Marsha J. MacBride, Jane E. Mago, Benjamin F. P. Ivins, and Jerianne Timmerman; for the National Association of Recording Merchandisers by Alan R. Malasky and Melanie Martin-Jones; for the Progress & Freedom Foundation by James V. DeLong; for the Video Software Dealers Association by John T. Mitchell; and for Professor Peter S. Menell et al. by Mr. Menell, pro se.

      143

      Briefs of amici curiae urging affirmance were filed for Altnet, Inc., by Roderick G. Dorman; for the American Civil Liberties Union et al. by Christopher A. Hansen, Steven R. Shapiro, Sharon M. McGowan, Ann Brick, and Jordan C. Budd; for the American Conservative Union et al. by David Post; for the Cellular Telecommunications & Internet Association et al. by Andrew G. McBride, Joshua S. Turner, Michael Altschul, James W. Olson, Frank L. Politano, Laura Kaster, Jeffrey A. Rackow, Grier C. Raclin, Michael Standard, John Thorne, Sarah B. Deutsch, and Paul J. Larkin, Jr.; for the Consumer Electronics Association et al. by Bruce G. Joseph and Scott E. Bain; for the Consumer Federation of America et al. by Peter Jaszi; for the Distributed Computing Industry Association by Mr. Dorman; for the Eagle Forum Education & Legal Defense Fund by Andrew L. Schlafly and Karen B. Tripp; for the Free Software Foundation et al. by Eben Moglen; for Intel Corp. by James M. Burger and Jonathan D. Hart; for Internet Law Faculty by William W. Fisher III and Jonathan Zittrain; for Law Professors by J. Glynn Lunney, Jr.; for the National Association of Shareholder and Consumer Attorneys by Kevin P. Roddy and Matthew E. Van Tine; for Sixty Intellectual Property and Technology Law Professors et al. by Deirdre K. Mulligan and Pamela Samuelson; for Sovereign Artists et al. by James R. Wheaton; for Computer Science Professor Harold Abelson et al. by James S. Tyre; for Professor Edward Lee et al. by Mr. Lee, pro se; for Charles Nesson by Mr. Nesson, pro se; and for Malla Pollack et al. by Ms. Pollack, pro se.

      144

      Briefs of amici curiae were filed for the American Intellectual Property Law Association by Rick D. Nydegger and Melvin C. Garner; for Audible Magic Corp. et al. by Bruce V. Spiva and Jeremy H. Stern; for Bridgemar Services, Ltd. d/b/a iMesh.com by Jeffrey A. Kimmel; for the Business Software Alliance by E. Edward Bruce and Robert A. Long, Jr.; for Creative Commons by Lawrence Lessig; for the Digital Media Association et al. by Lawrence Robbins, Alan Untereiner, Markham C. Erickson, and Jerry Berman; for Emerging Technology Companies by Michael Traynor and Matthew D. Brown; for IEEE-USA by Matthew J. Conigliaro, Andrew C. Greenberg, Joseph H. Lang, Jr., and Daniel E. Fisher; for Innovation Scholars and Economists by Laurence F. Pulgram; for the Intellectual Property Owners Association by James H. Pooley; for Media Studies Professors by Roy I. Liebman; for the National Venture Capital Association by Michael K. Kellogg, Mark L. Evans, and David L. Schwarz; for Sharman Networks Limited by Mr. Dorman; for SNOCAP, Inc., by Joel W. Nomkin; for Kenneth J. Arrow et al. by David A. Strauss; for Lee A. Hollaar by Lloyd W. Sadler; for U. S. Senator Patrick Leahy et al. by Mr. Leahy, pro se, and Senator Orrin G. Hatch, pro se; and for Felix Oberholzer-Gee et al. by Carl H. Settlemyer III and Arnold P. Lutzker.

      145

      [1] Peer-to-peer networks have disadvantages as well. Searches on peer-to-peer networks may not reach and uncover all available files because search requests may not be transmitted to every computer on the network. There may be redundant copies of popular files. The creator of the software has no incentive to minimize storage or bandwidth consumption, the costs of which are borne by every user of the network. Most relevant here, it is more difficult to control the content of files available for retrieval and the behavior of users.

      146

      [2] The studios and recording companies and the songwriters and music publishers filed separate suits against the defendants that were consolidated by the District Court.

      147

      [3] Subsequent versions of Morpheus, released after the record was made in this case, apparently rely not on Gnutella but on a technology called Neonet. These developments are not before us.

      148

      [4] There is some evidence that both Grokster and StreamCast previously operated supernodes, which compiled indexes of files available on all of the nodes connected to them. This evidence, pertaining to previous versions of the defendants' software, is not before us and would not affect our conclusions in any event.

      149

      [5] By comparison, evidence introduced by the plaintiffs in A&M Records, Inc. v. Napster, Inc., 239 F. 3d 1004 (CA9 2001), showed that 87% of files available on the Napster file-sharing network were copyrighted, id., at 1013.

      150

      [6] The Grokster founder contends that in answering these e-mails he often did not read them fully. App. 77, 769.

      151

      [7] The record makes clear that StreamCast developed these promotional materials but not whether it released them to the public. Even if these advertisements were not released to the public and do not show encouragement to infringe, they illuminate StreamCast's purposes.

      152

      [8] The mutual exclusivity of these values should not be overstated, however. On the one hand technological innovators, including those writing file-sharing computer programs, may wish for effective copyright protections for their work. See, e. g., Wu, When Code Isn't Law, 89 Va. L. Rev. 679, 750 (2003). (StreamCast itself was urged by an associate to "get [its] technology written down and [its intellectual property] protected." App. 866.) On the other hand the widespread distribution of creative works through improved technologies may enable the synthesis of new works or generate audiences for emerging artists. See Eldred v. Ashcroft, 537 U. S. 186, 223-226 (2003) (Stevens, J., dissenting); Van Houweling, Distributive Values in Copyright, 83 Texas L. Rev. 1535, 1539-1540, 1562-1564 (2005); Brief for Sovereign Artists et al. as Amici Curiae 11.

      153

      [9] We stated in Sony Corp. of America v. Universal City Studios, Inc., 464 U. S. 417 (1984), that "`the lines between direct infringement, contributory infringement and vicarious liability are not clearly drawn' . . . . [R]easoned analysis of [the Sony plaintiffs' contributory infringement claim] necessarily entails consideration of arguments and case law which may also be forwarded under the other labels, and indeed the parties . . . rely upon such arguments and authority in support of their respective positions on the issue of contributory infringement," id., at 435, n. 17 (quoting Universal City Studios, Inc. v. Sony Corp. of America, 480 F. Supp. 429, 457-458 (CD Cal. 1979)). In the present case MGM has argued a vicarious liability theory, which allows imposition of liability when the defendant profits directly from the infringement and has a right and ability to supervise the direct infringer, even if the defendant initially lacks knowledge of the infringement. See, e. g., Shapiro, Bernstein & Co. v. H. L. Green Co., 316 F. 2d 304, 308 (CA2 1963); Dreamland Ball Room, Inc. v. Shapiro, Bernstein & Co., 36 F. 2d 354, 355 (CA7 1929). Because we resolve the case based on an inducement theory, there is no need to analyze separately MGM's vicarious liability theory.

      154

      [10] Nor does the Patent Act's exemption from liability for those who distribute a staple article of commerce, 35 U. S. C. § 271(c), extend to those who induce patent infringement, § 271(b).

      155

      [11] Inducement has been codified in patent law. Ibid.

      156

      [12] Of course, in the absence of other evidence of intent, a court would be unable to find contributory infringement liability merely based on a failure to take affirmative steps to prevent infringement, if the device otherwise was capable of substantial noninfringing uses. Such a holding would tread too close to the Sony safe harbor.

      157

      [13] Grokster and StreamCast contend that any theory of liability based on their conduct is not properly before this Court because the rulings in the trial and appellate courts dealt only with the present versions of their software, not "past acts . . . that allegedly encouraged infringement or assisted . . . known acts of infringement." Brief for Respondents 14; see also id., at 34. This contention misapprehends the basis for their potential liability. It is not only that encouraging a particular consumer to infringe a copyright can give rise to secondary liability for the infringement that results. Inducement liability goes beyond that, and the distribution of a product can itself give rise to liability where evidence shows that the distributor intended and encouraged the product to be used to infringe. In such a case, the culpable act is not merely the encouragement of infringement but also the distribution of the tool intended for infringing use. See Kalem Co. v. Harper Brothers, 222 U. S. 55, 62-63 (1911); Cable/Home Communication Corp. v. Network Productions, Inc., 902 F. 2d 829, 846 (CA11 1990); A&M Records, Inc. v. Abdallah, 948 F. Supp. 1449, 1456 (CD Cal. 1996).

      158

      ---------------

      159

      [14] JUSTICE BREYER finds in Sony Corp. of America v. Universal City Studios, Inc., 464 U. S. 417 (1984), a "clear" rule permitting contributory liability for copyright infringement based on distribution of a product only when the product "will be used almost exclusively to infringe copyrights." Post, at 957. But cf. Sony, 464 U. S., at 442 (recognizing "copyright holder's legitimate demand for effective—not merely symbolic—protection"). Sony, as I read it, contains no clear, near-exclusivity test. Nor have Courts of Appeals unanimously recognized JUSTICE BREYER'S clear rule. Compare A&M Records, Inc. v. Napster, Inc., 239 F. 3d 1004, 1021 (CA9 2001) ("[E]vidence of actual knowledge of specific acts of infringement is required to hold a computer system operator liable for contributory copyright infringement."), with In re Aimster Copyright Litigation, 334 F. 3d 643, 649-650 (CA7 2003) ("[W]hen a supplier is offering a product or service that has noninfringing as well as infringing uses, some estimate of the respective magnitudes of these uses is necessary for a finding of contributory infringement. . . . But the balancing of costs and benefits is necessary only in a case in which substantial noninfringing uses, present or prospective, are demonstrated."). See also Matthew Bender & Co. v. West Pub. Co., 158 F. 3d 693, 707 (CA2 1998) ("The Supreme Court applied [the Sony] test to prevent copyright holders from leveraging the copyrights in their original work to control distribution of . . . products that might be used incidentally for infringement, but that had substantial noninfringing uses. . . . The same rationale applies here [to products] that have substantial, predominant and noninfringing uses as tools for research and citation."). All Members of the Court agree, moreover, that "the Court of Appeals misapplied Sony," at least to the extent it read that decision to limit "secondary liability" to a hardly ever category, "quite beyond the circumstances to which the case applied." Ante, at 933.

      160

      [15] Grokster and StreamCast, in the Court of Appeals' view, would be entitled to summary judgment unless MGM could show that the software companies had knowledge of specific acts of infringement and failed to act on that knowledge—a standard the court held MGM could not meet. 380 F. 3d, at 1162-1163.

      161

      [16] JUSTICE BREYER finds support for summary judgment in this motley collection of declarations and in a survey conducted by an expert retained by MGM. Post, at 952-955. That survey identified 75% of the files available through Grokster as copyrighted works owned or controlled by the plaintiffs, and 15% of the files as works likely copyrighted. App. 439. As to the remaining 10% of the files, "there was not enough information to form reasonable conclusions either as to what those files even consisted of, and/or whether they were infringing or non-infringing." Id., at 479. Even assuming, as JUSTICE BREYER does, that the Sony Court would have absolved Sony of contributory liability solely on the basis of the use of the Betamax for authorized time-shifting, post, at 950-951, summary judgment is not inevitably appropriate here. Sony stressed that the plaintiffs there owned "well below 10%" of copyrighted television programming, 464 U. S., at 443, and found, based on trial testimony from representatives of the four major sports leagues and other individuals authorized to consent to home recording of their copyrighted broadcasts, that a similar percentage of program copying was authorized, id., at 424. Here, the plaintiffs allegedly control copyrights for 70% or 75% of the material exchanged through the Grokster and StreamCast software, 380 F. 3d 1154, 1158 (CA9 2004); App. 439, and the District Court does not appear to have relied on comparable testimony about authorized copying from copyright holders.

      162

      [17] The District Court's conclusion that "[p]laintiffs do not dispute that [d]efendants' software is being used, and could be used, for substantial noninfringing purposes," 259 F. Supp. 2d 1029, 1036 (CD Cal. 2003); accord 380 F. 3d, at 1161, is, to say the least, dubious. In the courts below and in this Court, MGM has continuously disputed any such conclusion. Brief for Motion Picture Studio and Recording Company Petitioners 30-38; Brief for MGM Plaintiffs-Appellants in No. 03-55894 etc. (CA9), p. 41; App. 356-357, 361-365.

    • 2.2 Viacom Intern., Inc. v. YouTube, Inc.

      1

      102 U.S.P.Q.2d 1283
      2012 Copr.L.Dec. P 30,231
      676 F.3d 19

      VIACOM INTERNATIONAL, INC., Comedy Partners, Country Music Television, Inc., Paramount Pictures Corporation, Black Entertainment Television, LLC, Plaintiffs–Appellants,
      v.
      YOUTUBE, INC., YouTube, LLC, Google, Inc., Defendants–Appellees.The Football Association Premier League Limited, on behalf of themselves and all others similarly situated, Bourne Co., Cal IV Entertainment, LLC, Cherry Lane Music Publishing Company, Inc., X–Ray Dog Music, Inc., Fédération Française De Tennis, Murbo Music Publishing, Inc., Stage Three Music (US), Inc., Plaintiffs–Appellants,Robert Tur, d/b/a Los Angeles News Service, The Scottish Premier League Limited, The Music Force Media Group LLC, The Music Force, LLC, Sin–Drome Records, Ltd., on behalf of themselves and all others similarly situated, National Music Publishers' Association, The Rodgers & Hammerstein Organization, Edward B. Marks Music Company, Freddy Bienstock Music Company, d/b/a Bienstock Publishing Company, Alley Music Corporation, Plaintiffs,
      v.
      YouTube, Inc., YouTube, LLC, Google, Inc., Defendants–Appellees.

      Docket Nos. 10–3270–cv

      10–3342–cv.

      United States Court of Appeals, Second Circuit.

      Argued: Oct. 18, 2011. Decided: April 5, 2012.

      2

      [676 F.3d 22] Paul M. Smith, Jenner & Block LLP, Washington, DC (William M. Hohengarten, Scott B. Wilkens, Matthew S. Hellman, and Susan J. Kohlmann, Jenner & Block LLP, New York, NY, and Washington, DC; Theodore B. Olson and Matthew D. McGill, Gibson, Dunn & Crutcher LLP, Washington, DC; Stuart J. Baskin, Shearman & Sterling LLP, New York, NY, on the brief), for Plaintiffs–Appellants Viacom International, Inc., et al.

      3

      Charles S. Sims, Proskauer Rose LLP, New York, N.Y. (William M. Hart, Noah Siskind Gitterman, and Elizabeth A. Figueira, Proskauer Rose LLP, New York, NY, on the brief), for Plaintiffs–Appellants Football Association Premier League Ltd., et al.; Max W. Berger and John C. Browne, Bernstein Litowitz Berger & Grossmann LLP, New York, NY, on the brief, for Plaintiffs–Appellants Football Association Premier League Ltd., Bourne Co., Murbo Music Publishing, Inc., Cherry Lane Music Publishing Co., Inc., X–Ray Dog Music, Inc., and Fédération Française de Tennis; Louis M. Solomon and Hal S. Shaftel, Cadwalader, Wickersham & Taft, LLP, New York, NY, on the brief, for Plaintiff–Appellant Football Association Premier League Ltd.; Jacqueline C. Charlesworth and Cindy P. Abramson, Morrison & Foerster, New York, NY, and David S. Stellings and Annika K. Martin, Lieff Cabraser Heimann & Bernstein, LLP, New York, NY, on the brief, for Plaintiff–Appellant Stage Three Music (US), Inc., and Plaintiffs–Appellants National Music Publishers' Association, Rodgers & Hammerstein Organization, Edward B. Marks Music Co., Freddy Bienstock Music Co. d/b/a Bienstock Publishing Co., [676 F.3d 23] and Alley Music Corporation; Daniel Girard and Christina Connolly Sharp, Girard Gibbs LLP, San Francisco, CA, David Garrison, Barrett Johnston & Parsley, Nashville, TN, and Kevin Doherty, Burr & Forman LLP, Nashville, TN, on the brief, for Plaintiff–Appellant Cal IV Entertainment LLC; Christopher Lovell and Christopher M. McGrath, Lovell Stewart Halebian LLP, New York, NY, Jeffrey L. Graubart, Pasadena, CA, and Steve D'Onofrio, Washington, DC, for Plaintiffs The Music Force Media Group LLC, The Music Force, LLC, and Sin–Drome Records, Ltd.

      4

      Andrew H. Schapiro, Mayer Brown LLP, New York, N.Y. (A. John P. Mancini and Brian M. Willen, Mayer Brown LLP, New York, NY; David H. Kramer, Michael H. Rubin, and Bart E. Volkmer, Wilson Sonsini Goodrich & Rosati, Palo Alto, CA, on the brief), for Defendants–Appellees.Clifford M. Sloan (Christopher G. Clark and Mary E. Rasenberger, on the brief), Skadden, Arps, Slate, Meagher & Flom LLP, New York, NY, and Washington, DC, for amici curiae Advance Publications, Inc., Association of American Publishers, Association of American University Presses, The Associated Press, The Center for the Rule of Law, Gannett Co., Inc., ICBC Broadcast Holdings, Inc., Institute for Policy Innovation, The Ladies Professional Golf Association, The McClatchy Co., The Media Institute, Minority Media & Telecommunications Council, Inc., National Association of Black Owned Broadcasters, The National Football League, Newspaper Association of America, Picture Archive Council of America, Professional Photographers of America, Radio Television Digital News Association, Rosetta Stone Ltd., The E.W. Scripps Co., Sports Rights Owners Coalition, The Washington Post, and Zuffa LLC, in support of Plaintiffs–Appellants.Peter D. DeChiara, Cohen, Weiss & Simon LLP, New York, NY, for amici curiae American Federation of Musicians, American Federation of Television & Radio Artists, Directors Guild of America, Inc., International Alliance of Theatrical Stage Employees, Screen Actors Guild, Inc., and Studio Transportation Drivers, Local 399, International Brotherhood of Teamsters, in support of Plaintiffs–Appellants.Russell J. Frackman, Mitchell Silberberg & Knupp LLP, Los Angeles, CA, for amici curiae Broadcast Music, Inc., American Society of Composers, Authors and Publishers, SESAC, Inc., The Society of Composers and Lyricists, The Association of Independent Music Publishers, Songwriters Guild of America, The Recording Academy, The Nashville Songwriters Association International, American Association of Independent Music, Music Publishers' Association of the United States, Lisa Thomas Music Services, LLC, Garth Brooks, Bruce Hornsby, Boz Scaggs, Sting, Roger Waters, Glenn Frey, Don Henley, Timothy B. Schmit, and Joe Walsh (The Eagles), in support of Plaintiffs–Appellants.Carey R. Ramos (Lynn B. Bayard and Darren W. Johnson, on the brief), Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York, NY, for amici curiae Stuart N. Brotman, Ronald A. Cass, and Raymond T. Nimmer, in support of Plaintiffs–Appellants.Jonathan L. Marcus (Martin F. Hansen, Matthew Berns, Brian D. Ginsberg & Evan R. Cox, on the brief), Covington & Burling LLP, New York, NY, San Francisco, CA, and Washington, DC, for amicus curiae Business Software Alliance, in support of Plaintiffs–Appellants.Robert Penchina, Levine Sullivan Koch & Schulz, L.L.P., New York, NY, for amicus [676 F.3d 24] curiae CBS Corp., in support of Plaintiffs–Appellants.Bruce A. Lehman (Jason D. Koch and Cameron Coffey, on the brief), Washington, DC, for amicus curiae International Intellectual Property Institute, in support of Plaintiffs–Appellants.Bruce E. Boyden, Marquette University Law School, Milwaukee, WI, for amici curiae Intellectual Property Law Professors, in support of Plaintiffs–Appellants.Gregory G. Garre, Latham & Watkins LLP, Washington, DC (Lori Alvino McGill, Latham & Watkins LLP, Washington, DC, Thomas W. Burt, Microsoft Corp., Redmond, WA, and Jacob Schatz, Electronic Arts Inc., Redwood City, CA, on the brief), for amicus curiae Microsoft Corp. & Electronic Arts Inc., in support of Plaintiffs–Appellants.Kelly M. Klaus, Munger, Tolles & Olson LLP, Los Angeles, CA (Susan Cleary, Independent Film & Television Alliance, on the brief) for amicus curiae Motion Picture Association of America, Independent Film & Television Alliance, in support of Plaintiffs–Appellants.Richard B. Kendall (Laura W. Brill and Joshua Y. Karp, on the brief), Kendall Brill & Klieger LLP, Los Angeles, CA, for amici curiae Matthew L. Spitzer, John R. Allison, Robert G. Bone, Hugh C. Hansen, Michael S. Knoll, Reinier H. Kraakman, Alan Schwartz, and Robert E. Scott, in support of Plaintiffs–Appellants.Andrew M. Riddles, Crowell & Moring LLP, New York, N.Y. (Michael J. Songer, Crowell & Moring LLP, Washington, DC, and Daniel J. Popeo and Cory L. Andrews, Washington Legal Foundation, Washington, DC, on the brief), for amicus curiae Washington Legal Foundation, in support of Plaintiffs–Appellants.Ron Lazebnik, Lincoln Square Legal Services, Inc., New York, NY, for amici curiae Anaheim Ballet, Michael Moore, Khan Academy Inc., Adam Bahner, Michael Bassik, Dane Boedigheimer, Matthew Brown, Michael Buckley, Shay Butler, Charles Como, Iman Crosson, Philip De Vellis, Rawn Erickson, Hank Green, John Green, Kassem Gharaibeh, William Louis Hyde, Kevin Nalty, Allison Speed, Charles Todd, Charles Trippy, and Barnett Zitron, in support of Defendants–Appellees.Seth D. Greenstein, Constantine Cannon LLP, Washington, DC, for amicus curiae Professor Michael Carrier, in support of Defendants–Appellees.Jonathan Band, Washington, DC (Markham C. Erickson, Holch & Erickson LLP, Washington, DC, and Matthew Schruers, Computer & Communications Industry Association, Washington, DC, on the brief), for amici curiae Computer & Communications Industry Association, and Netcoalition, in support of Defendants–Appellees.Michael Barclay, Menlo Park, CA; Deborah R. Gerhardt, UNC School of Law, Chapel Hill, NC, for amicus curiae Consumer Electronics Association, in support of Defendants–Appellees.Andrew P. Bridges, Winston & Strawn LLP, San Francisco, CA, for amici curiae eBay Inc., Facebook, Inc., IAC/Interactivecorp., and Yahoo! Inc., in support of Defendants–Appellees.Corynne M. McSherry (Abigail Phillips, on the brief), Electronic Frontier Foundation, San Francisco, CA, for amici curiae Electronic Frontier Foundation, Center for Democracy & Technology, International Federation of Library Associations & Institutions, American Library Association, Association of College & Research Libraries, and Association of Research Libraries, in support of Defendants–Appellees.

      5

      [676 F.3d 25] David T. Goldberg (Sean H. Donahue, on the brief), Donahue & Goldberg, LLP, New York, NY, and Washington, DC, for amici curiae Human Rights Watch, Freedom House, Reporters Without Borders, and Access, in support of Defendants–Appellees.Rebecca S. Engrav, Perkins Coie LLP, Seattle, WA, for amici curiae Intellectual Property and Internet Law Professors, in support of Defendants–Appellees.Gregory P. Gulia (Vanessa C. Hew and R. Terry Parker, on the brief), Duane Morris LLP, New York, NY, for amicus curiae MP3Tunes, Inc., in support of Defendants–Appellees.Jennifer M. Urban, Samuelson Law, Technology & Public Policy Clinic, University of California, Berkeley School of Law, Berkeley, CA, for amici curiae National Alliance for Media Art and Culture and The Alliance for Community Media, in support of Defendants–Appellees.Anthony P. Schoenberg (Stephanie P. Skaff, Deepak Gupta, and David K. Ismay, on the brief), Farella Braun & Martel LLP, San Francisco, CA, for amici curiae National Consumers League, Consumers Union of United States, Inc., Consumer Action, and United States Student Association, in support of Defendants–Appellees.Joseph C. Gratz (Michael H. Page and Ragesh K. Tangri, on the brief), Durie Tangri LLP, San Francisco, CA, for amici curiae National Venture Capital Association, in support of Defendants–Appellees.Benjamin J. Kallos, New York, N.Y. (Sherwin Siy and Michael Weinberg, Public Knowledge, Washington, DC, on the brief), for amicus curiae Public Knowledge, in support of Defendants–Appellees.Patrick J. Coyne, Finnegan Henderson Farabow Garrett & Dunner, LLP, Washington, DC (David W. Hill, American Intellectual Property Law Association, Arlington, VA, on the brief), for amicus curiae American Intellectual Property Law Association, in support of neither party.Jeremy H. Stern, Stern Digital Strategies, Manhattan Beach, CA (Partha P. Chattoraj, Markowitz & Chattoraj LLP, New York, NY, on the brief), for amicus curiae Audible Magic Corp., in support of neither party.Stephen M. Wurzburg, Pillsbury Winthrop Shaw Pittman LLP, Palo Alto, CA, for amicus curiae Vobile, Inc., in support of neither party.

      6

      Before: CABRANES and LIVINGSTON, Circuit Judges.[*]

      7

      JOSÉ A. CABRANES, Circuit Judge:

      8

      This appeal requires us to clarify the contours of the “safe harbor” provision of the Digital Millennium Copyright Act (DMCA) that limits the liability of online service providers for copyright infringement that occurs “by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider.” 17 U.S.C. § 512(c).[1]

      9

      The plaintiffs-appellants in these related actions—Viacom International, Inc. (“Viacom”), The Football Association Premier League Ltd. (“Premier League”), and various film studios, television networks, music publishers, and sports leagues (jointly, [676 F.3d 26] the “plaintiffs”)[2] —appeal from an August 10, 2010 judgment of the United States District Court for the Southern District of New York (Louis L. Stanton, Judge), which granted summary judgment to defendants-appellees YouTube, Inc., YouTube, LLC, and Google Inc. (jointly, “YouTube” or the “defendants”). The plaintiffs alleged direct and secondary copyright infringement based on the public performance, display, and reproduction of approximately 79,000 audiovisual “clips” that appeared on the YouTube website between 2005 and 2008. They demanded, inter alia, statutory damages pursuant to 17 U.S.C. § 504(c) or, in the alternative, actual damages from the alleged infringement, as well as declaratory and injunctive relief.[3]

      10

      In a June 23, 2010 Opinion and Order (the “June 23 Opinion”), the District Court held that the defendants were entitled to DMCA safe harbor protection primarily because they had insufficient notice of the particular infringements in suit. Viacom Int'l, Inc. v. YouTube, Inc., 718 F.Supp.2d 514, 529 (S.D.N.Y.2010). In construing the statutory safe harbor, the District Court concluded that the “actual knowledge” or “aware[ness] of facts or circumstances” that would disqualify an online service provider from safe harbor protection under § 512(c)(1)(A) refer to “knowledge of specific and identifiable infringements.” Id. at 523. The District Court further held that item-specific knowledge of infringing activity is required for a service provider to have the “right and ability to control” infringing activity under § 512(c)(1)(B). Id. at 527. Finally, the District Court held that the replication, transmittal, and display of videos on YouTube constituted activity “by reason of the storage at the direction of a user” within the meaning of § 512(c)(1). Id. at 526–27.

      11

      These related cases present a series of significant questions of statutory construction. We conclude that the District Court correctly held that the § 512(c) safe harbor requires knowledge or awareness of specific infringing activity, but we vacate the order granting summary judgment because a reasonable jury could find that YouTube had actual knowledge or awareness of specific infringing activity on its website. We further hold that the District Court erred by interpreting the “right and ability to control” provision to require “item-specific” knowledge. Finally, we affirm the District Court's holding that three of the challenged YouTube software functions fall within the safe harbor for infringement that occurs “by reason of” user storage; we remand for further fact-finding with respect to a fourth software function.

      12
      BACKGROUND
      13
      A. The DMCA Safe Harbors
      14

      “The DMCA was enacted in 1998 to implement the World Intellectual Property Organization Copyright Treaty,” Universal City Studios, Inc. v. Corley, 273 F.3d 429, 440 (2d Cir.2001), and to update domestic copyright law for the digital age, [676 F.3d 27] see Ellison v. Robertson, 357 F.3d 1072, 1076 (9th Cir.2004). Title II of the DMCA, separately titled the “Online Copyright Infringement Liability Limitation Act” (OCILLA), was designed to “clarif[y] the liability faced by service providers who transmit potentially infringing material over their networks.” S.Rep. No. 105–190 at 2 (1998). But “[r]ather than embarking upon a wholesale clarification” of various copyright doctrines, Congress elected “to leave current law in its evolving state and, instead, to create a series of ‘safe harbors[ ]’ for certain common activities of service providers.” Id. at 19. To that end, OCILLA established a series of four “safe harbors” that allow qualifying service providers to limit their liability for claims of copyright infringement based on (a) “transitory digital network communications,” (b) “system caching,” (c) “information residing on systems or networks at [the] direction of users,” and (d) “information location tools.” 17 U.S.C. § 512(a)-(d).

      15

      To qualify for protection under any of the safe harbors, a party must meet a set of threshold criteria. First, the party must in fact be a “service provider,” defined, in pertinent part, as “a provider of online services or network access, or the operator of facilities therefor.” 17 U.S.C. § 512(k)(1)(B). A party that qualifies as a service provider must also satisfy certain “conditions of eligibility,” including the adoption and reasonable implementation of a “repeat infringer” policy that “provides for the termination in appropriate circumstances of subscribers and account holders of the service provider's system or network.” Id. § 512(i)(1)(A). In addition, a qualifying service provider must accommodate “standard technical measures” that are “used by copyright owners to identify or protect copyrighted works.” Id. § 512(i)(1)(B), (i)(2).

      16

      Beyond the threshold criteria, a service provider must satisfy the requirements of a particular safe harbor. In this case, the safe harbor at issue is § 512(c), which covers infringement claims that arise “by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider.” Id. § 512(c)(1). The § 512(c) safe harbor will apply only if the service provider:

      17

      (A) (i) does not have actual knowledge that the material or an activity using the material on the system or network is infringing;

      (ii) in the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent; or

      (iii) upon obtaining such knowledge or awareness, acts expeditiously to remove, or disable access to, the material;

      (B) does not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity; and

      (C) upon notification of claimed infringement as described in paragraph (3), responds expeditiously to remove, or disable access to, the material that is claimed to be infringing or to be the subject of infringing activity.

      18

      Id. § 512(c)(1)(A)-(C). Section 512(c) also sets forth a detailed notification scheme that requires service providers to “designate[ ] an agent to receive notifications of claimed infringement,” id. § 512(c)(2), and specifies the components of a proper notification, commonly known as a “takedown notice,” to that agent, see id. § 512(c)(3). Thus, actual knowledge of infringing material, awareness of facts or circumstances that make infringing activity apparent, or [676 F.3d 28] receipt of a takedown notice will each trigger an obligation to expeditiously remove the infringing material.

      19

      With the statutory context in mind, we now turn to the facts of this case.

      20
      B. Factual Background
      21

      YouTube was founded in February 2005 by Chad Hurley (“Hurley”), Steve Chen (“Chen”), and Jawed Karim (“Karim”), three former employees of the internet company Paypal. When YouTube announced the “official launch” of the website in December 2005, a press release described YouTube as a “consumer media company” that “allows people to watch, upload, and share personal video clips at www. You Tube. com.” Under the slogan “Broadcast yourself,” YouTube achieved rapid prominence and profitability, eclipsing competitors such as Google Video and Yahoo Video by wide margins. In November 2006, Google acquired YouTube in a stock-for-stock transaction valued at $1.65 billion. By March 2010, at the time of summary judgment briefing in this litigation, site traffic on YouTube had soared to more than 1 billion daily video views, with more than 24 hours of new video uploaded to the site every minute.

      22

      The basic function of the YouTube website permits users to “upload” and view video clips free of charge. Before uploading a video to YouTube, a user must register and create an account with the website. The registration process requires the user to accept YouTube's Terms of Use agreement, which provides, inter alia, that the user “will not submit material that is copyrighted ... unless [he is] the owner of such rights or ha[s] permission from their rightful owner to post the material and to grant YouTube all of the license rights granted herein.” When the registration process is complete, the user can sign in to his account, select a video to upload from the user's personal computer, mobile phone, or other device, and instruct the YouTube system to upload the video by clicking on a virtual upload “button.”

      23

      Uploading a video to the YouTube website triggers a series of automated software functions. During the upload process, YouTube makes one or more exact copies of the video in its original file format. YouTube also makes one or more additional copies of the video in “Flash” format,[4] a process known as “transcoding.” The transcoding process ensures that YouTube videos are available for viewing by most users at their request. The YouTube system allows users to gain access to video content by “streaming” the video to the user's computer in response to a playback request. YouTube uses a computer algorithm to identify clips that are “related” to a video the user watches and display links to the “related” clips.

      24
      C. Procedural History
      25

      Plaintiff Viacom, an American media conglomerate, and various Viacom affiliates filed suit against YouTube on March 13, 2007, alleging direct and secondary copyright infringement[5] based on the public performance, display, and reproduction of their audiovisual works on the YouTube website. Plaintiff Premier League, an English soccer league, and Plaintiff Bourne Co. filed a putative class action against [676 F.3d 29] YouTube on May 4, 2007, alleging direct and secondary copyright infringement on behalf of all copyright owners whose material was copied, stored, displayed, or performed on YouTube without authorization. Specifically at issue were some 63,497 video clips identified by Viacom, as well as 13,500 additional clips (jointly, the “clips-in-suit”) identified by the putative class plaintiffs.

      26

      The plaintiffs in both actions principally demanded statutory damages pursuant to 17 U.S.C. § 504(c) or, in the alternative, actual damages plus the defendants' profits from the alleged infringement, as well as declaratory and injunctive relief.[6] Judge Stanton, to whom the Viacom action was assigned, accepted the Premier League class action as related. At the close of discovery, the parties in both actions cross-moved for partial summary judgment with respect to the applicability of the DMCA safe harbor defense.[7]

      27

      In the dual-captioned June 23 Opinion, the District Court denied the plaintiffs' motions and granted summary judgment to the defendants, finding that YouTube qualified for DMCA safe harbor protection with respect to all claims of direct and secondary copyright infringement. Viacom Int'l, 718 F.Supp.2d at 529. The District Court prefaced its analysis of the DMCA safe harbor by holding that, based on the plaintiffs' summary judgment submissions, “a jury could find that the defendants not only were generally aware of, but welcomed, copyright-infringing material being placed on their website.” Id. at 518. However, the District Court also noted that the defendants had properly designated an agent pursuant to § 512(c)(2), and “when they received specific notice that a particular item infringed a copyright, they swiftly removed it.” Id. at 519. Accordingly, the District Court identified the crux of the inquiry with respect to YouTube's copyright liability as follows:

      28

      [T]he critical question is whether the statutory phrases “actual knowledge that the material or an activity using the material on the system or network is infringing,” and “facts or circumstances from which infringing activity is apparent” in § 512(c)(1)(A)(i) and (ii) mean a general awareness that there are infringements (here, claimed to be widespread and common), or rather mean actual or constructive knowledge of specific and identifiable infringements of individual items.

      29

      Id. After quoting at length from the legislative history of the DMCA, the District Court held that “the phrases ‘actual knowledge that the material or an activity’ is infringing, and ‘facts or circumstances' indicating infringing activity, describe knowledge of specific and identifiable infringements of particular individual items.” Id. at 523. “Mere knowledge of [the] prevalence of such activity in general,” the District Court concluded, “is not enough.” Id.

      30

      In a final section labeled “Other Points,” the District Court rejected two additional claims. First, it rejected the plaintiffs' argument that the replication, transmittal and display of YouTube videos are functions that fall outside the protection § 512(c)(1) affords for “infringement of copyright by reason of ... storage at the direction of the user.” Id. at 526–27. Second, it rejected the plaintiffs' argument [676 F.3d 30] that YouTube was ineligible for safe harbor protection under the control provision, holding that the “right and ability to control” infringing activity under § 512(c)(1)(B) requires “item-specific” knowledge thereof, because “the provider must know of the particular case before he can control it.” Id. at 527.

      31

      Following the June 23 Opinion, final judgment in favor of YouTube was entered on August 10, 2010. These appeals followed.

      32
      DISCUSSION
      33

      We review an order granting summary judgment de novo, drawing all factual inferences in favor of the non-moving party. See, e.g., Paneccasio v. Unisource Worldwide, Inc., 532 F.3d 101, 107 (2d Cir.2008). “Summary judgment is proper only when, construing the evidence in the light most favorable to the non-movant, ‘there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.’ ” Doninger v. Niehoff, 642 F.3d 334, 344 (2d Cir.2011) (quoting Fed.R.Civ.P. 56(a)).

      34
      A. Actual and “Red Flag” Knowledge: § 512(c)(1)(A)
      35

       The first and most important question on appeal is whether the DMCA safe harbor at issue requires “actual knowledge” or “aware[ness]” of facts or circumstances indicating “specific and identifiable infringements,” Viacom, 718 F.Supp.2d at 523. We consider first the scope of the statutory provision and then its application to the record in this case.

      36
      1. The Specificity Requirement
      37

      “As in all statutory construction cases, we begin with the language of the statute,” Barnhart v. Sigmon Coal Co., 534 U.S. 438, 450, 122 S.Ct. 941, 151 L.Ed.2d 908 (2002). Under § 512(c)(1)(A), safe harbor protection is available only if the service provider:

      38

      (i) does not have actual knowledge that the material or an activity using the material on the system or network is infringing;

      (ii) in the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent; or

      (iii) upon obtaining such knowledge or awareness, acts expeditiously to remove, or disable access to, the material....

      39

      17 U.S.C. § 512(c)(1)(A). As previously noted, the District Court held that the statutory phrases “actual knowledge that the material ... is infringing” and “facts or circumstances from which infringing activity is apparent” refer to “knowledge of specific and identifiable infringements.” Viacom, 718 F.Supp.2d at 523. For the reasons that follow, we substantially affirm that holding.

      40

      Although the parties marshal a battery of other arguments on appeal, it is the text of the statute that compels our conclusion. In particular, we are persuaded that the basic operation of § 512(c) requires knowledge or awareness of specific infringing activity. Under § 512(c)(1)(A), knowledge or awareness alone does not disqualify the service provider; rather, the provider that gains knowledge or awareness of infringing activity retains safe-harbor protection if it “acts expeditiously to remove, or disable access to, the material.” 17 U.S.C. § 512(c)(1)(A)(iii). Thus, the nature of the removal obligation itself contemplates knowledge or awareness of specific infringing material, because expeditious removal is possible only if the service provider knows with particularity which items to remove. Indeed, to require expeditious removal in the absence of specific knowledge [676 F.3d 31] or awareness would be to mandate an amorphous obligation to “take commercially reasonable steps” in response to a generalized awareness of infringement. Viacom Br. 33. Such a view cannot be reconciled with the language of the statute, which requires “expeditious[ ]” action to remove or disable “ the material ” at issue. 17 U.S.C. § 512(c)(1)(A)(iii) (emphasis added).

      41

      On appeal, the plaintiffs dispute this conclusion by drawing our attention to § 512(c)(1)(A)(ii), the so-called “red flag” knowledge provision. See id. § 512(c)(1)(A)(ii) (limiting liability where, “in the absence of such actual knowledge, [the service provider] is not aware of facts or circumstances from which infringing activity is apparent”). In their view, the use of the phrase “facts or circumstances” demonstrates that Congress did not intend to limit the red flag provision to a particular type of knowledge. The plaintiffs contend that requiring awareness of specific infringements in order to establish “aware[ness] of facts or circumstances from which infringing activity is apparent,” 17 U.S.C. § 512(c)(1)(A)(ii), renders the red flag provision superfluous, because that provision would be satisfied only when the “actual knowledge” provision is also satisfied. For that reason, the plaintiffs urge the Court to hold that the red flag provision “requires less specificity” than the actual knowledge provision. Pls.' Supp. Br. 1.

      42

      This argument misconstrues the relationship between “actual” knowledge and “red flag” knowledge. It is true that “we are required to ‘disfavor interpretations of statutes that render language superfluous.’ ” Conn. ex rel. Blumenthal v. U.S. Dep't of the Interior, 228 F.3d 82, 88 (2d Cir.2000) (quoting Conn. Nat'l Bank v. Germain, 503 U.S. 249, 253, 112 S.Ct. 1146, 117 L.Ed.2d 391 (1992)). But contrary to the plaintiffs' assertions, construing § 512(c)(1)(A) to require actual knowledge or awareness of specific instances of infringement does not render the red flag provision superfluous. The phrase “actual knowledge,” which appears in § 512(c)(1)(A)(i), is frequently used to denote subjective belief. See, e.g., United States v. Quinones, 635 F.3d 590, 602 (2d Cir.2011) (“[T]he belief held by the defendant need not be reasonable in order for it to defeat ... actual knowledge.”). By contrast, courts often invoke the language of “facts or circumstances,” which appears in § 512(c)(1)(A)(ii), in discussing an objective reasonableness standard. See, e.g., Maxwell v. City of New York, 380 F.3d 106, 108 (2d Cir.2004) (“Police officers' application of force is excessive ... if it is objectively unreasonable in light of the facts and circumstances confronting them, without regard to their underlying intent or motivation.” (internal quotation marks omitted)).

      43

      The difference between actual and red flag knowledge is thus not between specific and generalized knowledge, but instead between a subjective and an objective standard. In other words, the actual knowledge provision turns on whether the provider actually or “subjectively” knew of specific infringement, while the red flag provision turns on whether the provider was subjectively aware of facts that would have made the specific infringement “objectively” obvious to a reasonable person. The red flag provision, because it incorporates an objective standard, is not swallowed up by the actual knowledge provision under our construction of the § 512(c) safe harbor. Both provisions do independent work, and both apply only to specific instances of infringement.

      44

      The limited body of case law interpreting the knowledge provisions of the § 512(c) safe harbor comports with our view of the specificity requirement. Most [676 F.3d 32] recently, a panel of the Ninth Circuit addressed the scope of § 512(c) in UMG Recordings, Inc. v. Shelter Capital Partners LLC, 667 F.3d 1022 (9th Cir.2011), a copyright infringement case against Veoh Networks, a video-hosting service similar to YouTube.[8] As in this case, various music publishers brought suit against the service provider, claiming direct and secondary copyright infringement based on the presence of unauthorized content on the website, and the website operator sought refuge in the § 512(c) safe harbor. The Court of Appeals affirmed the district court's determination on summary judgment that the website operator was entitled to safe harbor protection. With respect to the actual knowledge provision, the panel declined to “adopt[ ] a broad conception of the knowledge requirement,” id. at 1038, holding instead that the safe harbor “[r]equir [es] specific knowledge of particular infringing activity,” id. at 1037. The Court of Appeals “reach[ed] the same conclusion” with respect to the red flag provision, noting that “[w]e do not place the burden of determining whether [materials] are actually illegal on a service provider.” Id. at 1038 (alterations in original) (quoting Perfect 10, Inc. v. CCBill LLC, 488 F.3d 1102, 1114 (9th Cir.2007)).

      45

      Although Shelter Capital contains the most explicit discussion of the § 512(c) knowledge provisions, other cases are generally in accord. See, e.g., Capitol Records, Inc. v. MP3tunes, LLC, 821 F.Supp.2d 627, 635, 2011 WL 5104616, at *14 (S.D.N.Y. Oct. 25, 2011) (“Undoubtedly, MP3tunes is aware that some level of infringement occurs. But, there is no genuine dispute that MP3tunes did not have specific ‘red flag’ knowledge with respect to any particular link....”); UMG Recordings, Inc. v. Veoh Networks, Inc., 665 F.Supp.2d 1099, 1108 (C.D.Cal.2009) (“ UMG II ”) (“[I]f investigation of ‘facts and circumstances' is required to identify material as infringing, then those facts and circumstances are not ‘red flags.’ ”). While we decline to adopt the reasoning of those decisions in toto, we note that no court has embraced the contrary proposition—urged by the plaintiffs—that the red flag provision “requires less specificity” than the actual knowledge provision.

      46

      Based on the text of § 512(c)(1)(A), as well as the limited case law on point, we affirm the District Court's holding that actual knowledge or awareness of facts or circumstances that indicate specific and identifiable instances of infringement will disqualify a service provider from the safe harbor.

      47
      2. The Grant of Summary Judgment
      48

      The corollary question on appeal is whether, under the foregoing construction of § 512(c)(1)(A), the District Court erred in granting summary judgment to YouTube on the record presented. For the reasons that follow, we hold that although the District Court correctly interpreted § 512(c)(1)(A), summary judgment for the defendants was premature.

      49
      i. Specific Knowledge or Awareness
      50

      The plaintiffs argue that, even under the District Court's construction of the safe harbor, the record raises material issues of fact regarding YouTube's actual knowledge or “red flag” awareness of specific instances of infringement. To that end, the plaintiffs draw our attention to various estimates regarding the percentage of infringing content on the YouTube website. For example, Viacom cites evidence [676 F.3d 33] that YouTube employees conducted website surveys and estimated that 75–80% of all YouTube streams contained copyrighted material. The class plaintiffs similarly claim that Credit Suisse, acting as financial advisor to Google, estimated that more than 60% of YouTube's content was “premium” copyrighted content—and that only 10% of the premium content was authorized. These approximations suggest that the defendants were conscious that significant quantities of material on the YouTube website were infringing. See Viacom Int'l, 718 F.Supp.2d at 518 (“[A] jury could find that the defendants not only were generally aware of, but welcomed, copyright-infringing material being placed on their website.”). But such estimates are insufficient, standing alone, to create a triable issue of fact as to whether YouTube actually knew, or was aware of facts or circumstances that would indicate, the existence of particular instances of infringement.

      51

      Beyond the survey results, the plaintiffs rely upon internal YouTube communications that do refer to particular clips or groups of clips. The class plaintiffs argue that YouTube was aware of specific infringing material because, inter alia, YouTube attempted to search for specific Premier League videos on the site in order to gauge their “value based on video usage.” In particular, the class plaintiffs cite a February 7, 2007 e-mail from Patrick Walker, director of video partnerships for Google and YouTube, requesting that his colleagues calculate the number of daily searches for the terms “soccer,” “football,” and “Premier League” in preparation for a bid on the global rights to Premier League content. On another occasion, Walker requested that any “clearly infringing, official broadcast footage” from a list of top Premier League clubs—including Liverpool Football Club, Chelsea Football Club, Manchester United Football Club, and Arsenal Football Club—be taken down in advance of a meeting with the heads of “several major sports teams and leagues.” YouTube ultimately decided not to make a bid for the Premier League rights—but the infringing content allegedly remained on the website.

      52

      The record in the Viacom action includes additional examples. For instance, YouTube founder Jawed Karim prepared a report in March 2006 which stated that, “[a]s of today[,] episodes and clips of the following well-known shows can still be found [on YouTube]: Family Guy, South Park, MTV Cribs, Daily Show, Reno 911, [and] Dave Chapelle [sic].” Karim further opined that, “although YouTube is not legally required to monitor content ... and complies with DMCA takedown requests, we would benefit from preemptively removing content that is blatantly illegal and likely to attract criticism.” He also noted that “a more thorough analysis” of the issue would be required. At least some of the TV shows to which Karim referred are owned by Viacom. A reasonable juror could conclude from the March 2006 report that Karim knew of the presence of Viacom-owned material on YouTube, since he presumably located specific clips of the shows in question before he could announce that YouTube hosted the content “[a]s of today.” A reasonable juror could also conclude that Karim believed the clips he located to be infringing (since he refers to them as “blatantly illegal”), and that YouTube did not remove the content from the website until conducting “a more thorough analysis,” thus exposing the company to liability in the interim.

      53

      Furthermore, in a July 4, 2005 e-mail exchange, YouTube founder Chad Hurley sent an e-mail to his co-founders with the subject line “budlight commercials,” and stated, “we need to reject these too.” Steve Chen responded, “can we please [676 F.3d 34] leave these in a bit longer? another week or two can't hurt.” Karim also replied, indicating that he “added back in all 28 bud videos.” Similarly, in an August 9, 2005 e-mail exchange, Hurley urged his colleagues “to start being diligent about rejecting copyrighted / inappropriate content,” noting that “there is a cnn clip of the shuttle clip on the site today, if the boys from Turner would come to the site, they might be pissed?” Again, Chen resisted:

      54

      but we should just keep that stuff on the site. i really don't see what will happen. what? someone from cnn sees it? he happens to be someone with power? he happens to want to take it down right away. he gets in touch with cnn legal. 2 weeks later, we get a cease & desist letter. we take the video down.

      And again, Karim agreed, indicating that “the CNN space shuttle clip, I like. we can remove it once we're bigger and better known, but for now that clip is fine.”

      55

      Upon a review of the record, we are persuaded that the plaintiffs may have raised a material issue of fact regarding YouTube's knowledge or awareness of specific instances of infringement. The foregoing Premier League e-mails request the identification and removal of “clearly infringing, official broadcast footage.” The March 2006 report indicates Karim's awareness of specific clips that he perceived to be “blatantly illegal.” Similarly, the Bud Light and space shuttle e-mails refer to particular clips in the context of correspondence about whether to remove infringing material from the website. On these facts, a reasonable juror could conclude that YouTube had actual knowledge of specific infringing activity, or was at least aware of facts or circumstances from which specific infringing activity was apparent. See § 512(c)(1)(A)(i)-(ii). Accordingly, we hold that summary judgment to YouTube on all clips-in-suit, especially in the absence of any detailed examination of the extensive record on summary judgment, was premature.[9]

      56

      We hasten to note, however, that although the foregoing e-mails were annexed as exhibits to the summary judgment papers, it is unclear whether the clips referenced therein are among the current clips-in-suit. By definition, only the current clips-in-suit are at issue in this litigation. Accordingly, we vacate the order granting summary judgment and instruct the District Court to determine on remand whether any specific infringements of which YouTube had knowledge or awareness correspond to the clips-in-suit in these actions.

      57
      ii. “Willful Blindness”
      58

      The plaintiffs further argue that the District Court erred in granting summary judgment to the defendants despite evidence that YouTube was “willfully blind” to specific infringing activity. On this issue of first impression, we consider the application of the common law willful blindness doctrine in the DMCA context.

      59

       “The principle that willful blindness is tantamount to knowledge is hardly novel.” Tiffany (NJ) Inc. v. eBay, Inc., 600 F.3d 93, 110 n. 16 (2d Cir.2010) (collecting [676 F.3d 35] cases); see In re Aimster Copyright Litig., 33,4 F.3d 643 (7th Cir.2003) (“Willful blindness is knowledge, in copyright law ... as it is in the law generally.”). A person is “willfully blind” or engages in “conscious avoidance” amounting to knowledge where the person “ ‘was aware of a high probability of the fact in dispute and consciously avoided confirming that fact.’ ” United States v. Aina-Marshall, 336 F.3d 167, 170 (2d Cir.2003) (quoting United States v. Rodriguez, 983 F.2d 455, 458 (2d Cir.1993)); cf. Global–Tech Appliances, Inc. v. SEB S.A., ––– U.S. ––––, 131 S.Ct. 2060, 2070–71, 179 L.Ed.2d 1167 (2011) (applying the willful blindness doctrine in a patent infringement case). Writing in the trademark infringement context, we have held that “[a] service provider is not ... permitted willful blindness. When it has reason to suspect that users of its service are infringing a protected mark, it may not shield itself from learning of the particular infringing transactions by looking the other way.” Tiffany, 600 F.3d at 109.

      60

      The DMCA does not mention willful blindness. As a general matter, we interpret a statute to abrogate a common law principle only if the statute “speak[s] directly to the question addressed by the common law.” Matar v. Dichter, 563 F.3d 9, 14 (2d Cir.2009) (internal quotation marks omitted). The relevant question, therefore, is whether the DMCA “speak[s] directly” to the principle of willful blindness. Id. (internal quotation marks omitted). The DMCA provision most relevant to the abrogation inquiry is § 512(m), which provides that safe harbor protection shall not be conditioned on “a service provider monitoring its service or affirmatively seeking facts indicating infringing activity, except to the extent consistent with a standard technical measure complying with the provisions of subsection (i).” 17 U.S.C. § 512(m)(1). Section 512(m) is explicit: DMCA safe harbor protection cannot be conditioned on affirmative monitoring by a service provider. For that reason, § 512(m) is incompatible with a broad common law duty to monitor or otherwise seek out infringing activity based on general awareness that infringement may be occurring. That fact does not, however, dispose of the abrogation inquiry; as previously noted, willful blindness cannot be defined as an affirmative duty to monitor. See Aina–Marshall, 336 F.3d at 170 (holding that a person is “willfully blind” where he “was aware of a high probability of the fact in dispute and consciously avoided confirming that fact”). Because the statute does not “speak[ ] directly” to the willful blindness doctrine, § 512(m) limits—but does not abrogate—the doctrine. Accordingly, we hold that the willful blindness doctrine may be applied, in appropriate circumstances, to demonstrate knowledge or awareness of specific instances of infringement under the DMCA.

      61

      The District Court cited § 512(m) for the proposition that safe harbor protection does not require affirmative monitoring, Viacom, 718 F.Supp.2d at 524, but did not expressly address the principle of willful blindness or its relationship to the DMCA safe harbors. As a result, whether the defendants made a “deliberate effort to avoid guilty knowledge,” In re Aimster, 33,4 F.3d at 650, remains a fact question for the District Court to consider in the first instance on remand.[10]

      62
      [676 F.3d 36] B. Control and Benefit: § 512(c)(1)(B)
      63

       Apart from the foregoing knowledge provisions, the § 512(c) safe harbor provides that an eligible service provider must “not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity.” 17 U.S.C. § 512(c)(1)(B). The District Court addressed this issue in a single paragraph, quoting from § 512(c)(1)(B), the so-called “control and benefit” provision, and concluding that “[t]he ‘right and ability to control’ the activity requires knowledge of it, which must be item-specific.” Viacom, 718 F.Supp.2d at 527. For the reasons that follow, we hold that the District Court erred by importing a specific knowledge requirement into the control and benefit provision, and we therefore remand for further fact-finding on the issue of control.

      64
      1. “Right and Ability to Control” Infringing Activity
      65

      On appeal, the parties advocate two competing constructions of the “right and ability to control” infringing activity. 17 U.S.C. § 512(c)(1)(B). Because each is fatally flawed, we reject both proposed constructions in favor of a fact-based inquiry to be conducted in the first instance by the District Court.

      66

      The first construction, pressed by the defendants, is the one adopted by the District Court, which held that “the provider must know of the particular case before he can control it.” Viacom, 718 F.Supp.2d at 527. The Ninth Circuit recently agreed, holding that “until [the service provider] becomes aware of specific unauthorized material, it cannot exercise its ‘power or authority’ over the specific infringing item. In practical terms, it does not have the kind of ability to control infringing activity the statute contemplates.” UMG Recordings, Inc. v. Shelter Capital Partners LLC, 667 F.3d 1022, 1041 (9th Cir.2011). The trouble with this construction is that importing a specific knowledge requirement into § 512(c)(1)(B) renders the control provision duplicative of § 512(c)(1)(A). Any service provider that has item-specific knowledge of infringing activity and thereby obtains financial benefit would already be excluded from the safe harbor under § 512(c)(1)(A) for having specific knowledge of infringing material and failing to effect expeditious removal. No additional service provider would be excluded by § 512(c)(1)(B) that was not already excluded by § 512(c)(1)(A). Because statutory interpretations that render language superfluous are disfavored, Conn. ex rel. Blumenthal, 228 F.3d at 88, we reject the District Court's interpretation of the control provision.

      67

      The second construction, urged by the plaintiffs, is that the control provision codifies the common law doctrine of vicarious copyright liability. The common law imposes liability for vicarious copyright infringement “[w]hen the right and ability to supervise coalesce with an obvious and direct financial interest in the exploitation of copyrighted materials—even in the absence of actual knowledge that the copyright mono [poly] is being impaired.” Shapiro, Bernstein & Co. v. H.L. Green Co., 316 F.2d 304, 307 (2d Cir.1963); cf. Metro–Goldwyn–Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 930 n. 9, 125 S.Ct. 2764, 162 L.Ed.2d 781 (2005). To support their codification argument, the plaintiffs rely [676 F.3d 37] on a House Report relating to a preliminary version of the DMCA: “The ‘right and ability to control’ language ... codifies the second element of vicarious liability.... Subparagraph (B) is intended to preserve existing case law that examines all relevant aspects of the relationship between the primary and secondary infringer.” H.R.Rep. No. 105–551(I), at 26 (1998). In response, YouTube notes that the codification reference was omitted from the committee reports describing the final legislation, and that Congress ultimately abandoned any attempt to “embark[ ] upon a wholesale clarification” of vicarious liability, electing instead “to create a series of ‘safe harbors' for certain common activities of service providers.” S.Rep. No. 105–190, at 19.

      68

      Happily, the future of digital copyright law does not turn on the confused legislative history of the control provision. The general rule with respect to common law codification is that when “Congress uses terms that have accumulated settled meaning under the common law, a court must infer, unless the statute otherwise dictates, that Congress means to incorporate the established meaning of those terms.” Neder v. United States, 527 U.S. 1, 21, 119 S.Ct. 1827, 144 L.Ed.2d 35 (1999) (ellipsis and internal quotation marks omitted). Under the common law vicarious liability standard, “ ‘[t]he ability to block infringers' access to a particular environment for any reason whatsoever is evidence of the right and ability to supervise.’ ” Arista Records LLC v. Usenet.com, Inc., 633 F.Supp.2d 124, 157 (S.D.N.Y.2009) (alteration in original) (quoting A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1023 (9th Cir.2001)). To adopt that principle in the DMCA context, however, would render the statute internally inconsistent. Section 512(c) actually presumes that service providers have the ability to “block ... access” to infringing material. Id. at 157; see Shelter Capital, 667 F.3d at 1042–43. Indeed, a service provider who has knowledge or awareness of infringing material or who receives a takedown notice from a copyright holder is required to “remove, or disable access to, the material” in order to claim the benefit of the safe harbor. 17 U.S.C. § 512(c)(1)(A)(iii) & (C). But in taking such action, the service provider would—in the plaintiffs' analysis—be admitting the “right and ability to control” the infringing material. Thus, the prerequisite to safe harbor protection under § 512(c)(1)(A)(iii) & (C) would at the same time be a disqualifier under § 512(c)(1)(B).

      69

      Moreover, if Congress had intended § 512(c)(1)(B) to be coextensive with vicarious liability, “the statute could have accomplished that result in a more direct manner.” Shelter Capital, 667 F.3d at 1045.

      70

      It is conceivable that Congress ... intended that [service providers] which receive a financial benefit directly attributable to the infringing activity would not, under any circumstances, be able to qualify for the subsection (c) safe harbor. But if that was indeed their intention, it would have been far simpler and much more straightforward to simply say as much. Id. (alteration in original) (quoting Ellison v. Robertson, 189 F.Supp.2d 1051, 1061 (C.D.Cal.2002), aff'd in part and rev'd in part on different grounds, 357 F.3d 1072 (9th Cir.2004)).

      71

      In any event, the foregoing tension—elsewhere described as a “predicament”[11] and a “catch22”[12]—is sufficient to establish that the control provision “dictates” [676 F.3d 38] a departure from the common law vicarious liability standard, Neder, 527 U.S. at 21, 119 S.Ct. 1827. Accordingly, we conclude that the “right and ability to control” infringing activity under § 512(c)(1)(B) “requires something more than the ability to remove or block access to materials posted on a service provider's website.” MP3tunes, LLC, 821 F.Supp.2d at 645, 2011 WL 5104616, at *14; accord Wolk v. Kodak Imaging Network, Inc., ––– F.Supp.2d ––––, ––––, 2012 WL 11270, at *21 (S.D.N.Y. Jan. 3, 2012); UMG II, 665 F.Supp.2d at 1114–15; Io Grp., Inc. v. Veoh Networks, Inc., 586 F.Supp.2d 1132, 1151 (N.D.Cal.2008); Corbis Corp. v. Amazon.com, Inc., 351 F.Supp.2d 1090, 1110 (W.D.Wash.2004), overruled on other grounds by Cosmetic Ideas, Inc. v. IAC/Interactivecorp., 606 F.3d 612 (9th Cir.2010). The remaining—and more difficult—question is how to define the “something more” that is required.

      72

      To date, only one court has found that a service provider had the right and ability to control infringing activity under § 512(c)(1)(B).[13] In Perfect 10, Inc. v. Cybernet Ventures, Inc., 213 F.Supp.2d 1146 (C.D.Cal.2002), the court found control where the service provider instituted a monitoring program by which user websites received “detailed instructions regard[ing] issues of layout, appearance, and content.” Id. at 1173. The service provider also forbade certain types of content and refused access to users who failed to comply with its instructions. Id. Similarly, inducement of copyright infringement under Metro–Goldwyn–Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 125 S.Ct. 2764, 162 L.Ed.2d 781 (2005), which “premises liability on purposeful, culpable expression and conduct,” id. at 937, 125 S.Ct. 2764, might also rise to the level of control under § 512(c)(1)(B). Both of these examples involve a service provider exerting substantial influence on the activities of users, without necessarily—or even frequently—acquiring knowledge of specific infringing activity.

      73

      In light of our holding that § 512(c)(1)(B) does not include a specific knowledge requirement, we think it prudent to remand to the District Court to consider in the first instance whether the plaintiffs have adduced sufficient evidence to allow a reasonable jury to conclude that YouTube had the right and ability to control the infringing activity and received a financial benefit directly attributable to that activity.

      74
      C. “By Reason of” Storage: § 512(c)(1)
      75

       The § 512(c) safe harbor is only available when the infringement occurs “by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider.” 17 U.S.C. § 512(c)(1). In this case, the District Court held that YouTube's software functions fell within the safe harbor for infringements that occur “by reason of” user storage. Viacom, 718 F.Supp.2d at 526 (noting that a contrary holding would “confine[ ] the word ‘storage’ too narrowly to meet the statute's purpose”). For the reasons that follow, we affirm that holding [676 F.3d 39] with respect to three of the challenged software functions—the conversion (or “transcoding”) of videos into a standard display format, the playback of videos on “watch” pages, and the “related videos” function. We remand for further fact-finding with respect to a fourth software function, involving the third-party syndication of videos uploaded to YouTube.

      76

      As a preliminary matter, we note that “the structure and language of OCILLA indicate that service providers seeking safe harbor under [§ ] 512(c) are not limited to merely storing material.” Io Grp., 586 F.Supp.2d at 1147. The structure of the statute distinguishes between so-called “conduit only” functions under § 512(a) and the functions addressed by § 512(c) and the other subsections. See 17 U.S.C. § 512(n) (“Subsections (a), (b), (c), and (d) describe separate and distinct functions for purposes of applying this section.”). Most notably, OCILLA contains two definitions of “service provider.” 17 U.S.C. § 512(k)(1)(A)-(B). The narrower definition, which applies only to service providers falling under § 512(a), is limited to entities that “offer[ ] the transmission, routing or providing of connections for digital online communications, between or among points specified by a user, of material of the user's choosing, without modification to the content of the material as sent or received.” Id. § 512(k)(1)(A) (emphasis added). No such limitation appears in the broader definition, which applies to service providers—including YouTube—falling under § 512(c). Under the broader definition, “the term ‘service provider’ means a provider of online services or network access, or the operator of facilities therefor, and includes an entity described in subparagraph (A).” Id. § 512(k)(1)(B). In the absence of a parallel limitation on the ability of a service provider to modify user-submitted material, we conclude that § 512(c) “is clearly meant to cover more than mere electronic storage lockers.” UMG Recordings, Inc. v. Veoh Networks, Inc., 620 F.Supp.2d 1081, 1088 (C.D.Cal.2008) (“UMG I”).

      77

      The relevant case law makes clear that the § 512(c) safe harbor extends to software functions performed “for the purpose of facilitating access to user-stored material.” Id.; see Shelter Capital, 667 F.3d at 1031–35. Two of the software functions challenged here—transcoding and playback—were expressly considered by our sister Circuit in Shelter Capital, which held that liability arising from these functions occurred “by reason of the storage at the direction of a user.” 17 U.S.C. § 512(c); see Shelter Capital, 667 F.3d at 1027–28, 1031; see also UMG I, 620 F.Supp.2d at 1089–91; Io Group, 586 F.Supp.2d at 1146–48. Transcoding involves “[m]aking copies of a video in a different encoding scheme” in order to render the video “viewable over the Internet to most users.” Supp. Joint App'x I:236. The playback process involves “deliver[ing] copies of YouTube videos to a user's browser cache” in response to a user request. Id. at 239. The District Court correctly found that to exclude these automated functions from the safe harbor would eviscerate the protection afforded to service providers by § 512(c). Viacom, 718 F.Supp.2d at 526–27.

      78

      A similar analysis applies to the “related videos” function, by which a YouTube computer algorithm identifies and displays “thumbnails” of clips that are “related” to the video selected by the user. The plaintiffs claim that this practice constitutes content promotion, not “access” to stored content, and therefore falls beyond the scope of the safe harbor. Citing similar language in the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961–68, and the Clayton [676 F.3d 40] Act, 15 U.S.C. §§ 12 et seq., the plaintiffs argue that the statutory phrase “by reason of” requires a finding of proximate causation between the act of storage and the infringing activity. See, e.g., Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 267–68, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992) (holding that the “by reason of” language in the RICO statute requires proximate causation). But even if the plaintiffs are correct that § 512(c) incorporates a principle of proximate causation—a question we need not resolve here—the indexing and display of related videos retain a sufficient causal link to the prior storage of those videos. The record makes clear that the related videos algorithm “is fully automated and operates solely in response to user input without the active involvement of YouTube employees.” Supp. Joint App'x I:237. Furthermore, the related videos function serves to help YouTube users locate and gain access to material stored at the direction of other users. Because the algorithm “is closely related to, and follows from, the storage itself,” and is “narrowly directed toward providing access to material stored at the direction of users,” UMG I, 620 F.Supp.2d at 1092, we conclude that the related videos function is also protected by the § 512(c) safe harbor.

      79

      The final software function at issue here—third-party syndication—is the closest case. In or around March 2007, YouTube transcoded a select number of videos into a format compatible with mobile devices and “syndicated” or licensed the videos to Verizon Wireless and other companies. The plaintiffs argue—with some force—that business transactions do not occur at the “direction of a user” within the meaning of § 512(c)(1) when they involve the manual selection of copyrighted material for licensing to a third party. The parties do not dispute, however, that none of the clips-in-suit were among the approximately 2,000 videos provided to Verizon Wireless. In order to avoid rendering an advisory opinion on the outer boundaries of the storage provision, we remand for fact-finding on the question of whether any of the clips-in-suit were in fact syndicated to any other third party.

      80
      D. Other Arguments
      81
      1. Repeat Infringer Policy
      82

      The class plaintiffs briefly argue that YouTube failed to comply with the requirements of § 512(i), which conditions safe harbor eligibility on the service provider having “adopted and reasonably implemented ... a policy that provides for the termination in appropriate circumstances of subscribers and account holders of the service provider's system or network who are repeat infringers.” 17 U.S.C. § 512(i)(1)(A). Specifically, the class plaintiffs allege that YouTube “deliberately set up its identification tools to try to avoid identifying infringements of class plaintiffs' works.” This allegation rests primarily on the assertion that YouTube permitted only designated “partners” to gain access to content identification tools by which YouTube would conduct network searches and identify infringing material.[14]

      83

      Because the class plaintiffs challenge YouTube's deployment of search technology, [676 F.3d 41] we must consider their § 512(i) argument in conjunction with § 512(m). As previously noted, § 512(m) provides that safe harbor protection cannot be conditioned on “a service provider monitoring its service or affirmatively seeking facts indicating infringing activity, except to the extent consistent with a standard technical measure complying with the provisions of subsection (i).” 17 U.S.C. § 512(m)(1) (emphasis added). In other words, the safe harbor expressly disclaims any affirmative monitoring requirement—except to the extent that such monitoring comprises a “standard technical measure” within the meaning of § 512(i). Refusing to accommodate or implement a “standard technical measure” exposes a service provider to liability; refusing to provide access to mechanisms by which a service provider affirmatively monitors its own network has no such result. In this case, the class plaintiffs make no argument that the content identification tools implemented by YouTube constitute “standard technical measures,” such that YouTube would be exposed to liability under § 512(i). For that reason, YouTube cannot be excluded from the safe harbor by dint of a decision to restrict access to its proprietary search mechanisms.

      84
      2. Affirmative Claims
      85

      Finally, the plaintiffs argue that the District Court erred in denying summary judgment to the plaintiffs on their claims of direct infringement, vicarious liability, and contributory liability under Metro–Goldwyn–Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 125 S.Ct. 2764, 162 L.Ed.2d 781 (2005). In granting summary judgment to the defendants, the District Court held that YouTube “qualif[ied] for the protection of ... § 512(c),” and therefore denied the plaintiffs' cross-motion for summary judgment without comment. Viacom, 718 F.Supp.2d at 529.

      86

      The District Court correctly determined that a finding of safe harbor application necessarily protects a defendant from all affirmative claims for monetary relief. 17 U.S.C. § 512(c)(1); see H.R.Rep. No. 105–551(II), at 50; S.Rep. No. 105–190, at 20; cf. 17 U.S.C. § 512(j) (setting forth the scope of injunctive relief available under § 512). For the reasons previously stated, further fact-finding is required to determine whether YouTube is ultimately entitled to safe harbor protection in this case. Accordingly, we vacate the order denying summary judgment to the plaintiffs and remand the cause without expressing a view on the merits of the plaintiffs' affirmative claims.

      87
      CONCLUSION
      88

      To summarize, we hold that:

      89

      (1) The District Court correctly held that 17 U.S.C. § 512(c)(1)(A) requires knowledge or awareness of facts or circumstances that indicate specific and identifiable instances of infringement;

      (2) However, the June 23, 2010 order granting summary judgment to YouTube is VACATED because a reasonable jury could conclude that YouTube had knowledge or awareness under § 512(c)(1)(A) at least with respect to a handful of specific clips; the cause is REMANDED for the District Court to determine whether YouTube had knowledge or awareness of any specific instances of infringement corresponding to the clips-in-suit;

      (3) The willful blindness doctrine may be applied, in appropriate circumstances, to demonstrate knowledge or awareness of specific instances of infringement under § 512(c)(1)(A); the cause is REMANDED for the [676 F.3d 42] District Court to consider the application of the willful blindness doctrine in the first instance;

      (4) The District Court erred by requiring “item-specific” knowledge of infringement in its interpretation of the “right and ability to control” infringing activity under 17 U.S.C. § 512(c)(1)(B), and the judgment is REVERSED insofar as it rests on that erroneous construction of the statute; the cause is REMANDED for further fact-finding by the District Court on the issues of control and financial benefit;

      (5) The District Court correctly held that three of the challenged YouTube software functions—replication, playback, and the related videos feature—occur “by reason of the storage at the direction of a user” within the meaning of 17 U.S.C. § 512(c)(1), and the judgment is AFFIRMED insofar as it so held; the cause is REMANDED for further fact-finding regarding a fourth software function, involving the syndication of YouTube videos to third parties.

      On remand, the District Court shall allow the parties to brief the following issues, with a view to permitting renewed motions for summary judgment as soon as practicable:

      (A) Whether, on the current record, YouTube had knowledge or awareness of any specific infringements (including any clips-in-suit not expressly noted in this opinion);

      (B) Whether, on the current record, YouTube willfully blinded itself to specific infringements;

      (C) Whether YouTube had the “right and ability to control” infringing activity within the meaning of § 512(c)(1)(B); and

      (D) Whether any clips-in-suit were syndicated to a third party and, if so, whether such syndication occurred “by reason of the storage at the direction of the user” within the meaning of § 512(c)(1), so that YouTube may claim the protection of the § 512(c) safe harbor.

      We leave to the sound discretion of the District Court the question of whether some additional, guided discovery is appropriate in order to resolve “(C)” (“[w]hether YouTube had ‘the right and ability to control’ infringing activity”), and “(D)” (“[w]hether any clips-in-suit were syndicated to a third party”). As noted above, for purposes of this case, the record with respect to “(A)” (“[w]hether ... YouTube had knowledge or awareness of any specific infringements”) and “(B)” (“[w]hether. YouTube willfully blinded itself to specific infringements”) is now complete.

      90

      Each party shall bear its own costs.

      91
      APPENDIX ARELEVANT PROVISIONS OF THE DIGITAL MILLENNIUM COPYRIGHT ACT 17 U.S.C. § 512
      92

      (c) Information residing on systems or networks at direction of users.

      (1) In general.—A service provider shall not be liable for monetary relief, or, except as provided in subsection (j), for injunctive or other equitable relief, for infringement of copyright by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider, if the service provider—

      (A) (i) does not have actual knowledge that the material or an activity using the material on the system or network is infringing;

      [676 F.3d 43] (ii) in the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent; or

      (iii) upon obtaining such knowledge or awareness, acts expeditiously to remove, or disable access to, the material;

      (B) does not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity; and

      (C) upon notification of claimed infringement as described in paragraph (3), responds expeditiously to remove, or disable access to, the material that is claimed to be infringing or to be the subject of infringing activity.

      (2) Designated agent.—The limitations on liability established in this subsection apply to a service provider only if the service provider has designated an agent to receive notifications of claimed infringement described in paragraph (3), by making available through its service, including on its website in a location accessible to the public, and by providing to the Copyright Office, substantially the following information:

      (A) the name, address, phone number, and electronic mail address of the agent.

      (B) other contact information which the Register of Copyrights may deem appropriate.

      The Register of Copyrights shall maintain a current directory of agents available to the public for inspection, including through the Internet, and may require payment of a fee by service providers to cover the costs of maintaining the directory.

      (3) Elements of notification.—

      (A) To be effective under this subsection, a notification of claimed infringement must be a written communication provided to the designated agent of a service provider that includes substantially the following:

      (i) A physical or electronic signature of a person authorized to act on behalf of the owner of an exclusive right that is allegedly infringed.

      (ii) Identification of the copyrighted work claimed to have been infringed, or, if multiple copyrighted works at a single online site are covered by a single notification, a representative list of such works at that site.

      (iii) Identification of the material that is claimed to be infringing or to be the subject of infringing activity and that is to be removed or access to which is to be disabled, and information reasonably sufficient to permit the service provider to locate the material.

      (vi) Information reasonably sufficient to permit the service provider to contact the complaining party, such as an address, telephone number, and, if available, an electronic mail address at which the complaining party may be contacted.

      (iv) A statement that the complaining party has a good faith belief that use of the material in the manner complained of is not authorized by the copyright owner, its agent, or the law.

      (v) A statement that the information in the notification is accurate, and under penalty of perjury, that the complaining party is authorized to act on behalf of the owner of an exclusive right that is allegedly infringed.

      (B)(i) Subject to clause (ii), a notification from a copyright owner or from a person authorized to act on behalf of the copyright owner that fails to comply substantially with the provisions of subparagraph

      [676 F.3d 44] (A) shall not be considered under paragraph (1)(A) in determining whether a service provider has actual knowledge or is aware of facts or circumstances from which infringing activity is apparent.

      (ii) In a case in which the notification that is provided to the service provider's designated agent fails to comply substantially with all the provisions of subparagraph (A) but substantially complies with clauses (ii), (iii), and (iv) of subparagraph (A), clause (i) of this subparagraph applies only if the service provider promptly attempts to contact the person making the notification or takes other reasonable steps to assist in the receipt of notification that substantially complies with all the provisions of subparagraph (A).

      (i) Conditions for Eligibility.

      (1) Accommodation of technology.—The limitations on liability established by this section shall apply to a service provider only if the service provider—

      (A) has adopted and reasonably implemented, and informs subscribers and account holders of the service provider's system or network of, a policy that provides for the termination in appropriate circumstances of subscribers and account holders of the service provider's system or network who are repeat infringers; and

      (B) accommodates and does not interfere with standard technical measures.

      (2) Definition.—As used in this subsection, the term “standard technical measures” means technical measures that are used by copyright owners to identify or protect copyrighted works and—

      (A) have been developed pursuant to a broad consensus of copyright owners and service providers in an open, fair, voluntary, multi-industry standards process;

      (B) are available to any person on reasonable and nondiscriminatory terms; and

      (C) do not impose substantial costs on service providers or substantial burdens on their systems or networks.

      (k) Definitions.

      (1) Service provider.—

      (A) As used in subsection (a), the term “service provider” means an entity offering the transmission, routing, or providing of connections for digital online communications, between or among points specified by a user, of material of the user's choosing, without modification to the content of the material as sent or received.

      (B) As used in this section, other than subsection (a), the term “service provider” means a provider of online services or network access, or the operator of facilities therefor, and includes an entity described in subparagraph (A).

      (2) Monetary relief.—As used in this section, the term “monetary relief” means damages, costs, attorneys' fees, and any other form of monetary payment.

      (m) Protection of privacy.—Nothing in this section shall be construed to condition the applicability of subsections (a) through (d) on—

      (1) a service provider monitoring its service or affirmatively seeking facts indicating infringing activity, except to the extent consistent with a standard technical measure complying with the provisions of subsection (i); or

      (2) a service provider gaining access to, removing, or disabling access to material [676 F.3d 45] in cases in which such conduct is prohibited by law.

      (n) Construction.

      Subsections (a), (b), (c), and (d) describe separate and distinct functions for purposes of applying this section. Whether a service provider qualifies for the limitation on liability in any one of those subsections shall be based solely on the criteria in that subsection, and shall not affect a determination of whether that service provider qualifies for the limitations on liability under any other such subsection.

      93

      [*] The Honorable Roger J. Miner, who was originally assigned to the panel, died prior to the resolution of this case. The remaining two members of the panel, who are in agreement, have determined the matter. See 28 U.S.C. § 46(d); 2d Cir. IOP E(b); United States v. Desimone, 140 F.3d 457, 458–59 (2d Cir.1998).

      94

      [1] The relevant provisions of 17 U.S.C. § 512(c) appear in Appendix A.

      95

      [2] The plaintiffs-appellants in Viacom Int'l, Inc. v. YouTube, Inc., No. 10–3270–cv, are Viacom, Comedy Partners, Country Music Television, Inc., Paramount Pictures Corporation, and Black Entertainment Television, LLC (jointly, the “Viacom plaintiffs”). The plaintiffs-appellants in Football Ass'n Premier League Ltd. v. YouTube, Inc., No. 10–3342–cv, are Premier League, Bourne Co., Cal IV Entertainment, LLC, Cherry Lane Music Publishing Company, Inc., X–Ray Dog Music, Inc., Fédération Française de Tennis, Murbo Music Publishing, Inc., and Stage Three Music (US), Inc. (jointly, the “class plaintiffs”).

      96

      [3] The class plaintiffs also sought class certification pursuant to Rule 23 of the Federal Rules of Civil Procedure.

      97

      [4] The “Flash” format “is a highly compressed streaming format that begins to play instantly. Unlike other delivery methods, it does not require the viewer to download the entire video file before viewing.” Joint App'x IV:73.

      98

      [5] Doctrines of secondary copyright infringement include contributory, vicarious, and inducement liability. See Metro–Goldwyn–Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 930–31, 936–37, 125 S.Ct. 2764, 162 L.Ed.2d 781 (2005).

      99

      [6] National Music Publishers' Association, one of the named plaintiffs in the putative class action, seeks only equitable relief.

      100

      [7] It is undisputed that all clips-in-suit had been removed from the YouTube website by the time of summary judgment, mostly in response to DMCA takedown notices. Viacom Int'l, 718 F.Supp.2d at 519.

      101

      [8] Veoh Networks operates a website that “allows people to share video content over the Internet.” Shelter Capital, 667 F.3d at 1026.

      102

      [9] We express no opinion as to whether the evidence discussed above will prove sufficient to withstand a renewed motion for summary judgment by YouTube on remand. In particular, we note that there is at least some evidence that the search requested by Walker in his February 7, 2007 e-mail was never carried out. See Joint App'x III:256. We also note that the class plaintiffs have failed to identify evidence indicating that any infringing content discovered as a result of Walker's request in fact remained on the YouTube website. The class plaintiffs, drawing on the voluminous record in this case, may be able to remedy these deficiencies in their briefing to the District Court on remand.

      103

      [10] Our recent decision in Tiffany (NJ) Inc. v. eBay Inc., 600 F.3d 93 (2d Cir.2010), lends support to this result. In Tiffany, we rejected a willful blindness challenge, holding that although eBay “knew as a general matter that counterfeit Tiffany products were listed and sold through its website,” such knowledge “is insufficient to trigger liability.” Id. at 110. In so holding, however, we rested on the extensive findings of the district court with respect to willful blindness. Id. (citing Tiffany (NJ) Inc. v. eBay, Inc., 576 F.Supp.2d 463, 513 (S.D.N.Y.2008)). Thus, the Tiffany holding counsels in favor of explicit fact-finding on the issue of willful blindness.

      104

      [11] Ellison, 189 F.Supp.2d at 1061.

      105

      [12] UMG II, 665 F.Supp.2d at 1112.

      106

      [13] Other courts have suggested that control may exist where the service provider is “actively involved in the listing, bidding, sale and delivery” of items offered for sale, Hendrickson v. eBay, Inc., 165 F.Supp.2d 1082, 1094 (C.D.Cal.2001), or otherwise controls vendor sales by previewing products prior to their listing, editing product descriptions, or suggesting prices, Corbis Corp., 351 F.Supp.2d at 1110. Because these cases held that control did not exist, however, it is not clear that the practices cited therein are individually sufficient to support a finding of control.

      107

      [14] The class plaintiffs also assert, in a single sentence, that YouTube failed to implement any repeat infringer policy prior to March 2006, and that the defendants are therefore excluded from the safe harbor for any infringing activity before that date. This one-sentence argument is insufficient to raise the issue for review before this Court. Accordingly, we deem the issue waived on appeal. See, e.g., Norton v. Sam's Club, 145 F.3d 114, 117 (2d Cir.1998) (“Issues not sufficiently argued in the briefs are considered waived and normally will not be addressed on appeal.”).

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  • 5 Week 5: Patentable Subject Matter

    • 5.1 BILSKI v. KAPPOS

      1
      130 S.Ct. 3218 (2010)
      2
      Bernard L. BILSKI and Rand A. Warsaw, Petitioners,
      v.
      David J. KAPPOS, Under Secretary of Commerce for Intellectual Property and Director, Patent and Trademark Office.
      3
      No. 08-964.
      4

      Supreme Court of United States.

      5
      Argued November 9, 2009.
      6
      Decided June 28, 2010.
      7

       

      8

      [3223] J. Michael Jakes, Washington, DC, for petitioners.

      9

      Malcolm L. Stewart, Washington, DC, for respondent.

      10

      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.

      11

      Cameron F. Kerry, General Counsel, Quentin A. Palfrey, Associate General Counsel, Joan Bernott Maginnis, Assistant General Counsel, U.S. Department of Commerce, Washington, DC, Raymond T. Chen, Solicitor and Deputy General Counsel, Thomas W. Krause, Scott C. Weidenfeller, Associate Solicitors, Alexandria, VA, Elena Kagan, Solicitor General, Counsel of Record, Malcolm L. Stewart, Deputy Solicitor General, Tony West, Assistant Attorney General, Ginger D. Anders, Assistant to the Solicitor General, Scott R. McIntosh, Mark R. Freeman, Attorneys, Department of Justice, Washington, DC, for respondent.

      12

      Justice KENNEDY delivered the opinion of the Court, except as to Parts II-B-2 and II-C-2.[*]

      13

      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 procedure for instructing buyers and sellers how to protect against the risk of price fluctuations in a discrete section of the economy. Three arguments are advanced 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 involves 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 machine-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.

      14
      I
      15

      Petitioners' application seeks patent protection for a claimed invention that explains how buyers and sellers of commodities in the energy market can protect, 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 following steps:

      16
      "(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 historical averages, said fixed rate corresponding to a risk position of said consumers;
      17
      "(b) identifying market participants for said commodity having a counter-risk position to said consumers; and
      18
      "(c) initiating a series of transactions between said commodity provider and said market participants 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.
      19

      The remaining claims explain how claims 1 and 4 can be applied to allow energy suppliers and consumers to minimize the risks resulting from fluctuations 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.

      20

      The patent examiner rejected petitioners' application, explaining that it "`is not implemented on a specific apparatus and merely manipulates [an] abstract idea and solves a purely mathematical problem without any limitation to a practical application, therefore, the invention is not directed to the technological arts.'" App. to Pet. for Cert. 148a. The Board of Patent Appeals and Interferences affirmed, concluding that the application involved only mental steps that do not transform physical matter and was directed to an abstract idea. Id., at 181a-186a.

      21

      The United States Court of Appeals for the Federal 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.

      22

      Chief Judge Michel wrote the opinion of the court. The court rejected its prior test for determining whether a claimed invention was a patentable "process" under § 101—whether it produces a "`useful, concrete, and tangible result'"—as articulated in State Street Bank & Trust Co. v. Signature Financial 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 concluded 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 machine-or-transformation test, the court held that petitioners' 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.

      23

      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 patentability." 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 proceedings to determine whether the application qualified as patentable under other provisions. Id., at 997.

      24

      This Court granted certiorari. 556 U.S. ___, 129 S.Ct. 2735, 174 L.Ed.2d 246 (2009).

      25
      II
      26
      A
      27

      Section 101 defines the subject matter that may be patented under the Patent Act:

      28
      "Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title."
      29

      Section 101 thus specifies four independent categories of inventions or discoveries that are eligible for protection: processes, machines, manufactures, and compositions of matter. "In choosing such expansive 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 "`ingenuity 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)).

      30

      The Court's precedents provide three specific exceptions to § 101's broad patent-eligibility principles: "laws of nature, physical phenomena, and abstract 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).

      31

      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 requirements include that the invention be novel, see § 102, nonobvious, see § 103, and fully and particularly described, see § 112.

      32

      The present case involves an invention that is claimed to be a "process" under § 101. Section 100(b) defines "process" as:

      33
      "process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material."
      34

      The Court first considers two proposed categorical limitations on "process" patents under § 101 that would, if adopted, bar petitioners' application in the present case: the machine-or-transformation test and the categorical exclusion of business method patents.

      35
      B
      36
      1
      37

      Under the Court of Appeals' formulation, an invention is a "process" only if: "(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing." 545 [3226] F.3d, at 954. This Court has "more than once cautioned that 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 (1981) (quoting Chakrabarty, supra, at 308, 100 S.Ct. 2204; some internal quotation marks omitted). In patent law, as in all statutory construction, "[u]nless otherwise defined, `words will be interpreted as taking their ordinary, contemporary, common meaning.'" Diehr, supra, at 182, 101 S.Ct. 1048 (quoting Perrin v. United States, 444 U.S. 37, 42, 100 S.Ct. 311, 62 L.Ed.2d 199 (1979)). The Court has read the § 101 term "manufacture" in accordance with dictionary definitions, see Chakrabarty, supra, at 308, 100 S.Ct. 2204 (citing American Fruit Growers, Inc. v. Brogdex Co., 283 U.S. 1, 11, 51 S.Ct. 328, 75 L.Ed. 801 (1931)), and approved a construction of the term "composition of matter" consistent with common usage, see Chakrabarty, supra, at 308, 100 S.Ct. 2204 (citing Shell Development Co. v. Watson, 149 F.Supp. 279, 280 (DDC 1957)).

      38

      Any suggestion in this Court's case law that the Patent Act's terms deviate from their ordinary meaning has only been an explanation for the exceptions for laws of nature, physical phenomena, and abstract ideas. See Parker v. Flook, 437 U.S. 584, 588-589, 98 S.Ct. 2522, 57 L.Ed.2d 451 (1978). This Court has not indicated that the existence of these well-established exceptions gives the Judiciary carte blanche to impose other limitations that are inconsistent with the text and the statute's purpose and design. Concerns about attempts to call any form of human activity a "process" can be met by making sure the claim meets the requirements of § 101.

      39

      Adopting the machine-or-transformation test as the sole test for what constitutes a "process" (as opposed to just an important and useful clue) violates these statutory interpretation principles. Section 100(b) provides that "[t]he term `process' means process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material." The Court is unaware of any "`ordinary, contemporary, common meaning,'" Diehr, supra, at 182, 101 S.Ct. 1048, of the definitional terms "process, art or method" that would require these terms to be tied to a machine or to transform an article. Respondent urges the Court to look to the other patentable categories in § 101—machines, manufactures, and compositions of matter—to confine the meaning of "process" to a machine or transformation, under the doctrine of noscitur a sociis. Under this canon, "an ambiguous term may be given more precise content by the neighboring words with which it is associated." United States v. Stevens, 559 U.S. ___, ___, 130 S.Ct. 1577, 1587, 176 L.Ed.2d 435 (2010) (internal quotation marks omitted). This canon is inapplicable here, for § 100(b) already explicitly defines the term "process." See Burgess v. United States, 553 U.S. 124, 130, 128 S.Ct. 1572, 170 L.Ed.2d 478 (2008) ("When a statute includes an explicit definition, we must follow that definition" (internal quotation marks omitted)).

      40

      The Court of Appeals incorrectly concluded that this Court has endorsed the machine-or-transformation test as the exclusive test. It is true that Cochrane v. Deener, 94 U.S. 780, 788, 24 L.Ed. 139 (1877), explained that a "process" is "an act, or a series of acts, performed upon the subject-matter to be transformed and reduced to a different state or thing." More recent cases, however, have rejected the broad implications of this dictum; and, in all events, later authority shows that it was not intended to be an exhaustive or exclusive test. Gottschalk v. Benson, 409 U.S. [3227] 63, 70, 93 S.Ct. 253, 34 L.Ed.2d 273 (1972), noted that "[t]ransformation and reduction of an article `to a different state or thing' is the clue to the patentability of a process claim that does not include particular machines." At the same time, it explicitly declined to "hold that no process patent could ever qualify if it did not meet [machine or transformation] requirements." Id., at 71, 93 S.Ct. 253. Flook took a similar approach, "assum[ing] that a valid process patent may issue even if it does not meet [the machine-or-transformation test]." 437 U.S., at 588, n. 9, 98 S.Ct. 2522.

      41

      This Court's precedents establish that the machine-or-transformation test is a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under § 101. The machine-or-transformation test is not the sole test for deciding whether an invention is a patent-eligible "process."

      42
      2
      43

      It is true that patents for inventions that did not satisfy the machine-or-transformation test were rarely granted in earlier eras, especially in the Industrial Age, as explained by Judge Dyk's thoughtful historical review. See 545 F.3d, at 966-976 (concurring opinion). But times change. Technology and other innovations progress in unexpected ways. For example, it was once forcefully argued that until recent times, "well-established principles of patent law probably would have prevented the issuance of a valid patent on almost any conceivable computer program." Diehr, 450 U.S., at 195, 101 S.Ct. 1048 (STEVENS, J., dissenting). But this fact does not mean that unforeseen innovations such as computer programs are always unpatentable. See id., at 192-193, 101 S.Ct. 1048 (majority opinion) (holding a procedure for molding rubber that included a computer program is within patentable subject matter). Section 101 is a "dynamic provision designed to encompass new and unforeseen inventions." J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred Int'l, Inc., 534 U.S. 124, 135, 122 S.Ct. 593, 151 L.Ed.2d 508 (2001). A categorical rule denying patent protection for "inventions in areas not contemplated by Congress . . . would frustrate the purposes of the patent law." Chakrabarty, 447 U.S., at 315, 100 S.Ct. 2204.

      44

      The machine-or-transformation test may well provide a sufficient basis for evaluating processes similar to those in the Industrial Age—for example, inventions grounded in a physical or other tangible form. But there are reasons to doubt whether the test should be the sole criterion for determining the patentability of inventions in the Information Age. As numerous amicus briefs argue, the machine-or-transformation test would create uncertainty as to the patentability of software, advanced diagnostic medicine techniques, and inventions based on linear programming, data compression, and the manipulation of digital signals. See, e.g., Brief for Business Software Alliance 24-25; Brief for Biotechnology Industry Organization et al. 14-27; Brief for Boston Patent Law Association 8-15; Brief for Houston Intellectual Property Law Association 17-22; Brief for Dolby Labs., Inc., et al. 9-10.

      45

      In the course of applying the machine-or-transformation test to emerging technologies, courts may pose questions of such intricacy and refinement that they risk obscuring the larger object of securing patents for valuable inventions without transgressing the public domain. The dissent by Judge Rader refers to some of these difficulties. 545 F.3d, at 1015. As a result, in deciding whether previously unforeseen inventions qualify as patentable [3228] "process[es]," it may not make sense to require courts to confine themselves to asking the questions posed by the machine-or-transformation test. Section 101's terms suggest that new technologies may call for new inquiries. See Benson, supra, at 71, 93 S.Ct. 253 (to "freeze process patents to old technologies, leaving no room for the revelations of the new, onrushing technology[,] . . . is not our purpose").

      46

      It is important to emphasize that the Court today is not commenting on the patentability of any particular invention, let alone holding that any of the above-mentioned technologies from the Information Age should or should not receive patent protection. This Age puts the possibility of innovation in the hands of more people and raises new difficulties for the patent law. With ever more people trying to innovate and thus seeking patent protections for their inventions, the patent law faces a great challenge in striking the balance between protecting inventors and not granting monopolies over procedures that others would discover by independent, creative application of general principles. Nothing in this opinion should be read to take a position on where that balance ought to be struck.

      47
      C
      48
      1
      49

      Section 101 similarly precludes the broad contention that the term "process" categorically excludes business methods. The term "method," which is within § 100(b)'s definition of "process," at least as a textual matter and before consulting other limitations in the Patent Act and this Court's precedents, may include at least some methods of doing business. See, e.g., Webster's New International Dictionary 1548 (2d ed.1954) (defining "method" as "[a]n orderly procedure or process . . . regular way or manner of doing anything; hence, a set form of procedure adopted in investigation or instruction"). The Court is unaware of any argument that the "`ordinary, contemporary, common meaning,'" Diehr, supra, at 182, 101 S.Ct. 1048, of "method" excludes business methods. Nor is it clear how far a prohibition on business method patents would reach, and whether it would exclude technologies for conducting a business more efficiently. See, e.g., Hall, Business and Financial Method Patents, Innovation, and Policy, 56 Scottish J. Pol. Econ. 443, 445 (2009) ("There is no precise definition of . . . business method patents").

      50

      The argument that business methods are categorically outside of § 101's scope is further undermined by the fact that federal law explicitly contemplates the existence of at least some business method patents. Under 35 U.S.C. § 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. For purposes of this defense alone, "method" is defined as "a method of doing or conducting business." § 273(a)(3). In other words, by allowing this defense the statute itself acknowledges that there may be business method patents. Section 273's definition of "method," to be sure, cannot change the meaning of a prior-enacted statute. But what § 273 does is clarify the understanding that a business method is simply one kind of "method" that is, at least in some circumstances, eligible for patenting under § 101.

      51

      A conclusion that business methods are not patentable in any circumstances would render § 273 meaningless. This would violate the canon against interpreting any statutory provision in a manner that would render another provision superfluous. See Corley v. United States, [3229] 556 U.S. ___, ___, 129 S.Ct. 1558, 1566, 173 L.Ed.2d 443 (2009). This principle, of course, applies to interpreting any two provisions in the U.S.Code, even when Congress enacted the provisions at different times. See, e.g., Hague v. Committee for Industrial Organization, 307 U.S. 496, 529-530, 59 S.Ct. 954, 83 L.Ed. 1423 (1939) (opinion of Stone, J.). This established rule of statutory interpretation cannot be overcome by judicial speculation as to the subjective intent of various legislators in enacting the subsequent provision. Finally, while § 273 appears to leave open the possibility of some business method patents, it does not suggest broad patentability of such claimed inventions.

      52
      2
      53

      Interpreting § 101 to exclude all business methods simply because business method patents were rarely issued until modern times revives many of the previously discussed difficulties. See supra, at 3227-3228. At the same time, some business method patents raise special problems in terms of vagueness and suspect validity. See eBay Inc. v. MercExchange, L.L. C., 547 U.S. 388, 397, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006) (KENNEDY, J., concurring). The Information Age empowers people with new capacities to perform statistical analyses and mathematical calculations with a speed and sophistication that enable the design of protocols for more efficient performance of a vast number of business tasks. If a high enough bar is not set when considering patent applications of this sort, patent examiners and courts could be flooded with claims that would put a chill on creative endeavor and dynamic change.

      54

      In searching for a limiting principle, this Court's precedents on the unpatentability of abstract ideas provide useful tools. See infra, at 3229-3231. Indeed, if the Court of Appeals were to succeed in defining a narrower category or class of patent applications that claim to instruct how business should be conducted, and then rule that the category is unpatentable because, for instance, it represents an attempt to patent abstract ideas, this conclusion might well be in accord with controlling precedent. See ibid. But beyond this or some other limitation consistent with the statutory text, the Patent Act leaves open the possibility that there are at least some processes that can be fairly described as business methods that are within patentable subject matter under § 101.

      55

      Finally, even if a particular business method fits into the statutory definition of a "process," that does not mean that the application claiming that method should be granted. In order to receive patent protection, any claimed invention must be novel, § 102, nonobvious, § 103, and fully and particularly described, § 112. These limitations 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.

      56
      III
      57

      Even though petitioners' application is not categorically outside of § 101 under the two broad and atextual 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. App. 19-20. Rather than adopting categorical rules that might have wide-ranging and unforeseen impacts, the Court resolves this case narrowly on the basis of this Court's decisions in Benson, Flook, and Diehr, which show that petitioners' claims are not patentable processes because they [3230] are attempts to patent abstract ideas. Indeed, all members of the Court agree that the patent application at issue here falls outside of § 101 because it claims an abstract idea.

      58

      In Benson, the Court considered whether a patent application for an algorithm to convert binary-coded decimal numerals into pure binary code was a "process" under § 101. 409 U.S., at 64-67, 93 S.Ct. 253. The Court first explained that "`[a] principle, in the abstract, is a fundamental truth; an original cause; a motive; these cannot be patented, as no one can claim in either of them an exclusive right.'" Id., at 67, 93 S.Ct. 253 (quoting Le Roy, 14 How., at 175, 14 L.Ed. 367). The Court then held the application at issue was not a "process," but an unpatentable abstract idea. "It is conceded that one may not patent an idea. But in practical effect that would be the result if the formula for converting . . . numerals to pure binary numerals were patented in this case." 409 U.S., at 71, 93 S.Ct. 253. A contrary holding "would wholly pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself." Id., at 72, 93 S.Ct. 253.

      59

      In Flook, the Court considered the next logical step after Benson. The applicant there attempted to patent a procedure for monitoring the conditions during the catalytic conversion process in the petrochemical and oil-refining industries. The application's only innovation was reliance on a mathematical algorithm. 437 U.S., at 585-586, 98 S.Ct. 2522. Flook held the invention was not a patentable "process." The Court conceded the invention at issue, unlike the algorithm in Benson, had been limited so that it could still be freely used outside the petrochemical and oil-refining industries. 437 U.S., at 589-590, 98 S.Ct. 2522. Nevertheless, Flook rejected "[t]he notion that post-solution activity, no matter how conventional or obvious in itself, can transform an unpatentable principle into a patentable process." Id., at 590, 98 S.Ct. 2522. The Court concluded that the process at issue there was "unpatentable under § 101, not because it contain[ed] a mathematical algorithm as one component, but because once that algorithm [wa]s assumed to be within the prior art, the application, considered as a whole, contain[ed] no patentable invention." Id., at 594, 98 S.Ct. 2522. As the Court later explained, Flook stands for the proposition that the prohibition against patenting abstract ideas "cannot be circumvented by attempting to limit the use of the formula to a particular technological environment" or adding "insignificant postsolution activity." Diehr, 450 U.S., at 191-192, 101 S.Ct. 1048.

      60

      Finally, in Diehr, the Court established a limitation on the principles articulated in Benson and Flook. The application in Diehr claimed a previously unknown method for "molding raw, uncured synthetic rubber into cured precision products," using a mathematical formula to complete some of its several steps by way of a computer. 450 U.S., at 177, 101 S.Ct. 1048. Diehr explained that while an abstract idea, law of nature, or mathematical formula could not be patented, "an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection." Id., at 187, 101 S.Ct. 1048. Diehr emphasized the need to consider the invention as a whole, rather than "dissect[ing] the claims into old and new elements and then . . . ignor[ing] the presence of the old elements in the analysis." Id., at 188, 101 S.Ct. 1048. Finally, the Court concluded that because the claim was not "an attempt to patent a mathematical formula, but rather [was] an industrial process for the molding of rubber products," it fell within § 101's patentable subject matter. Id., at 192-193, 101 S.Ct. 1048.

      61

      [3231] In light of these precedents, it is clear that petitioners' application is not a patentable "process." Claims 1 and 4 in petitioners' application explain the basic concept of hedging, or protecting against risk: "Hedging is a fundamental economic practice long prevalent in our system of commerce and taught in any introductory finance class." 545 F.3d, at 1013 (Rader, J., dissenting); see, e.g., D. Chorafas, Introduction to Derivative Financial Instruments 75-94 (2008); C. Stickney, R. Weil, K. Schipper, & J. Francis, Financial Accounting: An Introduction to Concepts, Methods, and Uses 581-582 (13th ed.2010); S. Ross, R. Westerfield, & B. Jordan, Fundamentals of Corporate Finance 743-744 (8th ed.2008). The concept of hedging, described in claim 1 and reduced to a mathematical formula in claim 4, is an unpatentable abstract idea, just like the algorithms at issue in Benson and Flook. Allowing petitioners to patent risk hedging would pre-empt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea.

      62

      Petitioners' remaining claims are broad examples of how hedging can be used in commodities and energy markets. Flook established that limiting an abstract idea to one field of use or adding token postsolution components did not make the concept patentable. That is exactly what the remaining claims in petitioners' application do. These claims attempt to patent the use of the abstract idea of hedging risk in the energy market and then instruct the use of well-known random analysis techniques to help establish some of the inputs into the equation. Indeed, these claims add even less to the underlying abstract principle than the invention in Flook did, for the Flook invention was at least directed to the narrower domain of signaling dangers in operating a catalytic converter.

      63
      * * *
      64

      Today, the Court once again declines to impose limitations on the Patent Act that are inconsistent with the Act's text. The patent application here can be rejected under our precedents on the unpatentability of abstract ideas. The Court, therefore, 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.

      65

      And nothing in today's opinion should be read as endorsing interpretations of § 101 that the Court of Appeals for the Federal Circuit has used in the past. See, e.g., State Street, 149 F.3d, at 1373; AT & T Corp., 172 F.3d, at 1357. It may be that the Court of Appeals 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, including (but not limited to) application of our opinions in Benson, Flook, and Diehr. In disapproving an exclusive machine-or-transformation test, we by no means foreclose the Federal Circuit's development of other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text.

      66

      The judgment of the Court of Appeals is affirmed.

      67

      It is so ordered.

      68

      Justice STEVENS, with whom Justice GINSBURG, Justice BREYER, and Justice SOTOMAYOR join, concurring in the judgment.

      69

      In the area of patents, it is especially important that the law remain stable and clear. The only question presented in this case is whether the so-called machine-or-transformation test is the exclusive test for what constitutes a patentable "process" under 35 U.S.C. § 101. It would be possible [3232] to answer that question simply by holding, as the entire Court agrees, that although the machine-or-transformation test is reliable in most cases, it is not the exclusive test.

      70

      I agree with the Court that, in light of the uncertainty that currently pervades this field, it is prudent to provide further guidance. But I would take a different approach. Rather than making any broad statements about how to define the term "process" in § 101 or tinkering with the bounds of the category of unpatentable, abstract ideas, I would restore patent law to its historical and constitutional moorings.

      71

      For centuries, it was considered well established that a series of steps for conducting business was not, in itself, patentable. In the late 1990's, the Federal Circuit and others called this proposition into question. Congress quickly responded to a Federal Circuit decision with a stopgap measure designed to limit a potentially significant new problem for the business community. It passed the First Inventors Defense Act of 1999 (1999 Act), 113 Stat. 1501A-555 (codified at 35 U.S.C. § 273), which provides a limited defense to claims of patent infringement, see § 273(b), for "method[s] of doing or conducting business," § 273(a)(3). Following several more years of confusion, the Federal Circuit changed course, overruling recent decisions and holding that a series of steps may constitute a patentable process only if it is tied to a machine or transforms an article into a different state or thing. This "machine-or-transformation test" excluded general methods of doing business as well as, potentially, a variety of other subjects that could be called processes.

      72

      The Court correctly holds that the machine-or-transformation test is not the sole test for what constitutes a patentable process; rather, it is a critical clue.[1] But the Court is quite wrong, in my view, to suggest that any series of steps that is not itself an abstract idea or law of nature may constitute a "process" within the meaning of § 101. The language in the Court's opinion to this effect can only cause mischief. The wiser course would have been to hold that petitioners' method is not a "process" because it describes only a general method of engaging in business transactions—and business methods are not patentable. More precisely, although a process is not patent-ineligible simply because it is useful for conducting business, a claim that merely describes a method of doing business does not qualify as a "process" under § 101.

      73
      I
      74

      Although the Court provides a brief statement of facts, ante, at 3220-3223, a more complete explication may be useful for those unfamiliar with petitioners' patent application and this case's procedural history.

      75

      Petitioners' patent application describes a series of steps for managing risk amongst buyers and sellers of commodities. The general method, described in Claim 1, entails "managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price," and consists of the following steps:

      76
      "(a) initiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumers purchase said commodity at a fixed rate based upon historical [3233] averages, said fixed rate corresponding to a risk position of said consumers;
      77
      "(b) identifying market participants for said commodity having a counter-risk position to said consumers; and
      78
      "(c) initiating a series of transactions between said commodity provider and said market participants 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.
      79

      Although the patent application makes clear that the "method can be used for any commodity to manage consumption risk in a fixed bill price product," id., at 11, it includes specific applications of the method, particularly in the field of energy, as a means of enabling suppliers and consumers to minimize the risks resulting from fluctuations in demand during specified time periods. See id., at 20-22. Energy suppliers and consumers may use that method to hedge their risks by agreeing upon a fixed series of payments at regular intervals throughout the year instead of charging or paying prices that fluctuate in response to changing weather conditions. The patent application describes a series of steps, including the evaluation of historical costs and weather variables and the use of economic and statistical formulas, to analyze these data and to estimate the likelihood of certain outcomes. See id., at 12-19.

      80

      The patent examiner rejected petitioners' application on the ground that it "is not directed to the technological arts," insofar as it "is not implemented on a specific apparatus and merely manipulates [an] abstract idea and solves a purely mathematical problem without any limitation to a practical application." App. to Pet. for Cert. 148a.

      81

      The Board of Patent Appeals and Interferences (Board) affirmed the examiner's decision, but it rejected the position that a patentable process must relate to "technological arts" or be performed on a machine. Id., at 180a-181a. Instead, the Board denied petitioners' patent on two alternative, although similar, grounds: first, that the patent involves only mental steps that do not transform physical subject matter, id., at 181a-184a; and, second, that it is directed to an "abstract idea," id., at 184a-187a.

      82

      Petitioners appealed to the United States Court of Appeals for the Federal Circuit. After briefing and argument before a three-judge panel, the court sua sponte decided to hear the case en banc and ordered the parties to address: (1) whether petitioners'"claim 1 . . . claims patent-eligible subject matter under 35 U.S.C. § 101"; (2) "[w]hat standard should govern in determining whether a process is patent-eligible subject matter"; (3) "[w]hether the claimed subject matter is not patent-eligible because it constitutes an abstract idea or mental process"; (4) "[w]hether a method or process must result in a physical transformation of an article or be tied to a machine to be patent-eligible subject matter"; and (5) whether the court's decisions in State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (1998) (State Street), and AT & T Corp. v. Excel Communications, Inc., 172 F.3d 1352 (1999), should be overruled in any respect. App. to Pet. for Cert. 144a-145a.

      83

      The en banc Court of Appeals affirmed the Board's decision. Eleven of the twelve judges agreed that petitioners' claims do not describe a patentable "process," § 101. Chief Judge Michel's opinion, joined by eight other judges, rejected several possible tests for what is a patent-eligible process, including whether the patent produces a "`useful, concrete and tangible result,'" whether the process relates to [3234] "technological arts," and "categorical exclusions" for certain processes such as business methods. In re Bilski, 545 F.3d 943, 959-960 (2008). Relying on several of our cases in which we explained how to differentiate a claim on a "fundamental principle" from a claim on a "process," the court concluded 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 954-955. The court further concluded that this "machine-or-transformation test" is "the sole test governing § 101 analyses," id., at 955 (emphasis added), and therefore the "test for determining patent eligibility of a process under § 101," id., at 956. Applying that test, the court held that petitioners' claim is not a patent-eligible process. Id., at 963-966.

      84

      In a separate opinion reaching the same conclusion, Judge Dyk carefully reviewed the history of American patent law and English precedents upon which our law is based, and found that "the unpatentability of processes not involving manufactures, machines, or compositions of matter has been firmly embedded . . . since the time of the Patent Act of 1793." Id., at 966. Judge Dyk observed, moreover, that "[t]here is no suggestion in any of this early consideration of process patents that processes for organizing human activity were or ever had been patentable." Id., at 972.

      85

      Three judges wrote dissenting opinions, although two of those judges agreed that petitioners' claim is not patent eligible. Judge Mayer would have held that petitioners' claim "is not eligible for patent protection because it is directed to a method of conducting business." Id., at 998. He submitted that "[t]he patent system is intended to protect and promote advances in science and technology, not ideas about how to structure commercial transactions." Ibid. "Affording patent protection to business methods lacks constitutional and statutory support, serves to hinder rather than promote innovation[,] and usurps that which rightfully belongs in the public domain." Ibid.

      86

      Judge Rader would have rejected petitioners' claim on the ground that it seeks to patent merely an abstract idea. Id., at 1011.

      87

      Only Judge Newman disagreed with the court's conclusion that petitioners' claim seeks a patent on ineligible subject matter. Judge Newman urged that the en banc court's machine-or-transformation test ignores the text and history of § 101, id., at 977-978, 985-990, is in tension with several of decisions by this Court, id., at 978-985, and the Federal Circuit, id., at 990-992, and will invalidate thousands of patents that were issued in reliance on those decisions, id., at 992-994.

      88
      II
      89

      Before explaining in more detail how I would decide this case, I will comment briefly on the Court's opinion. The opinion is less than pellucid in more than one respect, and, if misunderstood, could result in confusion or upset settled areas of the law. Three preliminary observations may be clarifying.

      90

      First, the Court suggests that the terms in the Patent Act must be read as lay speakers use those terms, and not as they have traditionally been understood in the context of patent law. See, e.g., ante, at 3226 (terms in § 101 must be viewed in light of their "`ordinary, contemporary, common meaning'"); ante, at 3228 (patentable "method" is any "orderly procedure or process," "regular way or manner of doing anything," or "set form of procedure adopted in investigation or instruction" (internal quotation marks omitted)). [3235] As I will explain at more length in Part III, infra, if this portion of the Court's opinion were taken literally, the results would be absurd: Anything that constitutes a series of steps would be patentable so long as it is novel, nonobvious, and described with specificity. But the opinion cannot be taken literally on this point. The Court makes this clear when it accepts that the "atextual" machine-or-transformation test, ante, at 3229, is "useful and important," ante, at 3227, even though it "violates" the stated "statutory interpretation principles," ante, at 3226; and when the Court excludes processes that tend to pre-empt commonly used ideas, see ante, at 3230-3231.

      91

      Second, in the process of addressing the sole issue presented to us, the opinion uses some language that seems inconsistent with our centuries-old reliance on the machine-or-transformation criteria as clues to patentability. Most notably, the opinion for a plurality suggests that these criteria may operate differently when addressing technologies of a recent vintage. See ante, at 3227-3228 (machine-or-transformation test is useful "for evaluating processes similar to those in the Industrial Age," but is less useful "for determining the patentability of inventions in the Information Age"). In moments of caution, however, the opinion for the Court explains —correctly—that the Court is merely restoring the law to its historical state of rest. See ante, at 3227 ("This Court's precedents establish that the machine-or-transformation test is a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under § 101"). Notwithstanding this internal tension, I understand the Court's opinion to hold only that the machine-or-transformation test remains an important test for patentability. Few, if any, processes cannot effectively be evaluated using these criteria.

      92

      Third, in its discussion of an issue not contained in the questions presented— whether the particular series of steps in petitioners' application is an abstract idea—the Court uses language that could suggest a shift in our approach to that issue. Although I happen to agree that petitioners seek to patent an abstract idea, the Court does not show how this conclusion follows "clear[ly]," ante, at 3230-3231, from our case law. The patent now before us is not for "[a] principle, in the abstract," or a "fundamental truth." Parker v. Flook, 437 U.S. 584, 589, 98 S.Ct. 2522, 57 L.Ed.2d 451 (1978) (internal quotation marks omitted). Nor does it claim the sort of phenomenon of nature or abstract idea that was embodied by the mathematical formula at issue in Gottschalk v. Benson, 409 U.S. 63, 67, 93 S.Ct. 253, 34 L.Ed.2d 273 (1972), and in Flook.

      93

      The Court construes petitioners' claims on processes for pricing as claims on "the basic concept of hedging, or protecting against risk," ante, at 3231, and thus discounts the application's discussion of what sorts of data to use, and how to analyze those data, as mere "token postsolution components," ante, at 3231. In other words, the Court artificially limits petitioners' claims to hedging, and then concludes that hedging is an abstract idea rather than a term that describes a category of processes including petitioners' claims. Why the Court does this is never made clear. One might think that the Court's analysis means that any process that utilizes an abstract idea is itself an unpatentable, abstract idea. But we have never suggested any such rule, which would undermine a host of patentable processes. It is true, as the Court observes, that petitioners' application is phrased broadly. See ante, at 3230-3231. But claim specification is covered by § 112, not § 101; and if a series of steps constituted an [3236] unpatentable idea merely because it was described without sufficient specificity, the Court could be calling into question some of our own prior decisions.[2] At points, the opinion suggests that novelty is the clue. See ante, at 3230. But the fact that hedging is "`long prevalent in our system of commerce,'" ibid., cannot justify the Court's conclusion, as "the proper construction of § 101 . . . does not involve the familiar issu[e] of novelty" that arises under § 102. Flook, 437 U.S., at 588, 98 S.Ct. 2522. At other points, the opinion for a plurality suggests that the analysis turns on the category of patent involved. See, e.g., ante, at 3229 (courts should use the abstract-idea rule as a "too[l]" to set "a high enough bar" "when considering patent applications of this sort"). But we have never in the past suggested that the inquiry varies by subject matter.

      94

      The Court, in sum, never provides a satisfying account of what constitutes an unpatentable abstract idea. Indeed, the Court does not even explain if it is using the machine-or-transformation criteria. The Court essentially asserts its conclusion that petitioners' application claims an abstract idea. This mode of analysis (or lack thereof) may have led to the correct outcome in this case, but it also means that the Court's musings on this issue stand for very little.

      95
      III
      96

      I agree with the Court that the text of § 101 must be the starting point of our analysis. As I shall explain, however, the text must not be the end point as well.

      97

      Pursuant to its power "[t]o promote the Progress of . . . useful Arts, by securing for limited Times to . . . Inventors the exclusive Right to their . . . Discoveries," U.S. Const., Art. I, § 8, cl. 8, Congress has passed a series of patent laws that grant certain exclusive rights over certain inventions and discoveries as a means of encouraging innovation. In the latest iteration, the Patent Act of 1952 (1952 Act), Congress has provided that "[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title," 35 U.S.C. § 101, which include that the patent also be novel, § 102, and nonobvious, § 103. The statute thus authorizes four categories of subject matter that may be patented: processes, machines, manufactures, and compositions of matter. Section 101 imposes a threshold condition. "[N]o patent is available for a discovery, however useful, novel, and nonobvious, unless it falls within one of the express categories of patentable subject matter." Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 483, 94 S.Ct. 1879, 40 L.Ed.2d 315 (1974).

      98

      Section 101 undoubtedly defines in "expansive terms" the subject matter eligible for patent protection, as the statute was meant to ensure that "`ingenuit[ies] receive a liberal encouragement.'" Diamond v. Chakrabarty, 447 U.S. 303, 308-309, 100 S.Ct. 2204, 65 L.Ed.2d 144 (1980); see also J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred Int'l, Inc., 534 U.S. 124, 130, 122 S.Ct. 593, 151 L.Ed.2d 508 (2001). Nonetheless, not every new invention or discovery [3237] may be patented. Certain things are "free for all to use." Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 151, 109 S.Ct. 971, 103 L.Ed.2d 118 (1989).[3]

      99

      The text of the Patent Act does not on its face give much guidance about what constitutes a patentable process. The statute defines the term "process" as a "process, art or method [that] includes a new use of a known process, machine, manufacture, composition of matter, or material." § 100(b). But, this definition is not especially helpful, given that it also uses the term "process" and is therefore somewhat circular.

      100

      As lay speakers use the word "process," it constitutes any series of steps. But it has always been clear that, as used in § 101, the term does not refer to a "`process' in the ordinary sense of the word," Flook, 437 U.S., at 588, 98 S.Ct. 2522; see also Corning v. Burden, 15 How. 252, 268, 14 L.Ed. 683 (1854) ("[T]he term process is often used in a more vague sense, in which it cannot be the subject of a patent"). Rather, as discussed in some detail in Part IV, infra, the term "process" (along with the definitions given to that term) has long accumulated a distinctive meaning in patent law. When the term was used in the 1952 Patent Act, it was neither intended nor understood to encompass any series of steps or any way to do any thing.

      101

      With that understanding in mind, the Government has argued that because "a word" in a statute "is given more precise content by the neighboring words with which it" associates, United States v. Williams, 553 U.S. 285, 294, 128 S.Ct. 1830, 170 L.Ed.2d 650 (2008), we may draw inferences from the fact that "[t]he other three statutory categories of patent-eligible subject matter identified in Section 101—`machine, manufacture, or composition of matter'—all `are things made by man, and involve technology.'" Brief for Respondent 26. Specifically, the Government submits, we may infer "that the term `process' is limited to technological and industrial methods." Ibid. The Court rejects this submission categorically, on the ground that "§ 100(b) already explicitly defines the term `process.'" Ante, at 3226. But § 100(b) defines the term "process" by using the term "process," as well as several other general terms. This is not a case, then, in which we must either "follow" a definition, ante, at 3226, or rely on neighboring words to understand the scope of an ambiguous term. The definition itself contains the very ambiguous term that we must define.

      102

      In my view, the answer lies in between the Government's and the Court's positions: The terms adjacent to "process" in § 101 provide a clue as to its meaning, although not a very strong clue. Section 101's list of categories of patentable subject matter is phrased in the disjunctive, suggesting that the term "process" has content distinct from the other items in the [3238] list. It would therefore be illogical to "rob" the word "process" of all independent meaning. Reiter v. Sonotone Corp., 442 U.S. 330, 338, 99 S.Ct. 2326, 60 L.Ed.2d 931 (1979). Moreover, to the extent we can draw inferences about what is a "process" from common attributes in § 101, it is a dangerous endeavor to do so on the basis of a perceived overarching theme. Given the many moving parts at work in the Patent Act, there is a risk of merely confirming our preconceived notions of what should be patentable or of seeing common attributes that track "the familiar issues of novelty and obviousness" that arise under other sections of the statute but are not relevant to § 101, Flook, 437 U.S., at 588, 98 S.Ct. 2522. The placement of "process" next to other items thus cannot prove that the term is limited to any particular categories; it does, however, give reason to be skeptical that the scope of a patentable "process" extends to cover any series of steps at all.

      103

      The Court makes a more serious interpretive error. As briefly discussed in Part II, supra, the Court at points appears to reject the well-settled proposition that the term "process" in § 101 is not a "`process' in the ordinary sense of the word," Flook, 437 U.S., at 588, 98 S.Ct. 2522. Instead, the Court posits that the word "process" must be understood in light of its "ordinary, contemporary, common meaning," ante, at 3228 (internal quotation marks omitted). Although this is a fine approach to statutory interpretation in general, it is a deeply flawed approach to a statute that relies on complex terms of art developed against a particular historical background.[4] Indeed, the approach would render § 101 almost comical. A process for training a dog, a series of dance steps, a method of shooting a basketball, maybe even words, stories, or songs if framed as the steps of typing letters or uttering sounds—all would be patent-eligible. I am confident that the term "process" in § 101 is not nearly so capacious.[5]

      104

      So is the Court, perhaps. What is particularly incredible about the Court's stated method of interpreting § 101 (other than that the method itself may be patent-eligible under the Court's theory of § 101) is that the Court deviates from its own professed commitment to "ordinary, contemporary, common meaning." As noted earlier, the Court accepts a role for the "atextual" machine-or-transformation "clue." Ante, at 3229, 3234. The Court also accepts that we have "foreclose[d] a purely literal reading of § 101," Flook, 437 U.S., at 589, 98 S.Ct. 2522, by holding that claims that are close to "laws of nature, natural phenomena, and abstract ideas," Diamond v. Diehr, 450 U.S. 175, 185, 101 S.Ct. 1048, 67 L.Ed.2d 155 (1981), do not count as "processes" under § 101, even if [3239] they can be colloquially described as such.[6] The Court attempts to justify this latter exception to § 101 as "a matter of statutory stare decisis." Ante, at 3225. But it is strange to think that the very same term must be interpreted literally on some occasions, and in light of its historical usage on others.

      105

      In fact, the Court's understanding of § 101 is even more remarkable because its willingness to exclude general principles from the provision's reach is in tension with its apparent willingness to include steps for conducting business. The history of patent law contains strong norms against patenting these two categories of subject matter. Both norms were presumably incorporated by Congress into the Patent Act in 1952.

      106
      IV
      107

      Because the text of § 101 does not on its face convey the scope of patentable processes, it is necessary, in my view, to review the history of our patent law in some detail. This approach yields a much more straightforward answer to this case than the Court's. As I read the history, it strongly supports the conclusion that a method of doing business is not a "process" under § 101.

      108

      I am, of course, mindful of the fact that § 101 "is a dynamic provision designed to encompass new and unforeseen inventions," and that one must therefore view historical conceptions of patent-eligible subject matter at an appropriately high level of generality. J.E.M. Ag Supply, 534 U.S., at 135, 122 S.Ct. 593; see also Chakrabarty, 447 U.S., at 315-316, 100 S.Ct. 2204. But it is nonetheless significant that while people have long innovated in fields of business, methods of doing business fall outside of the subject matter that has "historically been eligible to receive the protection of our patent laws," Diehr, 450 U.S., at 184, 101 S.Ct. 1048, and likely go beyond what the modern patent "statute was enacted to protect," Flook, 437 U.S., at 593, 98 S.Ct. 2522. It is also significant that when Congress enacted the latest Patent Act, it did so against the background of a well-settled understanding that a series of steps for conducting business cannot be patented. These considerations ought to guide our analysis. As Justice Holmes noted long ago, sometimes, "a page of history is worth a volume of logic." New York Trust Co. v. Eisner, 256 U.S. 345, 349, 41 S.Ct. 506, 65 L.Ed. 963 (1921).

      109
      English Backdrop
      110

      The Constitution's Patent Clause was written against the "backdrop" of English patent practices, Graham v. John Deere Co. of Kansas City, 383 U.S. 1, 5, 86 S.Ct. 684, 15 L.Ed.2d 545 (1966), and early American patent law was "largely based on and incorporated" features of the English patent system, E. Walterscheid, To Promote the Progress of Useful Arts: American Patent Law and Administration, 1789-1836, p. 109 (1998) (hereinafter Walterscheid, To Promote the Progress).[7] The [3240] governing English law, the Statute of Monopolies, responded to abuses whereby the Crown would issue letters patent, "granting monopolies to court favorites in goods or businesses which had long before been enjoyed by the public." Graham, 383 U.S., at 5, 86 S.Ct. 684. The statute generally prohibited the Crown from granting such exclusive rights, 21 Jam. 1, c. 3, § 1 (1623), in 4 Statutes of the Realm 1213 (reprint 1963), but it contained exceptions that, inter alia, permitted grants of exclusive rights to the "working or making of any manner of new Manufacture." § 6.

      111

      Pursuant to that provision, patents issued for the "mode, method, or way of manufacturing," F. Campin, Law of Patents for Inventions 11 (1869) (emphasis deleted), and English courts construed the phrase "working or making of any manner of new manufactures" to encompass manufacturing processes, see, e.g., Boulton v. Bull, 2 H. Bl. 463, 471, 492, 126 Eng. Rep. 651, 655, 666 (C.P. 1795) (holding that the term "manufacture" "applied not only to things made, but to the practice of making, to principles carried into practice in a new manner, to new results of principles carried into practice"). Thus, English courts upheld James Watt's famous patent on a method for reducing the consumption of fuel in steam engines,[8] as well as a variety of patents issued for methods of synthesizing substances or building mechanical devices.[9]

      112

      Although it is difficult to derive a precise understanding of what sorts of methods were patentable under English law, there is no basis in the text of the Statute of Monopolies, nor in pre-1790 English precedent, to infer that business methods could qualify.[10] There was some debate throughout the relevant time period about what processes could be patented. But it does not appear that anyone seriously believed that one could patent "a method for organizing human activity." 545 F.3d, at 970 (Dyk, J., concurring).[11]

      113

      There were a small number of patents issued between 1623 and 1790 relating to banking or lotteries and one for a method [3241] of life insurance,[12] but these did not constitute the "prevail[ing]" "principles and practice" in England on which our patent law was based, Pennock v. Dialogue, 2 Pet. 1, 18, 7 L.Ed. 327 (1829). Such patents were exceedingly rare, and some of them probably were viewed not as inventions or discoveries but rather as special state privileges[13] that until the mid-1800's were recorded alongside inventions in the patent records, see MacLeod 1-2 (explaining that various types of patents were listed together). It appears that the only English patent of the time that can fairly be described as a business method patent was one issued in 1778 on a "Plan for assurances on lives of persons from 10 to 80 years of Age." Woodcroft 324.[14] And "[t]here is no indication" that this patent "was ever enforced or its validity tested," 545 F.3d, at 974 (Dyk, J., concurring); the patent may thus have represented little more than the whim—or error—of a single patent clerk.[15]

      114

      In any event, these patents (or patent) were probably not known to the Framers of early patent law. In an era before computerized databases, organized case law, and treatises,[16] the American drafters probably would have known about particular patents only if they were well publicized or subject to reported litigation. So far as I am aware, no published cases pertained to patents on business methods.

      115

      Also noteworthy is what was not patented under the English system. During the 17th and 18th centuries, Great Britain saw innovations in business organization,[17] business models,[18] management techniques,[19] [3242] and novel solutions to the challenges of operating global firms in which subordinate managers could be reached only by a long sea voyage.[20] Few if any of these methods of conducting business were patented.[21]

      116
      Early American Patent Law
      117

      At the Constitutional Convention, the Founders decided to give Congress a patent power so that it might "promote the Progress of ... useful Arts." Art. I, § 8, cl. 8. There is little known history of that Clause.[22] We do know that the Clause passed without objection or debate.[23] This is striking because other proposed powers, such as a power to grant charters of incorporation, generated discussion about the fear that they might breed "monopolies."[24] Indeed, at the ratification conventions, some States recommended amendments that would have prohibited Congress from granting "`exclusive advantages of commerce.'"[25] If the original understanding of the Patent Clause included the authority to patent methods of doing business, it might not have passed so quietly.

      118

      In 1790, Congress passed the first Patent Act, an "Act to promote the progress of useful Arts" that authorized patents for persons who had "invented or discovered any useful art, manufacture, engine, machine, or device, or any improvement therein not before known or used," if "the invention or discovery [was] sufficiently useful and important." 1 Stat. 109-110. Three years later, Congress passed the Patent Act of 1793 and slightly modified the language to cover "any new and useful [3243] art, machine, manufacture or composition of matter, or any new and useful improvement on any art, machine, manufacture or composition of matter." 1 Stat. 319.

      119

      The object of the constitutional patent power and the statutory authorization for process patents in the early patent Acts was the term "useful art." It is not evident from the face of the statutes or the Constitution whether the objects of the patent system were "arts" that are also useful, or rather a more specific category, the class of arts known as "useful arts." Cf. Graham, 383 U.S., at 12, 86 S.Ct. 684 (describing the "`new and useful' tests which have always existed in the statutory scheme" and apply to all categories of subject matter). However, we have generally assumed that "useful art," at least as it is used in the Patent Act, is itself a term of art. See Burden, 15 How., at 267-268, 14 L.Ed. 683.

      120

      The word "art" and the phrase "useful arts" are subject to many meanings. There is room on the margins to debate exactly what qualifies as either. There is room, moreover, to debate at what level of generality we should understand these broad and historical terms, given that "[a] rule that unanticipated inventions are without protection would conflict with the core concept of the patent law," Chakrabarty, 447 U.S., at 316, 100 S.Ct. 2204. It appears, however, that regardless of how one construes the term "useful arts," business methods are not included.

      121

      Noah Webster's first American dictionary[26] defined the term "art" as the "disposition or modification of things by human skill, to answer the purpose intended," and differentiated between "useful or mechanic" arts, on the one hand, and "liberal or polite" arts, on the other. 1 An American Dictionary of the English Language (1828) (facsimile edition) (emphasis added). Although other dictionaries defined the word "art" more broadly,[27] Webster's definition likely conveyed a message similar to the meaning of the word "manufactures" in the earlier English statute. And we know that the term "useful arts" was used in the founding era to refer to manufacturing and similar applied trades.[28] See Coulter, [3244] The Field of the Statutory Useful Arts, 34 J. Pat. Off. Soc. 487, 493-500 (1952); see also Thomas, The Patenting of the Liberal Professions, 40 Boston College L.Rev. 1139, 1164 (1999) ("[The Framers of the Constitution] undoubtedly contemplated the industrial, mechanical and manual arts of the late eighteenth Century, in contrast to the seven `liberal arts' and the four `fine arts' of classical learning"). Indeed, just days before the Constitutional Convention, one delegate listed examples of American progress in "manufactures and the useful arts," all of which involved the creation or transformation of physical substances. See T. Coxe, An Address to an Assembly of the Friends of American Manufactures 17-18 (1787) (listing, inter alia, meal, ships, liquors, potash, gunpowder, paper, starch, articles of iron, stone work, carriages, and harnesses). Numerous scholars have suggested that the term "useful arts" was widely understood to encompass the fields that we would now describe as relating to technology or "technological arts."[29]

      122

      Thus, fields such as business and finance were not generally considered part of the "useful arts" in the founding Era. See, e.g., The Federalist No. 8, p. 69 (C. Rossiter ed. 1961) (A.Hamilton) (distinguishing between "the arts of industry, and the science of finance"); 30 The Writings of George Washington 1745-1799, p. 186 (J. Fitzpatrick ed.1939) (writing in a letter that "our commerce has been considerably curtailed," but "the useful arts have been almost imperceptible pushed to a considerable degree of perfection"). Indeed, the same delegate to the Constitutional Convention who gave an address in which he listed triumphs in the useful arts distinguished between those arts and the conduct of business. He explained that investors were now attracted to the "manufactures and the useful arts," much as they had long invested in "commerce, navigation, stocks, banks, and insurance companies." T. Coxe, A Statement of the Arts and Manufactures of the United States of [3245] America for the Year 1810, (1814), in 2 American State Papers, Finance 666, 688 (1832).

      123

      Some scholars have remarked, as did Thomas Jefferson, that early patent statutes neither included nor reflected any serious debate about the precise scope of patentable subject matter. See, e.g., Graham, 383 U.S., at 9-10, 86 S.Ct. 684 (discussing Thomas Jefferson's observations). It has been suggested, however, that "[p]erhaps this was in part a function of an understanding—shared widely among legislators, courts, patent office officials, and inventors—about what patents were meant to protect. Everyone knew that manufactures and machines were at the core of the patent system." Merges, Property Rights for Business Concepts and Patent System Reform, 14 Berkeley Tech. L.J. 577, 585 (1999) (hereinafter Merges). Thus, although certain processes, such as those related to the technology of the time, might have been considered patentable, it is possible that "[a]gainst this background, it would have been seen as absurd for an entrepreneur to file a patent" on methods of conducting business. Ibid.

      124
      Development of American Patent Law
      125

      During the first years of the patent system, no patents were issued on methods of doing business.[30] Indeed, for some time, there were serious doubts as to "the patentability of processes per se," as distinct from the physical end product or the tools used to perform a process. Id., at 581-582.[31]

      126

      Thomas Jefferson was the "`first administrator of our patent system'" and "the author of the 1793 Patent Act." Graham, 383 U.S., at 7, 86 S.Ct. 684. We have said that his "conclusions as to conditions of patentability ... are worthy of note." Ibid. at 7, 86 S.Ct. 684. During his time administering the system, Jefferson "saw clearly the difficulty" of deciding what should be patentable.[32] Id., at 9, 86 S.Ct. 684. He drafted the 1793 Act, id., at 7, 86 S.Ct. 684, and, years later, explained that in that Act "`the whole was turned over to the judiciary, to be matured into a system, under which every one might know when his actions were safe and lawful,'" id., at 10, 86 S.Ct. 684 (quoting Letter to Isaac McPherson, in VI Writings of Thomas Jefferson 181-182 (H. Washington ed. 1861)). As the Court has explained, "Congress agreed with Jefferson ... that the courts should develop additional conditions for patentability." Graham, 383 U.S., at 10, 86 S.Ct. 684. Thus "[a]lthough the Patent Act was amended, revised or codified some 50 times between 1790 and 1950, Congress steered clear" of adding statutory requirements of patentability. Ibid. For nearly 160 years, Congress retained the term "useful arts," see, e.g., Act of July 4, 1836, ch. 357, 5 Stat. 117, leaving "wide latitude for judicial construction ... to keep pace with industrial development," Berman, Method Claims, 17 J. Pat. Off. Soc. 713, 714 (1935) (hereinafter Berman).

      127

      Although courts occasionally struggled with defining what was a patentable "art" [3246] during those 160 years, they consistently rejected patents on methods of doing business. The rationales for those decisions sometimes varied. But there was an overarching theme, at least in dicta: Business methods are not patentable arts. See, e.g., United States Credit Sys. Co. v. American Credit Indem. Co., 53 F. 818, 819 (CCSDNY 1893) ("method of insuring against loss by bad debts" could not be patented "as an art"); Hotel Security Checking Co. v. Lorraine Co., 160 F. 467, 469 (C.A.2 1908) ("A system of transacting business disconnected from the means for carrying out the system is not, within the most liberal interpretation of the term, an art"); Guthrie v. Curlett, 10 F.2d 725, 726 (C.A.2 1926) (method of abbreviating rail tariff schedules, "if it be novel, is not the kind of art protected by the patent acts"); In re Patton, 29 C.C.P.A. 982, 127 F.2d 324, 327-328 (CCPA 1942) (holding that novel "`interstate and national fire-fighting system'" was not patentable because, inter alia, "a system of transacting business, apart from the means for carrying out such system is not" an art within the meaning of the patent law, "nor is an abstract idea or theory, regardless of its importance or ... ingenuity"); Loew's Drive-in Theatres, Inc. v. Park-in Theatres, Inc., 174 F.2d 547, 552 (C.A.1 1949) ("[A] system for the transaction of business, such, for example, as the cafeteria system for transacting the restaurant business... however novel, useful, or commercially successful is not patentable apart from the means for making the system practically useful, or carrying it out"); Joseph E. Seagram & Sons, Inc. v. Marzall, 180 F.2d 26, 28 (C.A.D.C.1950) (method of focus-group testing for beverages is not patentable subject matter); see also In re Howard, 55 C.C.P.A. 1121, 394 F.2d 869, 872 (CCPA 1968) (Kirkpatrick, J., concurring) (explaining that a "method of doing business" cannot be patented). Between 1790 and 1952, this Court never addressed the patentability of business methods. But we consistently focused the inquiry on whether an "art" was connected to a machine or physical transformation,[33] an inquiry that would have excluded methods of doing business.

      128

      By the early 20th century, it was widely understood that a series of steps for conducting business could not be patented. A leading treatise, for example, listed "`systems' of business" as an "unpatentable subjec[t]." 1 A. Deller, Walker on Patents § 18, p. 62 (1937).[34] Citing many of the cases listed above, the treatise concluded that a "method of transacting business" is not an "`art.'" Id., § 22, at 69; see also L. Amdur, Patent Law and Practice § 39, p. 53 (1935) (listing "Methods of doing business" as an "Unpatentable [A]r[t]"); Berman 718 ("[C]ases have been fairly unanimous in denying patentability to such methods"); Tew, Method of Doing Business, 16 J. Pat. Off. Soc. 607 (1934) ("It is probably settled by long practice and many precedents that `methods of doing business,' as these words are generally understood, are unpatentable"). Indeed, "[u]ntil recently" it was still "considered well established that [business] methods were non-statutory." 1 R. Moy, Walker on Patents § 5:28, p. 5-104 (4th ed.2009).[35]

      129

      [3247]

      130

       

      131
      Modern American Patent Law
      132

      By the mid-1900's, many courts were construing the term "art" by using words such as "method, process, system, or like terms." Berman 713; see Expanded Metal Co. v. Bradford, 214 U.S. 366, 382, 29 S.Ct. 652, 53 L.Ed. 1034 (1909) ("The word `process' has been brought into the decisions because it is supposedly an equivalent form of expression or included in the statutory designation of a new and useful art").[36] Thus in 1952, when Congress updated the patent laws as part of its ongoing project to revise the United States Code, it changed the operative language in § 101, replacing the term "art" with "process" and adding a definition of "process" as a "process, art or method," § 100(b).

      133

      That change was made for clarity and did not alter the scope of a patentable "process." See Diehr, 450 U.S., at 184, 101 S.Ct. 1048. The new terminology was added only in recognition of the fact that courts had been interpreting the category "art" by using the terms "process or method"; Congress thus wanted to avoid "the necessity of explanation that the word `art' as used in this place means `process or method.'" S.Rep. No.1979, 82d Cong., 2d Sess., 5 (1952) (hereinafter S. Rep.1979); accord, H.R.Rep. No.1923, 82d Cong., 2d Sess., 6 (1952) (hereinafter H.R. Rep.1923); see also id., at 17 (explaining that "the word `art'" in § 101 "has been interpreted by the courts as being practically synonymous with process or method," and that the switch to the word "[p]rocess" was intended only for clarity).[37]

      134

      It appears that when Congress changed the language in § 101 to incorporate the prevailing judicial terminology, it merely codified the prevailing judicial interpretation of that category of subject matter. See Diehr, 450 U.S., at 184, 101 S.Ct. 1048; see also Barber v. Gonzales, 347 U.S. 637, 641, 74 S.Ct. 822, 98 L.Ed. 1009 (1954) ("While it is true that statutory language should be interpreted whenever possible according to common usage, some terms acquire a special technical meaning by a process of judicial construction"). Both the Senate and House Committee Reports explained that the word "process" was used in § 101 "to clarify the present law as to the patentability of certain types of processes or methods as to which some insubstantial doubts have been expressed." S. Rep.1979, at 5; accord, H. Rep.1923, at 6. And both noted that those terms were used to convey the prevailing meaning of the term "art," "as interpreted" by courts, S. Rep.1979, at 17; accord, H. Rep.1923, at 17. Indeed, one of the main drafters of the Act explained that the definition of the term "process" in § 100(b) reflects "how the courts have construed the term `art.'" Tr. of address by Judge Giles S. Rich to [3248] the New York Patent Law Association 7-8 (Nov. 6, 1952).

      135

      As discussed above, by this time, courts had consistently construed the term "art" to exclude methods of doing business. The 1952 Act likely captured that same meaning.[38] Cf. Graham, 383 U.S., at 16-17, 86 S.Ct. 684 (reasoning that because a provision of the 1952 Act "paraphrases language which has often been used in decisions of the courts" and was "added to the statute for uniformity and definiteness, "that provision should be treated as "a codification of judicial precedents").[39] Indeed, Judge Rich, the main drafter of the 1952 Act, later explained that "the invention of a more effective organization of the materials in, and the techniques of teaching a course in physics, chemistry, or Russian is not a patentable invention because it is outside of the enumerated categories of `process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.'" Principles of Patentability, 28 Geo. Wash. L.Rev. 393, 394 (1960). "Also outside that group," he added, was a process for doing business: "the greatest inventio[n] of our times, the diaper service." Ibid.[40]

      136
      "Anything Under the Sun"
      137

      Despite strong evidence that Congress has consistently authorized patents for a limited class of subject matter and that the 1952 Act did not alter the nature of the then-existing limits, petitioners and their amici emphasize a single phrase in the Act's legislative history, which suggests that the statutory subject matter "`include[s] anything under the sun that is made by man.'" Brief for Petitioners 19 (quoting Chakrabarty, 447 U.S., at 309, 100 S.Ct. 2204, in turn quoting S. Rep.1979, at 5). Similarly, the Court relies on language from our opinion in Chakrabarty that was based in part on this piece of legislative history. See ante, at 3224, 3226.

      138

      This reliance is misplaced. We have never understood that piece of legislative history to mean that any series of steps is a patentable process. Indeed, if that were so, then our many opinions analyzing what [3249] is a patentable process were simply wastes of pages in the U.S. Reports. And to accept that errant piece of legislative history as widening the scope of the patent law would contradict other evidence in the congressional record, as well as our presumption that the 1952 Act merely codified the meaning of "process" and did not expand it, see Diehr, 450 U.S., at 184, 101 S.Ct. 1048.

      139

      Taken in context, it is apparent that the quoted language has a far less expansive meaning. The full sentence in the Committee Reports reads: "A person may have `invented' a machine or a 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 [this] title are fulfilled." S.Rep.1979, at 5; H.R. Rep. 1923, at 6. Viewed as a whole, it seems clear that this language does not purport to explain that "anything under the sun" is patentable. Indeed, the language may be understood to state the exact opposite: that "[a] person may have `invented' ... anything under the sun," but that thing "is not necessarily patentable under section 101." Thus, even in the Chakrabarty opinion, which relied on this quote, we cautioned that the 1952 Reports did not "suggest that § 101 has no limits or that it embraces every discovery." 447 U.S., at 309, 100 S.Ct. 2204.

      140

      Moreover, even if the language in the Committee Reports was meant to flesh out the meaning of any portion of § 101, it did not purport to define the term "process." The language refers only to "manufacture[s]" and "machine[s]," tangible objects "made by man." It does not reference the "process" category of subject matter (nor could a process be comfortably described as something "made by man"). The language may also be understood merely as defining the term "invents" in § 101. As Judge Dyk explained in his opinion below, the phrase "made by man" "is reminiscent" of a 1790's description of the limits of English patent law, that an "invention must be `made by man'" and cannot be "`a philosophical principle only, neither organized or capable of being organized' from a patentable manufacture." 545 F.3d, at 976 (quoting Hornblower v. Boulton, 8 T.R. 95, 98 (K. & B. 1799)).

      141

      The 1952 Act, in short, cannot be understood as expanding the scope of patentable subject matter by suggesting that any series of steps may be patented as a "process" under § 101. If anything, the Act appears to have codified the conclusion that subject matter which was understood not to be patentable in 1952 was to remain unpatentable.

      142

      Our recent case law reinforces my view that a series of steps for conducting business is not a "process" under § 101. Since Congress passed the 1952 Act, we have never ruled on whether that Act authorizes patents on business methods. But we have cast significant doubt on that proposition by giving substantial weight to the machine-or-transformation test, as general methods of doing business do not pass that test. And more recently, Members of this Court have noted that patents on business methods are of "suspect validity." eBay Inc. v. MercExchange, L.L. C., 547 U.S. 388, 397, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006) (KENNEDY, J., concurring).

      143
      * * *
      144

      Since at least the days of Assyrian merchants, people have devised better and better ways to conduct business. Yet it appears that neither the Patent Clause, nor early patent law, nor the current § 101 contemplated or was publicly understood to mean that such innovations are patentable. Although it may be difficult to define with precision what is a patentable "process" [3250] under § 101, the historical clues converge on one conclusion: A business method is not a "process." And to the extent that there is ambiguity, we should be mindful of our judicial role. "[W]e must proceed cautiously when we are asked to extend patent rights" into an area that the Patent Act likely was not "enacted to protect," Flook, 437 U.S., at 596, 593, 98 S.Ct. 2522, lest we create a legal regime that Congress never would have endorsed, and that can be repaired only by disturbing settled property rights.

      145
      V
      146

      Despite the strong historical evidence that a method of doing business does not constitute a "process" under § 101, petitioners nonetheless argue—and the Court suggests in dicta, ante, at 3228-3229— that a subsequent law, the First Inventor Defense Act of 1999, "must be read together" with § 101 to make business methods patentable. Brief for Petitioners 29. This argument utilizes a flawed method of statutory interpretation and ignores the motivation for the 1999 Act.

      147

      In 1999, following a Federal Circuit decision that intimated business methods could be patented, see State Street, 149 F.3d 1368, Congress moved quickly to limit the potential fallout. Congress passed the 1999 Act, codified at 35 U.S.C. § 273, which provides a limited defense to claims of patent infringement, see § 273(b), regarding certain "method[s] of doing or conducting business," § 273(a)(3).

      148

      It is apparent, both from the content and history of the Act, that Congress did not in any way ratify State Street (or, as petitioners contend, the broadest possible reading of State Street). The Act merely limited one potential effect of that decision: that businesses might suddenly find themselves liable for innocently using methods they assumed could not be patented. The Act did not purport to amend the limitations in § 101 on eligible subject matter. Indeed, Congress placed the statute in Part III of Title 35, which addresses "Patents and Protection of Patent Rights," rather than in Part II, which contains § 101 and addresses "Patentability of Inventions and Grant of Patents." Particularly because petitioners' reading of the 1999 Act would expand § 101 to cover a category of processes that have not "historically been eligible" for patents, Diehr, 450 U.S., at 184, 101 S.Ct. 1048, we should be loathe to conclude that Congress effectively amended § 101 without saying so clearly. We generally presume that Congress "does not, one might say, hide elephants in mouseholes." Whitman v. American Trucking Assns., Inc., 531 U.S. 457, 468, 121 S.Ct. 903, 149 L.Ed.2d 1 (2001).

      149

      The Act therefore is, at best, merely evidence of 1999 legislative views on the meaning of the earlier, 1952 Act. "[T]he views of a subsequent Congress," however, "form a hazardous basis for inferring the intent of an earlier one." United States v. Price, 361 U.S. 304, 313, 80 S.Ct. 326, 4 L.Ed.2d 334 (1960). When a later statute is offered as "an expression of how the ... Congress interpreted a statute passed by another Congress ... a half century before," "such interpretation has very little, if any, significance." Rainwater v. United States, 356 U.S. 590, 593, 78 S.Ct. 946, 2 L.Ed.2d 996 (1958).

      150

      Furthermore, even assuming that Congress' views at the turn of the 21st century could potentially serve as a valid basis for interpreting a statute passed in the mid-20th century, the First Inventor Defense Act does not aid petitioners because it does not show that the later Congress itself understood § 101 to cover business methods. If anything, it shows that a few judges on the Federal Circuit understood [3251] § 101 in that manner and that Congress understood what those judges had done. The Act appears to reflect surprise and perhaps even dismay that business methods might be patented. Thus, in the months following State Street, congressional authorities lamented that "business methods and processes ... until recently were thought not to be patentable," H.R.Rep. No. 106-464, p. 121 (1999); accord, H.R.Rep. No. 106-287, pt. 1, p. 31 (1999).[41] The fact that Congress decided it was appropriate to create a new defense to claims that business method patents were being infringed merely demonstrates recognition that such claims could create a significant new problem for the business community.

      151

      The Court nonetheless states that the 1999 Act "acknowledges that there may be business method patents," thereby "clarify[ing]" its "understanding" of § 101. Ante, at 3228. More specifically, the Court worries that if we were to interpret the 1952 Act to exclude business methods, our interpretation "would render § 273 meaningless." Ibid. I agree that "[a] statute should be construed so that effect is given to all its provisions." Corley v. United States, 556 U.S. ___, ___, 129 S.Ct. 1558, 1566, 173 L.Ed.2d 443 (2009) (internal quotation marks omitted). But it is a different matter altogether when the Court construes one statute, the 1952 Act, to give effect to a different statute, the 1999 Act. The canon on which the Court relies is predicated upon the idea that "[a] statute is passed as a whole." 2A N. Singer & J. Singer, Statutes and Statutory Construction § 46:5, p. 189 (7th ed.2007). But the two statutes in question were not passed as a whole.

      152

      Put another way, we ordinarily assume, quite sensibly, that Congress would not in one statute include two provisions that are at odds with each other. But as this case shows, that sensible reasoning can break down when applied to different statutes.[42] The 1999 Act was passed to limit the impact of the Federal Circuit's then-recent statements on the 1952 Act. Although repudiating that judicial dictum (as we should) might effectively render the 1999 Act a nullity going forward, such a holding would not mean that it was a nullity when Congress enacted it. Section 273 may have been a technically unnecessary response to confusion about patentable subject matter, but it appeared necessary in 1999 in light of what was being discussed [3252] in legal circles at the time.[43] Consider the logical implications of the Court's approach to this question: If, tomorrow, Congress were to conclude that patents on business methods are so important that the special infringement defense in § 273 ought to be abolished, and thus repealed that provision, this could paradoxically strengthen the case against such patents because there would no longer be a § 273 that "acknowledges ... business method patents," ante, at 3228. That is not a sound method of statutory interpretation.

      153

      In light of its history and purpose, I think it obvious that the 1999 Congress would never have enacted § 273 if it had foreseen that this Court would rely on the provision as a basis for concluding that business methods are patentable. Section 273 is a red herring; we should be focusing our attention on § 101 itself.

      154
      VI
      155

      The constitutionally mandated purpose and function of the patent laws bolster the conclusion that methods of doing business are not "processes" under § 101.

      156

      The Constitution allows Congress to issue patents "[t]o promote the Progress of... useful Arts," Art. I, § 8, cl. 8. This clause "is both a grant of power and a limitation." Graham, 383 U.S., at 5, 86 S.Ct. 684. It "reflects a balance between the need to encourage innovation and the avoidance of monopolies which stifle competition without any concomitant advance in the `Progress of Science and useful Arts.'" Bonito Boats, 489 U.S., at 146, 109 S.Ct. 971. "This is the standard expressed in the Constitution and it may not be ignored. And it is in this light that patent validity `requires reference to [the] standard written into the Constitution.'" Graham, 383 U.S., at 6, 86 S.Ct. 684 (quoting Great Atlantic & Pacific Tea Co. v. Supermarket Equipment Corp., 340 U.S. 147, 154, 71 S.Ct. 127, 95 L.Ed. 162 (1950) (Douglas, J., concurring) (emphasis deleted)); see also Grant v. Raymond, 6 Pet. 218, 241-242, 8 L.Ed. 376 (1832) (explaining that patent "laws which are passed to give effect to this [constitutional] purpose ought, we think, to be construed in the spirit in which they have been made").[44]

      157

      Thus, although it is for Congress to "implement the stated purpose of the Framers by selecting the policy which in its judgment best effectuates the constitutional aim," Graham, 383 U.S., at 6, 86 S.Ct. 684, we interpret ambiguous patent laws as a set of rules that "wee[d] out those inventions which would not be disclosed or devised but for the inducement of a patent," id., at 11, 86 S.Ct. 684, and that "embod[y]" the "careful balance between the need to promote innovation and the recognition that imitation and refinement through imitation are both necessary to invention itself and the very lifeblood of a competitive economy," Bonito Boats, 489 [3253] U.S., at 146, 109 S.Ct. 971. And absent a discernible signal from Congress, we proceed cautiously when dealing with patents that press on the limits of the "`standard written into the constitution,'" Graham, 383 U.S., at 6, 86 S.Ct. 684, for at the "fringes of congressional power," "more is required of legislatures than a vague delegation to be filled in later," Barenblatt v. United States, 360 U.S. 109, 139-140, 79 S.Ct. 1081, 3 L.Ed.2d 1115 (1959) (Black, J., dissenting); see also Greene v. McElroy, 360 U.S. 474, 507, 79 S.Ct. 1400, 3 L.Ed.2d 1377 (1959) ("[D]ecisions of great constitutional import and effect" "requir[e] careful and purposeful consideration by those responsible for enacting and implementing our laws"). We should not casually risk exceeding the constitutional limitation on Congress' behalf.

      158

      The Court has kept this "constitutional standard" in mind when deciding what is patentable subject matter under § 101. For example, we have held that no one can patent "laws of nature, natural phenomena, and abstract ideas." Diehr, 450 U.S., at 185, 101 S.Ct. 1048. These "are the basic tools of scientific and technological work," Benson, 409 U.S., at 67, 93 S.Ct. 253, and therefore, if patented, would stifle the very progress that Congress is authorized to promote, see, e.g., O'Reilly, 15 How., at 113, 14 L.Ed. 601 (explaining that Morse's patent on electromagnetism for writing would preempt a wide swath of technological developments).

      159

      Without any legislative guidance to the contrary, there is a real concern that patents on business methods would press on the limits of the "standard expressed in the Constitution," Graham, 383 U.S., at 6, 86 S.Ct. 684, more likely stifling progress than "promot[ing]" it. U.S. Const., Art. I, § 8, cl. 8. I recognize that not all methods of doing business are the same, and that therefore the constitutional "balance," Bonito Boats, 489 U.S., at 146, 109 S.Ct. 971, may vary within this category. Nevertheless, I think that this balance generally supports the historic understanding of the term "process" as excluding business methods. And a categorical analysis fits with the purpose, as Thomas Jefferson explained, of ensuring that "`every one might know when his actions were safe and lawful,'" Graham, 383 U.S., at 10, 86 S.Ct. 684; see also Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U.S. 722, 730-731, 122 S.Ct. 1831, 152 L.Ed.2d 944 (2002) ("The monopoly is a property right; and like any property right, its boundaries should be clear. This clarity is essential to promote progress"); Diehr, 450 U.S., at 219, 101 S.Ct. 1048 (STEVENS, J., dissenting) (it is necessary to have "rules that enable a conscientious patent lawyer to determine with a fair degree of accuracy" what is patentable).

      160

      On one side of the balance is whether a patent monopoly is necessary to "motivate the innovation," Pfaff v. Wells Electronics, Inc., 525 U.S. 55, 63, 119 S.Ct. 304, 142 L.Ed.2d 261 (1998). Although there is certainly disagreement about the need for patents, scholars generally agree that when innovation is expensive, risky, and easily copied, inventors are less likely to undertake the guaranteed costs of innovation in order to obtain the mere possibility of an invention that others can copy.[45] Both common sense and recent economic scholarship suggest that these dynamics of cost, risk, and reward vary by the type of thing being patented.[46] And the functional [3254] case that patents promote progress generally is stronger for subject matter that has "historically been eligible to receive the protection of our patent laws," Diehr, 450 U.S., at 184, 101 S.Ct. 1048, than for methods of doing business.

      161

      Many have expressed serious doubts about whether patents are necessary to encourage business innovation.[47] Despite the fact that we have long assumed business methods could not be patented, it has been remarked that "the chief business of the American people, is business."[48] Federal Express developed an overnight delivery service and a variety of specific methods (including shipping through a central hub and online package tracking) without a patent. Although counterfactuals are a dubious form of analysis, I find it hard to believe that many of our entrepreneurs forwent business innovation because they could not claim a patent on their new methods.

      162

      "[C]ompanies have ample incentives to develop business methods even without patent protection, because the competitive marketplace rewards companies that use more efficient business methods." Burk & Lemley 1618.[49] Innovators often capture advantages from new business methods notwithstanding the risk of others copying their innovation. Some business methods occur in secret and therefore can be protected with trade secrecy.[50] And for those methods that occur in public, firms that innovate often capture long-term benefits from doing so, thanks to various first mover advantages, including lockins, branding, and networking effects.[51] Business innovation, moreover, generally does not entail the same kinds of risk as does more traditional, technological innovation. It generally does not require the same "enormous costs in terms of time, research, and development," Bicron, 416 U.S., at 480, 94 S.Ct. 1879, and thus does not require the same kind of "compensation to [innovators] for their labor, toil, and expense," Seymour v. Osborne, 11 Wall. 516, 533-544, 20 L.Ed. 33 (1871).[52]

      163

      Nor, in many cases, would patents on business methods promote progress by encouraging "public disclosure." Pfaff, 525 U.S., at 63, 119 S.Ct. 304; see also Brenner v. Manson, 383 U.S. 519, 533, 86 S.Ct. 1033, 16 L.Ed.2d 69 (1966) ("[O]ne of the purposes of the patent system is to encourage dissemination of information concerning discoveries and inventions"). Many business methods are practiced in public, and therefore a patent does not necessarily [3255] encourage the dissemination of anything not already known. And for the methods practiced in private, the benefits of disclosure may be small: Many such methods are distributive, not productive—that is, they do not generate any efficiency but only provide a means for competitors to one-up each other in a battle for pieces of the pie. And as the Court has explained, "it is hard to see how the public would be benefited by disclosure" of certain business tools, since the nondisclosure of these tools "encourages businesses to initiate new and individualized plans of operation," which "in turn, leads to a greater variety of business methods." Bicron, 416 U.S., at 483, 94 S.Ct. 1879.

      164

      In any event, even if patents on business methods were useful for encouraging innovation and disclosure, it would still be questionable whether they would, on balance, facilitate or impede the progress of American business. For even when patents encourage innovation and disclosure, "too much patent protection can impede rather than `promote the Progress of ... useful Arts.'" Laboratory Corp. of America Holdings v. Metabolite Laboratories, Inc., 548 U.S. 124, 126-127, 126 S.Ct. 2921, 165 L.Ed.2d 399 (2006) (BREYER, J., dissenting from dismissal of certiorari). Patents "can discourage research by impeding the free exchange of information," for example, by forcing people to "avoid the use of potentially patented ideas, by leading them to conduct costly and time-consuming searches of existing or pending patents, by requiring complex licensing arrangements, and by raising the costs of using the patented" methods. Id., at 127, 126 S.Ct. 2921. Although "[e]very patent is the grant of a privilege of exacting tolls from the public," Great Atlantic, 340 U.S., at 154, 71 S.Ct. 127 (Douglas, J., concurring), the tolls of patents on business methods may be especially high.

      165

      The primary concern is that patents on business methods may prohibit a wide swath of legitimate competition and innovation. As one scholar explains, "it is useful to conceptualize knowledge as a pyramid: the big ideas are on top; specific applications are at the bottom." Dreyfuss 275. The higher up a patent is on the pyramid, the greater the social cost and the greater the hindrance to further innovation.[53] Thus, this Court stated in Benson that "[p]henomena of nature ..., mental processes, and abstract intellectual concepts are not patentable, as they are the basic tools of scientific and technological work," 409 U.S., at 67, 93 S.Ct. 253; see also, Joseph E. Seagram & Sons, Inc., 180 F.2d, at 28 ("To give appellant a monopoly, through the issuance of a patent, upon so great an area ... would in our view impose without warrant of law a serious restraint upon the advance of science and industry"). Business methods are similarly often closer to "big ideas," as they are the basic tools of commercial work. They are also, in many cases, the basic tools of further business innovation: Innovation in business methods is often a sequential and complementary process in which imitation may be a "spur to innovation" and patents may "become an impediment." Bessen & Maskin, Sequential Innovation, Patents, and Imitation, 40 RAND J. Econ. 611, 613 (2009).[54] "Think [3256] how the airline industry might now be structured if the first company to offer frequent flyer miles had enjoyed the sole right to award them." Dreyfuss 264. "[I]mitation and refinement through imitation are both necessary to invention itself and the very lifeblood of a competitive economy." Bonito Boats, 489 U.S., at 146, 109 S.Ct. 971.

      166

      If business methods could be patented, then many business decisions, no matter how small, could be potential patent violations. Businesses would either live in constant fear of litigation or would need to undertake the costs of searching through patents that describe methods of doing business, attempting to decide whether their innovation is one that remains in the public domain. See Long, Information Costs in Patent and Copyright, 90 Va. L.Rev. 465, 487-488 (2004) (hereinafter Long). But as we have long explained, patents should not "embaras[s] the honest pursuit of business with fears and apprehensions of concealed liens and unknown liabilities to lawsuits and vexatious accountings for profits made in good faith." Atlantic Works v. Brady, 107 U.S. 192, 200, 2 S.Ct. 225, 27 L.Ed. 438 (1883).[55]

      167

      These effects are magnified by the "potential vagueness" of business method patents, eBay Inc., 547 U.S., at 397, 126 S.Ct. 1837 (KENNEDY, J., concurring). When it comes to patents, "clarity is essential to promote progress." Festo Corp., 535 U.S., at 730-731, 122 S.Ct. 1831. Yet patents on methods of conducting business generally are composed largely or entirely of intangible steps. Compared to "the kinds of goods ... around which patent rules historically developed," it thus tends to be more costly and time consuming to search through, and to negotiate licenses for, patents on business methods. See Long 539, 470.[56]

      168

      The breadth of business methods, their omnipresence in our society, and their potential vagueness also invite a particularly pernicious use of patents that we have long criticized. As early as the 19th century, we explained that the patent laws are not intended to "creat[e] a class of speculative schemers who make it their business to watch the advancing wave of improvement, and gather its foam in the form of patented monopolies, which enable them to lay a heavy tax upon the industry of the country, without contributing anything to the real advancement of the arts." Atlantic Works, 107 U.S., at 200, 2 S.Ct. 225. Yet business method patents may have begun to do exactly that. See eBay Inc., 547 U.S., at 396-397, 126 S.Ct. 1837 (opinion of KENNEDY, J.).

      169

      These many costs of business method patents not only may stifle innovation, but [3257] they are also likely to "stifle competition," Bonito Boats, 489 U.S., at 146, 109 S.Ct. 971. Even if a business method patent is ultimately held invalid, patent holders may be able to use it to threaten litigation and to bully competitors, especially those that cannot bear the costs of a drawn out, fact-intensive patent litigation.[57] That can take a particular toll on small and upstart businesses.[58] Of course, patents always serve as a barrier to competition for the type of subject matter that is patented. But patents on business methods are patents on business itself. Therefore, unlike virtually every other category of patents, they are by their very nature likely to depress the dynamism of the marketplace.[59]

      170
      * * *
      171

      The constitutional standard for patentability is difficult to apply with any precision, and Congress has significant discretion to "implement the stated purpose of the Framers by selecting the policy which in its judgment best effectuates the constitutional aim," Graham, 383 U.S., at 6, 86 S.Ct. 684. But Congress has not, either explicitly or implicitly, determined that patents on methods of doing business would effectuate this aim. And as I understand their practical consequences, it is hard to see how they would.

      172
      VII
      173

      The Constitution grants to Congress an important power to promote innovation. In its exercise of that power, Congress has established an intricate system of intellectual property. The scope of patentable subject matter under that system is broad. But it is not endless. In the absence of any clear guidance from Congress, we have only limited textual, historical, and functional clues on which to rely. Those clues all point toward the same conclusion: that petitioners' claim is not a "process" within the meaning of § 101 because methods of doing business are not, in themselves, covered by the statute. In my view, acknowledging as much would be a far more sensible and restrained way to resolve this case. Accordingly, while I concur in the judgment, I strongly disagree with the Court's disposition of this case.

      174

      Justice BREYER, with whom Justice SCALIA joins as to Part II, concurring in the judgment.

      175
      I
      176

      I agree with Justice STEVENS that a "general method of engaging in business transactions" is not a patentable "process" within the meaning of 35 U.S.C. § 101. Ante, at 3232 (STEVENS, J., concurring in judgment). This Court has never before held that so-called "business methods" are patentable, and, in my view, the text, history, and purposes of the Patent Act make clear that they are not. Ante, at [3258] 3236-3257. I would therefore decide this case on that ground, and I join Justice STEVENS' opinion in full.

      177

      I write separately, however, in order to highlight the substantial agreement among many Members of the Court on many of the fundamental issues of patent law raised by this case. In light of the need for clarity and settled law in this highly technical area, I think it appropriate to do so.

      178
      II
      179

      In addition to the Court's unanimous agreement that the claims at issue here are unpatentable abstract ideas, it is my view that the following four points are consistent with both the opinion of the Court and Justice STEVENS' opinion concurring in the judgment:

      180

      First, although the text of § 101 is broad, it is not without limit. See ante, at 3224-3225 (opinion of the Court); ante, at 3236 (STEVENS, J., concurring in judgment). "[T]he underlying policy of the patent system [is] that `the things which are worth to the public the embarrassment of an exclusive patent,' ... must outweigh the restrictive effect of the limited patent monopoly." Graham v. John Deere Co. of Kansas City, 383 U.S. 1, 10-11, 86 S.Ct. 684, 15 L.Ed.2d 545 (1966) (quoting Letter from Thomas Jefferson to Isaac McPherson (Aug. 13, 1813), in 6 Writings of Thomas Jefferson 181 (H. Washington ed.)). The Court has thus been careful in interpreting the Patent Act to "determine not only what is protected, but also what is free for all to use." Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 151, 109 S.Ct. 971, 103 L.Ed.2d 118 (1989). In particular, the Court has long held that "[p]henomena of nature, though just discovered, mental processes, and abstract intellectual concepts are not patentable" under § 101, since allowing individuals to patent these fundamental principles would "wholly pre-empt" the public's access to the "basic tools of scientific and technological work." Gottschalk v. Benson, 409 U.S. 63, 67, 72, 93 S.Ct. 253, 34 L.Ed.2d 273 (1972); see also, e.g., Diamond v. Diehr, 450 U.S. 175, 185, 101 S.Ct. 1048, 67 L.Ed.2d 155 (1981); Diamond v. Chakrabarty, 447 U.S. 303, 309, 100 S.Ct. 2204, 65 L.Ed.2d 144 (1980).

      181

      Second, in a series of cases that extend back over a century, the Court has stated that "[t]ransformation and reduction of an article to a different state or thing is the clue to the patentability of a process claim that does not include particular machines." Diehr, supra, at 184, 101 S.Ct. 1048 (emphasis added; internal quotation marks omitted); see also, e.g., Benson, supra, at 70, 93 S.Ct. 253; Parker v. Flook, 437 U.S. 584, 588, n. 9, 98 S.Ct. 2522, 57 L.Ed.2d 451 (1978); Cochrane v. Deener, 94 U.S. 780, 788, 24 L.Ed. 139 (1877). Application of this test, the so-called "machine-ortransformation test," has thus repeatedly helped the Court to determine what is "a patentable `process.'" Flook, supra, at 589, 98 S.Ct. 2522.

      182

      Third, while the machine-or-transformation test has always been a "useful and important clue," it has never been the "sole test" for determining patentability. Ante, at 3227; see also ante, at 3231-3232 (STEVENS, J., concurring in judgment); Benson, supra, at 71, 93 S.Ct. 253 (rejecting the argument that "no process patent could ever qualify" for protection under § 101 "if it did not meet the [machine-or-transformation] requirements"). Rather, the Court has emphasized that a process claim meets the requirements of § 101 when, "considered as a whole," it "is performing a function which the patent laws were designed to protect (e.g., transforming or reducing an article to a different state or thing)." Diehr, supra, at 192, 101 [3259] S.Ct. 1048. The machine-or-transformation test is thus an important example of how a court can determine patentability under § 101, but the Federal Circuit erred in this case by treating it as the exclusive test.

      183

      Fourth, although the machine-or-transformation test is not the only test for patentability, this by no means indicates that anything which produces a "`useful, concrete, and tangible result,'" State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368, 1373 (C.A.Fed.1998), is patentable. "[T]his Court has never made such a statement and, if taken literally, the statement would cover instances where this Court has held the contrary." Laboratory Corp. of America Holdings v. Metabolite Laboratories, Inc., 548 U.S. 124, 136, 126 S.Ct. 2921, 165 L.Ed.2d 399 (2006) (BREYER, J., dissenting from dismissal of certiorari as improvidently granted); see also, e.g., O'Reilly v. Morse, 15 How. 62, 117, 14 L.Ed. 601 (1854); Flook, supra, at 590, 98 S.Ct. 2522. Indeed, the introduction of the "useful, concrete, and tangible result" approach to patentability, associated with the Federal Circuit's State Street decision, preceded the granting of patents that "ranged from the somewhat ridiculous to the truly absurd." In re Bilski, 545 F.3d 943, 1004 (C.A.Fed.2008) (Mayer, J., dissenting) (citing patents on, inter alia, a "method of training janitors to dust and vacuum using video displays," a "system for toilet reservations," and a "method of using color-coded bracelets to designate dating status in order to limit `the embarrassment of rejection'"); see also Brief for Respondent 40-41, and n. 20 (listing dubious patents). To the extent that the Federal Circuit's decision in this case rejected that approach, nothing in today's decision should be taken as disapproving of that determination. See ante, at 3231; ante, at 3232, n. 1 (STEVENS, J., concurring in judgment).

      184

      In sum, it is my view that, in reemphasizing that the "machine-or-transformation" test is not necessarily the sole test of patentability, the Court intends neither to de-emphasize the test's usefulness nor to suggest that many patentable processes lie beyond its reach.

      185
      III
      186

      With these observations, I concur in the Court's judgment.

      187

      [*] Justice SCALIA does not join Parts II-B-2 and II-C-2.

      188

      [1] Even if the machine-or-transformation test may not define the scope of a patentable process, it would be a grave mistake to assume that anything with a "`useful, concrete and tangible result,'" State Street Bank & Trust v. Signature Financial Group, Inc., 149 F.3d 1368, 1373 (C.A.Fed.1998), may be patented.

      189

      [2] For example, a rule that broadly-phrased claims cannot constitute patentable processes could call into question our approval of Alexander Graham Bell's famous fifth claim on "`[t]he method of, and apparatus for, transmitting vocal or other sounds telegraphically, as herein described, by causing electrical undulations, similar in form to the vibrations of the air accompanying the said vocal or other sounds, substantially as set forth,'" The Telephone Cases, 126 U.S. 1, 531, 8 S.Ct. 778, 31 L.Ed. 863 (1888).

      190

      [3] The Court quotes our decision in Diamond v. Chakrabarty, 447 U.S. 303, 100 S.Ct. 2204, 65 L.Ed.2d 144 (1980), for the proposition that, "`[i]n choosing such expansive terms. . . modified by the comprehensive "any," Congress plainly contemplated that the patent laws would be given wide scope.'" Ante, at 3225. But the Court fails to mention which terms we were discussing in Chakrabarty: the terms "manufacture" and "composition of matter." See 447 U.S., at 308, 100 S.Ct. 2204 ("In choosing such expansive terms as `manufacture' and `composition of matter,' modified by the comprehensive `any,' Congress plainly contemplated that the patent laws would be given wide scope"). As discussed herein, Congress' choice of the term "process" reflected a background understanding of what sorts of series of steps could be patented, and likely reflected an intentional design to codify that settled, judicial understanding. This may not have been the case with the terms at issue in Chakrabarty.

      191

      [4] For example, if this Court were to interpret the Sherman Act according to the Act's plain text, it could prohibit "the entire body of private contract," National Soc. of Professional Engineers v. United States, 435 U.S. 679, 688, 98 S.Ct. 1355, 55 L.Ed.2d 637 (1978).

      192

      [5] The Court attempts to avoid such absurd results by stating that these "[c]oncerns" "can be met by making sure that the claim meets the requirements of § 101." Ante, at 3226. Because the only limitation on the plain meaning of "process" that the Court acknowledges explicitly is the bar on abstract ideas, laws of nature, and the like, it is presumably this limitation that is left to stand between all conceivable human activity and patent monopolies. But many processes that would make for absurd patents are not abstract ideas. Nor can the requirements of novelty, nonobviousness, and particular description pick up the slack. Cf. ante, at 3229-3230 (plurality opinion). A great deal of human activity was at some time novel and nonobvious.

      193

      [6] Curiously, the Court concedes that "these exceptions are not required by the statutory text," but urges that "they are consistent with the notion that a patentable process must be `new and useful.'" Ante, at 3225 (emphasis added). I do not see how these exceptions find a textual home in the term "new and useful." The exceptions may be consistent with those words, but they are sometimes inconsistent with the "ordinary, contemporary, common meaning," ante, at 3226, 3228 (internal quotation marks omitted), of the words "process" and "method."

      194

      [7] See Pennock v. Dialogue, 2 Pet. 1, 18, 7 L.Ed. 327 (1829) ("[M]any of the provisions of our patent act are derived from the principles and practice, which have prevailed in the construction of that of England"); Proceedings in Congress During the Years 1789 and 1790 Relating to the First Patent and Copyright Laws, 22 J. Pat. Off. Soc. 352, 363 (1940) (explaining that the 1790 Patent Act was "framed according to the Course of Practice in the English Patent Office"); see also Walterscheid, The Early Evolution of the United States Patent Law: Antecedents, 76 J. Pat. & Trademark Off. Soc. 697, 698 (1994) (describing the role of the English backdrop).

      195

      [8] See Hornblower v. Boulton, 8 T.R. 95 (K. B. 1799).

      196

      [9] See, e.g., Roebuck and Garbett v. William Stirling & Son (H.L.1774), reprinted in 1 T. Webster, Reports and Notes of Cases on Letters Patent for Inventions 45 (1844) ("method of making acid spirit by burning sulphur and saltpetre, and collecting the condensed fumes"); id., at 77 ("`method of producing a yellow colour for painting in oil or water, making white lead, and separating the mineral alkali from common salt, all to be performed in one single process'"); see also C. MacLeod, Inventing the Industrial Revolution: The English Patent System, 1660-1800, pp. 84-93, 100-104, 109-110, 152-155 (1988) (listing patents) (hereinafter MacLeod).

      197

      [10] Some English cases made reference to the permissibility of patents over new "trades." But so far as I can tell, the term "trade" referred not to the methods of conducting business but rather to methods of making and using physical items or to the object of the trade. See, e.g., Clothworkers of Ipswich Case, 78 Eng. Rep. 147, 148 (K. B. 1603) ("[I]f a man hath brought in a new invention and a new trade within the kingdom . . . [the King] may grant by charter unto him").

      198

      [11] See also Pollack, The Multiple Unconstitutionality of Business Method Patents: Common Sense, Congressional Consideration, and Constitutional History, 28 Rutgers Computer & Tech. L.J. 61, 94-96 (2002) (hereinafter Pollack) (describing English practice).

      199

      [12] See id., at 95; B. Woodcroft, Alphabetical Index of Patentees of Inventions, from March 2, 1617 (14 James I) to October 1, 1852 (16 Victoriae) 383, 410 (2d ed.1969) (hereinafter Woodcroft).

      200

      [13] See, e.g., C. Ewen, Lotteries and Sweepstakes 70-71 (1932) (describing the "letters patent" to form a colony in Virginia and to operate lotteries to fund that colony).

      201

      [14] See also Renn, John Knox's Plan for Insuring Lives: A Patent of Invention in 1778, 101 J. Inst. Actuaries 285, 286 (1974) (hereinafter Renn) (describing the patent).

      202

      [15] "The English patent system" at that time "was one of simple registration. Extensive scrutiny was not expected of the law officers administering it." MacLeod 41. Thus, as one scholar suggested of the patent on life insurance, "perhaps the Law Officer was in a very good humour that day, or perhaps he had forgotten the wording of the statute; most likely he was concerned only with the promised `very considerable Consumption of [Revenue] Stamps' which [the patent holder] declared, would `contribute to the increase of the Public Revenues.'" Renn 285.

      203

      [16] See Markman v. Westview Instruments, Inc., 517 U.S. 370, 381, 116 S.Ct. 1384, 134 L.Ed.2d 577 (1996) ("[T]he state of patent law in the common-law courts before 1800 led one historian to observe that `the reported cases are destitute of any decision of importance'" (quoting Hulme, On the Consideration of the Patent Grant, Past and Present, 13 L.Q. Rev. 313, 318 (1897))); MacLeod 1, 61-62 (explaining the dearth of clear case law); see also Boulton v. Bull, 2 H. Bl. 463, 491, 126 Eng. Rep. 651, 665 (C.P. 1795) (Eyre, C.J.) ("Patent rights are no where that I can find accurately discussed in our books").

      204

      [17] See, e.g., A. DuBois, The English Business Company After the Bubble Act, 1720-1800, pp. 38-40, 435-438 (1938); Harris, The Bubble Act: Its Passage and its Effects on Business Organization, 54 J. Econ. Hist. 610, 624-625 (1994).

      205

      [18] See Pollack 97-100. For example, those who held patents on oil lamps developed firms that contracted to provide street lighting. See M. Falkus, Lighting in the Dark Ages of English Economic History: Town Streets before the Industrial Revolutions, in Trade, Government, and Economy in Pre-Industrial England 249, 255-257, 259-260 (D. Coleman & A. John eds.1976).

      206

      [19] See, e.g., G. Hammersley, The State and the English Iron Industry in the Sixteenth and Seventeenth Centuries, in id., at 166, 173, 175-178 (describing the advent of management techniques for efficiently running a major ironworks).

      207

      [20] See, e.g., Carlos & Nicholas, Agency Problems in Early Chartered Companies: The Case of the Hudson's Bay Company, 50 J. Econ. Hist. 853, 853-875 (1990).

      208

      [21] Nor, so far as I can tell, were business method patents common in the United States in the brief period between independence and the creation of our Constitution—despite the fact that it was a time of great business innovation, including new processes for engaging in risky trade and transport, one of which has been called "the quintessential business innovation of the 1780s." T. Doerflinger, A Vigorous Spirit of Enterprise: Merchants and Economic Development in Revolutionary Philadelphia 291 (1986) (describing new methods of conducting and financing trade with China).

      209

      [22] See Seidel, The Constitution and a Standard of Patentability, 48 J. Pat. Off. Soc. 5, 10 (1966) (hereinafter Seidel); Walterscheid, To Promote the Progress of Science and Useful Arts: The Background and Origin of the Intellectual Property Clause of the United States Constitution, 2 J. Intell. Prop. L. 1, 26 (1994) (hereinafter Walterscheid, Background and Origin); Walterscheid, To Promote the Progress 59, and n. 12; Prager, A History of Intellectual Property From 1545 to 1787, 26 J. Pat. Off. Soc. 711, 746 (1944).

      210

      [23] Walterscheid, Background and Origin 26; 2 Records of the Federal Convention of 1787, pp. 509-510 (M. Farrand ed. 1966).

      211

      [24] J. Madison, Notes of Debates in the Federal Convention of 1787, pp. 638-639 (Ohio Univ. Press ed.1966).

      212

      [25] See Walterscheid, Background and Origin 38, n. 124, 55-56 (collecting sources); see also The Objections of Hon. George Mason, One of the Delegates from Virginia, in the Late Continental Convention, to the Proposed Federal Constitution, Assigned as His Reasons For Not Signing the Same, 2 American Museum or Repository of Ancient and Modern Fugitive Pieces, etc. 534, 536 (1787) (reprint 1965); Ratification of the New Constitution by the Convention of the State of New York, 4 id., at 153, 156 (1789); Remarks on the Amendments to the Federal Constitution Proposed by The Conventions of Massachusetts, New Hampshire, New York, Virginia, South and North Carolina, with the Minorities of Pennsylvania and Maryland by the Rev. Nicholas Collin, D. D., 6 id., at 303, 303.

      213

      [26] Some scholars suggest that Webster's "close proximity to the Constitutional Convention coupled with his familiarity with the delegates makes it likely that he played some indirect role in the development" of the Constitution's Intellectual Property Clause—a Clause that established not only the power to create patents but also copyrights, a subject in which Webster had great interest. Donner, Copyright Clause of the U.S. Constitution: Why Did the Framers Include It With Unanimous Approval? 36 Am. J. Legal. Hist. 361, 372 (1992). But there is no direct evidence of this fact. See Walterscheid, Background and Origin 40-41.

      214

      [27] See, e.g., 1 S. Johnson, Dictionary of the English Language (1773) (reprint 1978) (listing as definitions of an "art": "[t]he power of doing something not taught by nature and instinct," "[a] science; as, the liberal arts," "[a] trade," "[a]rtfulness; skill; dexterity," "[c]unning," and "[s]peculation"). One might question the breadth of these definitions. This same dictionary offered as an example of "doing something not taught by nature and instinct," the art of "dance"; and as an example of a "trade," the art of "making sugar." Ibid.

      215

      [28] For examples of this usage, see Book of Trades or Library of Useful Arts (1807) (describing in a three-volume work 68 trades, each of which is the means of creating a product, such as feather worker or cork cutter); 1 J. Bigelow, The Useful Arts Considered in Connexion with the Applications of Science (1840) (surveying a history of what we would today call mechanics, technology, and engineering). See also D. Defoe, A General History of Discoveries and Improvements, in Useful Arts (1727); T. Coxe, An Address to an Assembly of the Friends of American Manufactures 17-18 (1787); G. Logan, A Letter to the Citizens of Pennsylvania, on the Necessity of Promoting Agriculture, Manufactures, and the Useful Arts 12-13 (2d ed. 1800); W. Kenrick, An Address to the Artists and Manufacturers of Great Britain 21-38 (1774); cf. Corning v. Burden, 15 How. 252, 267, 14 L.Ed. 683 (1854) (listing the "arts of tanning, dyeing, making water-proof cloth, vulcanizing India rubber, [and] smelting ores").

      216

      [29] See, e.g., 1 D. Chisum, Patents G1-23 (2010); Lutz, Patents and Science: A Clarification of the Patent Clause of the U.S. Constitution, 18 Geo. Wash. L.Rev. 50, 54 (1949-1950); Samuelson, Benson Revisited: The Case Against Patent Protection for Algorithms and Other Computer-Related Inventions, 39 Emory L.J. 1025, 1033, n. 24 (1990); Seidel 10, 13; see also Great Atlantic & Pacific Tea Co. v. Supermarket Equipment Corp., 340 U.S. 147, 154, 71 S.Ct. 127, 95 L.Ed. 162 (1950) (Douglas, J., concurring) (explaining that in the Framers' view, an "invention, to justify a patent, had to serve the ends of science—to push back the frontiers of chemistry, physics, and the like; to make a distinctive contribution to scientific knowledge"); In re Waldbaum, 59 C.C.P.A. 940, 457 F.2d 997, 1003 (CCPA 1972) (Rich, J., concurring) ("`The phrase "technological arts," as we have used it, is synonymous with the phrase "useful arts" as it appears in Article I, Section 8 of the Constitution'"); Paulik v. Rizkalla, 760 F.2d 1270, 1276 (C.A.Fed. 1985) (explaining that "useful arts" is "the process today called technological innovation"); Thomas, The Post-Industrial Patent System, 10 Fordham Intell. Prop. Media & Ent. L.J. 3, 32-55 (1999) (cataloguing early understandings of technological arts). This view may be supported, for example, by an 1814 grant to Harvard University to create a "Professorship on the Application of Science to the Useful Arts," something that today might be akin to applied science or engineering. See M. James, Engineering an Environment for Change: Bigelow, Peirce, and Early Nineteenth-Century Practical Education at Harvard, in Science at Harvard University: Historical Perspectives 59 (C. Elliott & M. Rossiter eds.1992).

      217

      [30] See Walterscheid, To Promote the Progress 173-178; Pollack 107-108.

      218

      [31] These doubts ended by the time of Cochrane v. Deener, 94 U.S. 780, 24 L.Ed. 139 (1877), in which we held that "a process may be patentable irrespective of the particular form of the instrumentalities used," and therefore one may patent "an act, or series of acts, performed upon the subject matter to be transformed and reduced to a different state or thing." Id., at 788.

      219

      [32] A skeptic of patents, Jefferson described this as "drawing a line between things which are worth to the public the embarrassment of a patent, and those which are not." 13 Writings of Thomas Jefferson 335 (Memorial ed.1904).

      220

      [33] See, e.g., Expanded Metal Co. v. Bradford, 214 U.S. 366, 383, 385-386, 29 S.Ct. 652, 53 L.Ed. 1034 (1909); The Telephone Cases, 126 U.S., at 533-537, 8 S.Ct. 778; Cochrane, 94 U.S., at 787-788; Burden, 15 How., at 267-268, 14 L.Ed. 683.

      221

      [34] See also 1 A. Deller, Walker on Patents § 26, p. 152 (2d ed. 1964) (A "`system' or method of transacting business is not [a process], nor does it come within any other designation of patentable subject matter").

      222

      [35] Although a few patents issued before 1952 that related to methods of doing business, see United States Patent and Trademark Office, Automated Financial or Management Data Processing Methods, online at http://www.uspto.gov/web/menu/busmethp/index.html (all Internet materials as visited June 26, 2010, and available in Clerk of Court's case file), these patents were rare, often issued through self-registration rather than any formalized patent examination, generally were not upheld by courts, and arguably are distinguishable from pure patents on business methods insofar as they often involved the manufacture of new objects. See In re Bilski, 545 F.3d 943, 974, and n. 18 (C.A.Fed.2008) (case below) (Dyk, J., concurring); Pollack 74-75; Walterscheid, To Promote the Progress 243.

      223

      [36] For examples of such usage, see The Telephone Cases, 126 U.S., at 533, and Burden, 15 How., at 267, 14 L.Ed. 683.

      224

      [37] See also 98 Cong. Rec. A415 (1952) (remarks of Rep. Bryson) (describing, after the fact, the 1952 Patent Act, and explaining that "[t]he word `art' was changed to `process' in order to clarify its meaning. No change in substance was intended").

      225

      [38] The 1952 Act also retained the language "invents or discovers," which by that time had taken on a connotation that would tend to exclude business methods. See B. Evans & C. Evans, A Dictionary of Contemporary Usage 137 (1957) (explaining that "discover; invent" means "to make or create something new, especially, in modern usage, something ingeniously devised to perform mechanical operations").

      226

      [39] As explained in Part II, supra, the Court engages in a Jekyll-and-Hyde form of interpretation with respect to the word "process" in § 101. It rejects the interpretation I proffer because the words "process" and "method" do not, on their face, distinguish between different series of acts. Ante, at 3228. But it also rejects many sorts of processes without a textual basis for doing so. See ante, at 3224-3225, 3226, 3229-3231. And while the Courts rests a great deal of weight on Parker v. Flook, 437 U.S. 584, 98 S.Ct. 2522, 57 L.Ed.2d 451 (1978), for its analysis of abstract ideas, the Court minimizes Flook's rejection of "a purely literal reading of § 101," as well as Flook's reliance on the historical backdrop of § 101 and our understanding of what "the statute was enacted to protect," id., at 588-590, 593, 98 S.Ct. 2522; see also Diamond v. Diehr, 450 U.S. 175, 192, 101 S.Ct. 1048, 67 L.Ed.2d 155 (1981) (explaining that a "claim satisfies the requirements of § 101" when it "is performing a function which the patent laws were designed to protect").

      227

      [40] Forty years later, Judge Rich authored the State Street opinion that some have understood to make business methods patentable. But State Street dealt with whether a piece of software could be patented and addressed only claims directed at machines, not processes. His opinion may therefore be better understood merely as holding that an otherwise patentable process is not unpatentable simply because it is directed toward the conduct of doing business—an issue the Court has no occasion to address today. See State Street, 149 F.3d, at 1375.

      228

      [41] See also 145 Cong. Rec. 30985 (1999) (remarks of Sen. Schumer) (explaining that "[i]n State Street, the Court did away with the so-called `business methods' exception to statutory patentable subject matter," and "[t]he first inventor defense will provide ... important, needed protections in the face of the uncertainty presented by ... the State Street case"); id., at 31007 (remarks of Sen. DeWine) ("Virtually no one in the industry believed that these methods or processes were patentable"); id., at 19281 (remarks of Rep. Manzullo) ("Before the State Street Bank and Trust case ... it was universally thought that methods of doing or conducting business were not patentable items").

      229

      [42] The Court opines that "[t]his principle, of course, applies to interpreting any two provisions in the U.S.Code, even when Congress enacted the provisions at different times." Ante, at 3229 (emphasis added). The only support the Court offers for this proposition is a 1937 opinion for three Justices, in Hague v. Committee for Industrial Organization, 307 U.S. 496, 528-530, 59 S.Ct. 954, 83 L.Ed. 1423 (1939) (opinion of Stone, J.). But that opinion is inapposite. Although Justice Stone stated that two provisions "must be read together," id., at 530, 59 S.Ct. 954, he did so to explain that an ambiguity in a later-in-time statute must be understood in light of the earlier-in-time framework against which the ambiguous statute was passed, id., at 528-530, 59 S.Ct. 954, particularly because the later statute explicitly stated that it "shall not be construed to apply" to the provision created by an earlier Act, id., at 528, 59 S.Ct. 954.

      230

      [43] I am not trying to "overcome" an "established rule of statutory interpretation" with "judicial speculation as to the subjective intent of various legislators," ante, at 3229, but, rather, I am explaining why the Court has illogically expanded the canon upon which it relies beyond that canon's logical underpinnings.

      231

      [44] See also Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617, 626, 128 S.Ct. 2109, 170 L.Ed.2d 996 (2008) ("`[T]he primary purpose of our patent laws is not the creation of private fortunes for the owners of patents but is "to promote the progress of science and useful arts"'" (quoting Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502, 511, 37 S.Ct. 416, 61 L.Ed. 871 (1917))); Pfaff v. Wells Electronics, Inc., 525 U.S. 55, 63, 119 S.Ct. 304, 142 L.Ed.2d 261 (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").

      232

      [45] See generally W. Landes & R. Posner, The Economic Structure of Intellectual Property Law 13-15 (2003).

      233

      [46] See, e.g., Burk & Lemley, Policy Levers in Patent Law, 89 Va. L.Rev. 1575, 1577-1589 (2003) (hereinafter Burk & Lemley).

      234

      [47] See, e.g., Burk & Lemley 1618; Carrier, Unraveling the Patent-Antitrust Paradox, 150 U. Pa. L.Rev. 761, 826 (2002) (hereinafter Carrier); Dreyfuss, Are Business Methods Patents Bad for Business? 16 Santa Clara Computer & High Tech. L.J. 263, 274-277 (2000) (hereinafter Dreyfuss); Posner, The Law and Economics of Intellectual Property, 131 Daedalus 5 (Spring 2002).

      235

      [48] C. Coolidge, The Press Under a Free Government, in Foundations of the Republic: Speeches and Addresses 187 (1926).

      236

      [49] See also Pollack 75-76 ("Since business methods are `useful' when they directly earn revenue, they are inherently unlikely to be underproduced").

      237

      [50] See R. Levin et al., Appropriating the Returns from Industrial Research and Development, in 3 Brookings Papers on Econ. Activity 794-795 (1987).

      238

      [51] See Burk & Lemley 1618; Dreyfuss 275; see generally Carrier 821-823. Concededly, there may some methods of doing business that do not confer sufficient first-mover advantages. See Abramowicz & Duffy, Intellectual Property for Market Experimentation, 83 N.Y.U. & ensp; L.Rev. 337, 340-342 (2008).

      239

      [52] See Burk & Lemley 1618; Carrier 826; Olson, Taking the Utilitarian Basis for Patent Law Seriously: The Case For Restricting Patentable Subject Matter, 82 Temp. L.Rev. 181, 231 (2009).

      240

      [53] See Dreyfuss 276; Merges & Nelson, On the Complex Economics of Patent Scope, 90 Colum. L.Rev. 839, 873-878 (1990).

      241

      [54] See also Raskind, The State Street Bank Decision, The Bad Business of Unlimited Patent Protection for Methods of Doing Business, 10 Fordham Intell. Prop. Media & Ent. L.J. 61, 102 (1999) ("Interactive emulation more than innovation is the driving force of business method changes").

      242

      [55] There is substantial academic debate, moreover, about whether the normal process of screening patents for novelty and obviousness can function effectively for business methods. The argument goes that because business methods are both vague and not confined to any one industry, there is not a well-confined body of prior art to consult, and therefore many "bad" patents are likely to issue, a problem that would need to be sorted out in later litigation. See, e.g., Dreyfuss 268-270; Eisenberg, Analyze This: A Law and Economics Agenda for the Patent System, 53 Vand. L.Rev.2081, 2090 (2000); Merges 589-590.

      243

      [56] See also J. Bessen & M. Meurer, Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk 46-72 (2008) (hereinafter Bessen & Meurer); P. Menell & S. Scotchmer, Intellectual Property Law, in 2 Handbook of Law and Economics 1500-1501, 1506 (M. Polinsky & S. Shavell eds.2007). Concededly, alterations in the remedy structure, such as the First Inventor Defense Act of 1999, § 4301 et seq., 113 Stat. 1536, codified at 35 U.S.C. § 273, mitigate these costs.

      244

      [57] See generally Farrell & Shapiro, How Strong Are Weak Patents? 98 Amer. Econ. Rev. 1347 (2008); Meurer, Controlling Opportunistic and Anti-Competitive Intellectual Property Litigation, 44 Boston College L.Rev. 509 (2003); Moore, Populism and Patents, 82 N.Y. U. L.Rev. 69, 90-91 (2007).

      245

      [58] See Bessen & Meurer 176; Lessig, The Death of Cyberspace, 57 Wash. & Lee L.Rev. 337, 346-347 (2000).

      246

      [59] Congress and the courts have worked long and hard to create and administer antitrust laws that ensure businesses cannot prevent each other from competing vigorously. If methods of conducting business were themselves patentable, then virtually any novel, nonobvious business method could be granted a federally protected monopoly. The tension this might create with our antitrust regime provides yet another reason for skepticism that Congress would have wanted the patent laws to extend to business methods.

    • 5.2 Ass'n for Molecular Pathology v. Myriad

      1
      133 S.Ct. 2107 (2013)
      2
      ASSOCIATION FOR MOLECULAR PATHOLOGY et al., Petitioners
      v.
      MYRIAD GENETICS, INC., et al.
      3
      No. 12-398.
      4

      Supreme Court of United States.

      5
      Argued April 15, 2013.
      6
      Decided June 13, 2013.
      7

      [2110] Christopher A. Hansen, Glenwood, MD, for Petitioners.

      8

      Donald B. Verrilli, Jr., Solicitor General, for the United States as amicus curiae, by special leave of the court, supporting neither party.

      9

      Gregory A. Castanias, Washington, DC, for Respondents.

      10

      Daniel B. Ravicher, Sabrina Y. Hassan, Public Patent Foundation (PUBPAT), Benjamin N. Cardozo, School of Law, New York, NY, Christopher A. Hansen, Counsel of Record, Sandra S. Park, Lenora M. Lapidus, Steven R. Shapiro, New York, NY, for Petitioners.

      11
      Justice THOMAS delivered the opinion of the Court.
      12

      Respondent Myriad Genetics, Inc. (Myriad), discovered the precise location and [2111] sequence of two human genes, mutations of which can substantially increase the risks of breast and ovarian cancer. Myriad obtained a number of patents based upon its discovery. This case involves claims from three of them and requires us to resolve whether a naturally occurring segment of deoxyribonucleic acid (DNA) is patent eligible under 35 U.S.C. § 101 by virtue of its isolation from the rest of the human genome. We also address the patent eligibility of synthetically created DNA known as complementary DNA (cDNA), which contains the same protein-coding information found in a segment of natural DNA but omits portions within the DNA segment that do not code for proteins. For the reasons that follow, we hold that a naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated, but that cDNA is patent eligible because it is not naturally occurring. We, therefore, affirm in part and reverse in part the decision of the United States Court of Appeals for the Federal Circuit.

      13
      I
      14
      A
      15

      Genes form the basis for hereditary traits in living organisms. See generally Association for Molecular Pathology v. United States Patent and Trademark Office, 702 F.Supp.2d 181, 192-211 (S.D.N.Y. 2010). The human genome consists of approximately 22,000 genes packed into 23 pairs of chromosomes. Each gene is encoded as DNA, which takes the shape of the familiar "double helix" that Doctors James Watson and Francis Crick first described in 1953. Each "cross-bar" in the DNA helix consists of two chemically joined nucleotides. The possible nucleotides are adenine (A), thymine (T), cytosine (C), and guanine (G), each of which binds naturally with another nucleotide: A pairs with T; C pairs with G. The nucleotide cross-bars are chemically connected to a sugar-phosphate backbone that forms the outside framework of the DNA helix. Sequences of DNA nucleotides contain the information necessary to create strings of amino acids, which in turn are used in the body to build proteins. Only some DNA nucleotides, however, code for amino acids; these nucleotides are known as "exons." Nucleotides that do not code for amino acids, in contrast, are known as "introns."

      16

      Creation of proteins from DNA involves two principal steps, known as transcription and translation. In transcription, the bonds between DNA nucleotides separate, and the DNA helix unwinds into two single strands. A single strand is used as a template to create a complementary ribonucleic acid (RNA) strand. The nucleotides on the DNA strand pair naturally with their counterparts, with the exception that RNA uses the nucleotide base uracil (U) instead of thymine (T). Transcription results in a single strand RNA molecule, known as pre-RNA, whose nucleotides form an inverse image of the DNA strand from which it was created. Pre-RNA still contains nucleotides corresponding to both the exons and introns in the DNA molecule. The pre-RNA is then naturally "spliced" by the physical removal of the introns. The resulting product is a strand of RNA that contains nucleotides corresponding only to the exons from the original DNA strand. The exons-only strand is known as messenger RNA (mRNA), which creates amino acids through translation. In translation, cellular structures known as ribosomes read each set of three nucleotides, known as codons, in the mRNA. Each codon either tells the ribosomes which of the 20 possible amino acids to synthesize or provides a stop signal that ends amino acid production.

      17

      [2112] DNA's informational sequences and the processes that create mRNA, amino acids, and proteins occur naturally within cells. Scientists can, however, extract DNA from cells using well known laboratory methods. These methods allow scientists to isolate specific segments of DNA — for instance, a particular gene or part of a gene — which can then be further studied, manipulated, or used. It is also possible to create DNA synthetically through processes similarly well known in the field of genetics. One such method begins with an mRNA molecule and uses the natural bonding properties of nucleotides to create a new, synthetic DNA molecule. The result is the inverse of the mRNA's inverse image of the original DNA, with one important distinction: Because the natural creation of mRNA involves splicing that removes introns, the synthetic DNA created from mRNA also contains only the exon sequences. This synthetic DNA created in the laboratory from mRNA is known as complementary DNA (cDNA).

      18

      Changes in the genetic sequence are called mutations. Mutations can be as small as the alteration of a single nucleotide — a change affecting only one letter in the genetic code. Such small-scale changes can produce an entirely different amino acid or can end protein production altogether. Large changes, involving the deletion, rearrangement, or duplication of hundreds or even millions of nucleotides, can result in the elimination, misplacement, or duplication of entire genes. Some mutations are harmless, but others can cause disease or increase the risk of disease. As a result, the study of genetics can lead to valuable medical breakthroughs.

      19
      B
      20

      This case involves patents filed by Myriad after it made one such medical breakthrough. Myriad discovered the precise location and sequence of what are now known as the BRCA1 and BRCA2 genes. Mutations in these genes can dramatically increase an individual's risk of developing breast and ovarian cancer. The average American woman has a 12- to 13-percent risk of developing breast cancer, but for women with certain genetic mutations, the risk can range between 50 and 80 percent for breast cancer and between 20 and 50 percent for ovarian cancer. Before Myriad's discovery of the BRCA1 and BRCA2 genes, scientists knew that heredity played a role in establishing a woman's risk of developing breast and ovarian cancer, but they did not know which genes were associated with those cancers.

      21

      Myriad identified the exact location of the BRCA1 and BRCA2 genes on chromosomes 17 and 13. Chromosome 17 has approximately 80 million nucleotides, and chromosome 13 has approximately 114 million. Association for Molecular Pathology v. United States Patent and Trademark Office, 689 F.3d 1303, 1328 (C.A.Fed.2012). Within those chromosomes, the BRCA1 and BRCA2 genes are each about 80,000 nucleotides long. If just exons are counted, the BRCA1 gene is only about 5,500 nucleotides long; for the BRCA2 gene, that number is about 10,200. Ibid. Knowledge of the location of the BRCA1 and BRCA2 genes allowed Myriad to determine their typical nucleotide sequence.[1] That information, in turn, enabled Myriad to develop medical tests that are useful for detecting mutations in a patient's BRCA1 and BRCA2 genes and thereby assessing [2113] whether the patient has an increased risk of cancer.

      22

      Once it found the location and sequence of the BRCA1 and BRCA2 genes, Myriad sought and obtained a number of patents. Nine composition claims from three of those patents are at issue in this case.[2] See id., at 1309, and n. 1 (noting composition claims). Claims 1, 2, 5, and 6 from the '282 patent are representative. The first claim asserts a patent on "[a]n isolated DNA coding for a BRCA1 polypeptide," which has "the amino acid sequence set forth in SEQ ID NO:2." App. 822. SEQ ID NO:2 sets forth a list of 1,863 amino acids that the typical BRCA1 gene encodes. See id., at 785-790. Put differently, claim 1 asserts a patent claim on the DNA code that tells a cell to produce the string of BRCA1 amino acids listed in SEQ ID NO:2.

      23

      Claim 2 of the '282 patent operates similarly. It claims "[t]he isolated DNA of claim 1, wherein said DNA has the nucleotide sequence set forth in SEQ ID NO:1." Id., at 822. Like SEQ ID NO:2, SEQ ID NO:1 sets forth a long list of data, in this instance the sequence of cDNA that codes for the BRCA1 amino acids listed in claim 1. Importantly, SEQ ID NO:1 lists only the cDNA exons in the BRCA1 gene, rather than a full DNA sequence containing both exons and introns. See id., at 779 (stating that SEQ ID NO:1's "MOLECULE TYPE:" is "cDNA"). As a result, the Federal Circuit recognized that claim 2 asserts a patent on the cDNA nucleotide sequence listed in SEQ ID NO:1, which codes for the typical BRCA1 gene. 689 F.3d, at 1326, n. 9; id., at 1337 (Moore, J., concurring in part); id., at 1356 (Bryson, J., concurring in part and dissenting in part).

      24

      Claim 5 of the '282 patent claims a subset of the data in claim 1. In particular, it claims "[a]n isolated DNA having at least 15 nucleotides of the DNA of claim 1." App. 822. The practical effect of claim 5 is to assert a patent on any series of 15 nucleotides that exist in the typical BRCA1 gene. Because the BRCA1 gene is thousands of nucleotides long, even BRCA1 genes with substantial mutations are likely to contain at least one segment of 15 nucleotides that correspond to the typical BRCA1 gene. Similarly, claim 6 of the '282 patent claims "[a]n isolated DNA having at least 15 nucleotides of the DNA of claim 2." Ibid. This claim operates similarly to claim 5, except that it references the cDNA-based claim 2. The remaining claims at issue are similar, though several list common mutations rather than typical BRCA1 and BRCA2 sequences. See ibid. (claim 7 of the '282 patent); id., at 930 (claim 1 of the '473 patent); id., at 1028 (claims 1, 6, and 7 of the '492 patent).

      25
      C
      26

      Myriad's patents would, if valid, give it the exclusive right to isolate an individual's BRCA1 and BRCA2 genes (or any strand of 15 or more nucleotides within the genes) by breaking the covalent bonds that connect the DNA to the rest of the individual's genome. The patents would also give Myriad the exclusive right to synthetically create BRCA cDNA. In Myriad's view, manipulating BRCA DNA in either of these fashions triggers its "right to exclude others from making" its patented composition of matter under the Patent Act. 35 U.S.C. § 154(a)(1); see also § 271(a) ("[W]hoever without authority [2114] makes ... any patented invention ... infringes the patent").

      27

      But isolation is necessary to conduct genetic testing, and Myriad was not the only entity to offer BRCA testing after it discovered the genes. The University of Pennsylvania's Genetic Diagnostic Laboratory (GDL) and others provided genetic testing services to women. Petitioner Dr. Harry Ostrer, then a researcher at New York University School of Medicine, routinely sent his patients' DNA samples to GDL for testing. After learning of GDL's testing and Ostrer's activities, Myriad sent letters to them asserting that the genetic testing infringed Myriad's patents. App. 94-95 (Ostrer letter). In response, GDL agreed to stop testing and informed Ostrer that it would no longer accept patient samples. Myriad also filed patent infringement suits against other entities that performed BRCA testing, resulting in settlements in which the defendants agreed to cease all allegedly infringing activity. 689 F.3d, at 1315. Myriad, thus, solidified its position as the only entity providing BRCA testing.

      28

      Some years later, petitioner Ostrer, along with medical patients, advocacy groups, and other doctors, filed this lawsuit seeking a declaration that Myriad's patents are invalid under 35 U.S.C. § 101. 702 F.Supp.2d, at 186. Citing this Court's decision in MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 S.Ct. 764, 166 L.Ed.2d 604 (2007), the District Court denied Myriad's motion to dismiss for lack of standing. Association for Molecular Pathology v. United States Patent and Trademark Office, 669 F.Supp.2d 365, 385-392 (S.D.N.Y.2009). The District Court then granted summary judgment to petitioners on the composition claims at issue in this case based on its conclusion that Myriad's claims, including claims related to cDNA, were invalid because they covered products of nature. 702 F.Supp.2d, at 220-237. The Federal Circuit reversed, Association for Molecular Pathology v. United States Patent and Trademark Office, 653 F.3d 1329 (2011), and this Court granted the petition for certiorari, vacated the judgment, and remanded the case in light of Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. ___, 132 S.Ct. 1289, 182 L.Ed.2d 321 (2012). See Association for Molecular Pathology v. Myriad Genetics, Inc., 566 U.S. ___, 133 S.Ct. 694, 184 L.Ed.2d 496 (2012).

      29

      On remand, the Federal Circuit affirmed the District Court in part and reversed in part, with each member of the panel writing separately. All three judges agreed that only petitioner Ostrer had standing. They reasoned that Myriad's actions against him and his stated ability and willingness to begin BRCA1 and BRCA2 testing if Myriad's patents were invalidated were sufficient for Article III standing. 689 F.3d, at 1323; id., at 1337 (opinion of Moore, J.); id., at 1348 (opinion of Bryson, J.).

      30

      With respect to the merits, the court held that both isolated DNA and cDNA were patent eligible under § 101. The central dispute among the panel members was whether the act of isolating DNA — separating a specific gene or sequence of nucleotides from the rest of the chromosome — is an inventive act that entitles the individual who first isolates it to a patent. Each of the judges on the panel had a different view on that question. Judges Lourie and Moore agreed that Myriad's claims were patent eligible under § 101 but disagreed on the rationale. Judge Lourie relied on the fact that the entire DNA molecule is held together by chemical bonds and that the covalent bonds at both ends of the segment must be severed in order to isolate segments of DNA. This [2115] process technically creates new molecules with unique chemical compositions. See id., at 1328 ("Isolated DNA ... is a free-standing portion of a larger, natural DNA molecule. Isolated DNA has been cleaved (i.e., had covalent bonds in its backbone chemically severed) or synthesized to consist of just a fraction of a naturally occurring DNA molecule"). Judge Lourie found this chemical alteration to be dispositive, because isolating a particular strand of DNA creates a nonnaturally occurring molecule, even though the chemical alteration does not change the informationtransmitting quality of the DNA. See id., at 1330 ("The claimed isolated DNA molecules are distinct from their natural existence as portions of larger entities, and their informational content is irrelevant to that fact. We recognize that biologists may think of molecules in terms of their uses, but genes are in fact materials having a chemical nature"). Accordingly, he rejected petitioners' argument that isolated DNA was ineligible for patent protection as a product of nature.

      31

      Judge Moore concurred in part but did not rely exclusively on Judge Lourie's conclusion that chemically breaking covalent bonds was sufficient to render isolated DNA patent eligible. Id., at 1341 ("To the extent the majority rests its conclusion on the chemical differences between [naturally occurring] and isolated DNA (breaking the covalent bonds), I cannot agree that this is sufficient to hold that the claims to human genes are directed to patentable subject matter"). Instead, Judge Moore also relied on the United States Patent and Trademark Office's (PTO) practice of granting such patents and on the reliance interests of patent holders. Id., at 1343. However, she acknowledged that her vote might have come out differently if she "were deciding this case on a blank canvas." Ibid.

      32

      Finally, Judge Bryson concurred in part and dissented in part, concluding that isolated DNA is not patent eligible. As an initial matter, he emphasized that the breaking of chemical bonds was not dispositive: "[T]here is no magic to a chemical bond that requires us to recognize a new product when a chemical bond is created or broken." Id., at 1351. Instead, he relied on the fact that "[t]he nucleotide sequences of the claimed molecules are the same as the nucleotide sequences found in naturally occurring human genes." Id., at 1355. Judge Bryson then concluded that genetic "structural similarity dwarfs the significance of the structural differences between isolated DNA and naturally occurring DNA, especially where the structural differences are merely ancillary to the breaking of covalent bonds, a process that is itself not inventive." Ibid. Moreover, Judge Bryson gave no weight to the PTO's position on patentability because of the Federal Circuit's position that "the PTO lacks substantive rulemaking authority as to issues such as patentability." Id., at 1357.

      33

      Although the judges expressed different views concerning the patentability of isolated DNA, all three agreed that patent claims relating to cDNA met the patent eligibility requirements of § 101. Id., at 1326, and n. 9 (recognizing that some patent claims are limited to cDNA and that such claims are patent eligible under § 101); id., at 1337 (Moore, J., concurring in part); id., at 1356 (Bryson, J., concurring in part and dissenting in part) ("cDNA cannot be isolated from nature, but instead must be created in the laboratory... because the introns that are found in the native gene are removed from the cDNA segment").[3] We granted certiorari. [2116] 568 U.S. ___, 133 S.Ct. 694, 184 L.Ed.2d 496 (2012).

      34
      II
      35
      A
      36

      Section 101 of the Patent Act provides:

      37
      "Whoever invents or discovers any new and useful ... composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title." 35 U.S.C. § 101.
      38

      We have "long held that this provision contains an important implicit exception[:] Laws of nature, natural phenomena, and abstract ideas are not patentable." Mayo, 566 U.S., at ___, 132 S.Ct., at 1293 (internal quotation marks and brackets omitted). Rather, "`they are the basic tools of scientific and technological work'" that lie beyond the domain of patent protection. Id., at ___, 132 S.Ct., at 1293. As the Court has explained, without this exception, there would be considerable danger that the grant of patents would "tie up" the use of such tools and thereby "inhibit future innovation premised upon them." Id., at ___, 132 S.Ct., at 1301. This would be at odds with the very point of patents, which exist to promote creation. Diamond v. Chakrabarty, 447 U.S. 303, 309, 100 S.Ct. 2204, 65 L.Ed.2d 144 (1980) (Products of nature are not created, and "`manifestations... of nature [are] free to all men and reserved exclusively to none'").

      39

      The rule against patents on naturally occurring things is not without limits, however, for "all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas," and "too broad an interpretation of this exclusionary principle could eviscerate patent law." 566 U.S., at ___, 132 S.Ct., at 1293. As we have recognized before, patent protection strikes a delicate balance between creating "incentives that lead to creation, invention, and discovery" and "imped[ing] the flow of information that might permit, indeed spur, invention." Id., at ___, 132 S.Ct., at 1305. We must apply this well-established standard to determine whether Myriad's patents claim any "new and useful ... composition of matter," § 101, or instead claim naturally occurring phenomena.

      40
      B
      41

      It is undisputed that Myriad did not create or alter any of the genetic information encoded in the BRCA1 and BRCA2 genes. The location and order of the nucleotides existed in nature before Myriad found them. Nor did Myriad create or alter the genetic structure of DNA. Instead, Myriad's principal contribution was uncovering the precise location and genetic sequence of the BRCA1 and BRCA2 genes within chromosomes 17 and 13. The question is whether this renders the genes patentable.

      42

      Myriad recognizes that our decision in Chakrabarty is central to this inquiry. Brief for Respondents 14, 23-27. In Chakrabarty, scientists added four plasmids to a bacterium, which enabled it to break down various components of crude oil. 447 U.S., at 305, and n. 1, 100 S.Ct. 2204. The Court held that the modified bacterium was patentable. It explained [2117] that the patent claim was "not to a hitherto unknown natural phenomenon, but to a nonnaturally occurring manufacture or composition of matter — a product of human ingenuity `having a distinctive name, character [and] use.'" Id., at 309-310, 100 S.Ct. 2204 (quoting Hartranft v. Wiegmann, 121 U.S. 609, 615, 7 S.Ct. 1240, 30 L.Ed. 1012 (1887); alteration in original). The Chakrabarty bacterium was new "with markedly different characteristics from any found in nature," 447 U.S., at 310, 100 S.Ct. 2204, due to the additional plasmids and resultant "capacity for degrading oil." Id., at 305, n. 1, 100 S.Ct. 2204. In this case, by contrast, Myriad did not create anything. To be sure, it found an important and useful gene, but separating that gene from its surrounding genetic material is not an act of invention.

      43

      Groundbreaking, innovative, or even brilliant discovery does not by itself satisfy the § 101 inquiry. In Funk Brothers Seed Co. v. Kalo Inoculant Co., 333 U.S. 127, 68 S.Ct. 440, 92 L.Ed. 588 (1948), this Court considered a composition patent that claimed a mixture of naturally occurring strains of bacteria that helped leguminous plants take nitrogen from the air and fix it in the soil. Id., at 128-129, 68 S.Ct. 440. The ability of the bacteria to fix nitrogen was well known, and farmers commonly "inoculated" their crops with them to improve soil nitrogen levels. But farmers could not use the same inoculant for all crops, both because plants use different bacteria and because certain bacteria inhibit each other. Id., at 129-130, 68 S.Ct. 440. Upon learning that several nitrogen-fixing bacteria did not inhibit each other, however, the patent applicant combined them into a single inoculant and obtained a patent. Id., at 130, 68 S.Ct. 440. The Court held that the composition was not patent eligible because the patent holder did not alter the bacteria in any way. Id., at 132, 68 S.Ct. 440 ("There is no way in which we could call [the bacteria mixture a product of invention] unless we borrowed invention from the discovery of the natural principle itself"). His patent claim thus fell squarely within the law of nature exception. So do Myriad's. Myriad found the location of the BRCA1 and BRCA2 genes, but that discovery, by itself, does not render the BRCA genes "new ... composition[s] of matter," § 101, that are patent eligible.

      44

      Indeed, Myriad's patent descriptions highlight the problem with its claims. For example, a section of the '282 patent's Detailed Description of the Invention indicates that Myriad found the location of a gene associated with increased risk of breast cancer and identified mutations of that gene that increase the risk. See App. 748-749.[4] In subsequent language Myriad explains that the location of the gene was unknown until Myriad found it among the approximately eight million nucleotide pairs contained in a subpart of chromosome [2118] 17. See Ibid.[5] The '473 and '492 patents contain similar language as well. See id., at 854, 947. Many of Myriad's patent descriptions simply detail the "iterative process" of discovery by which Myriad narrowed the possible locations for the gene sequences that it sought.[6] See, e.g., id., at 750. Myriad seeks to import these extensive research efforts into the § 101 patent-eligibility inquiry. Brief for Respondents 8-10, 34. But extensive effort alone is insufficient to satisfy the demands of § 101.

      45

      Nor are Myriad's claims saved by the fact that isolating DNA from the human genome severs chemical bonds and thereby creates a nonnaturally occurring molecule. Myriad's claims are simply not expressed in terms of chemical composition, nor do they rely in any way on the chemical changes that result from the isolation of a particular section of DNA. Instead, the claims understandably focus on the genetic information encoded in the BRCA1 and BRCA2 genes. If the patents depended upon the creation of a unique molecule, then a would-be infringer could arguably avoid at least Myriad's patent claims on entire genes (such as claims 1 and 2 of the '282 patent) by isolating a DNA sequence that included both the BRCA1 or BRCA2 gene and one additional nucleotide pair. Such a molecule would not be chemically identical to the molecule "invented" by Myriad. But Myriad obviously would resist that outcome because its claim is concerned primarily with the information contained in the genetic sequence, not with the specific chemical composition of a particular molecule.

      46

      Finally, Myriad argues that the PTO's past practice of awarding gene patents is entitled to deference, citing J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred Int'l, Inc., 534 U.S. 124, 122 S.Ct. 593, 151 L.Ed.2d 508 (2001). See Brief for Respondents 35-39, 49-50. We disagree. J.E.M. held that new plant breeds were eligible for utility patents under § 101 notwithstanding separate statutes providing special protections for plants, see 7 U.S.C. § 2321 et seq. (Plant Variety Protection Act); 35 U.S.C. §§ 161-164 (Plant Patent Act of 1930). After analyzing the text and structure of the relevant statutes, the Court mentioned that the Board of Patent Appeals and Interferences had determined that new plant breeds were patent eligible under § 101 and that Congress had recognized and endorsed that position in a subsequent Patent Act amendment. 534 U.S., at 144-145, 122 S.Ct. 593 (citing In re Hibberd, 227 U.S.P.Q. 443 (1985) and 35 U.S.C. § 119(f)). In this case, however, Congress has not endorsed the views of the PTO in subsequent legislation. While Myriad relies on Judge Moore's view that Congress endorsed the PTO's position in a single sentence in the Consolidated Appropriations Act of 2004, see Brief for Respondents 31, n. 8; 689 F.3d, at 1346, that Act does not even mention genes, much [2119] less isolated DNA. § 634, 118 Stat. 101 ("None of the funds appropriated or otherwise made available under this Act may be used to issue patents on claims directed to or encompassing a human organism").

      47

      Further undercutting the PTO's practice, the United States argued in the Federal Circuit and in this Court that isolated DNA was not patent eligible under § 101, Brief for United States as Amicus Curiae 20-33, and that the PTO's practice was not "a sufficient reason to hold that isolated DNA is patent-eligible." Id., at 26. See also id., at 28-29. These concessions weigh against deferring to the PTO's determination.[7]

      48
      C
      49

      cDNA does not present the same obstacles to patentability as naturally occurring, isolated DNA segments. As already explained, creation of a cDNA sequence from mRNA results in an exons-only molecule that is not naturally occurring.[8] Petitioners concede that cDNA differs from natural DNA in that "the non-coding regions have been removed." Brief for Petitioners 49. They nevertheless argue that cDNA is not patent eligible because "[t]he nucleotide sequence of cDNA is dictated by nature, not by the lab technician." Id., at 51. That may be so, but the lab technician unquestionably creates something new when cDNA is made. cDNA retains the naturally occurring exons of DNA, but it is distinct from the DNA from which it was derived. As a result, cDNA is not a "product of nature" and is patent eligible under § 101, except insofar as very short series of DNA may have no intervening introns to remove when creating cDNA. In that situation, a short strand of cDNA may be indistinguishable from natural DNA.[9]

      50
      III
      51

      It is important to note what is not implicated by this decision. First, there are no method claims before this Court. Had Myriad created an innovative method of manipulating genes while searching for the BRCA1 and BRCA2 genes, it could possibly have sought a method patent. But the processes used by Myriad to isolate DNA were well understood by geneticists at the time of Myriad's patents "were well understood, widely used, and fairly uniform insofar [2120] as any scientist engaged in the search for a gene would likely have utilized a similar approach," 702 F.Supp.2d, at 202-203, and are not at issue in this case.

      52

      Similarly, this case does not involve patents on new applications of knowledge about the BRCA1 and BRCA2 genes. Judge Bryson aptly noted that, "[a]s the first party with knowledge of the [BRCA1 and BRCA2] sequences, Myriad was in an excellent position to claim applications of that knowledge. Many of its unchallenged claims are limited to such applications." 689 F.3d, at 1349.

      53

      Nor do we consider the patentability of DNA in which the order of the naturally occurring nucleotides has been altered. Scientific alteration of the genetic code presents a different inquiry, and we express no opinion about the application of § 101 to such endeavors. We merely hold that genes and the information they encode are not patent eligible under § 101 simply because they have been isolated from the surrounding genetic material.

      54
      * * *
      55

      For the foregoing reasons, the judgment of the Federal Circuit is affirmed in part and reversed in part.

      56

      It is so ordered.

      57
      Justice SCALIA, concurring in part and concurring in the judgment.
      58

      I join the judgment of the Court, and all of its opinion except Part I-A and some portions of the rest of the opinion going into fine details of molecular biology. I am unable to affirm those details on my own knowledge or even my own belief. It suffices for me to affirm, having studied the opinions below and the expert briefs presented here, that the portion of DNA isolated from its natural state sought to be patented is identical to that portion of the DNA in its natural state; and that complementary DNA (cDNA) is a synthetic creation not normally present in nature.

      59

      [1] Technically, there is no "typical" gene because nucleotide sequences vary between individuals, sometimes dramatically. Geneticists refer to the most common variations of genes as "wild types."

      60

      [2] At issue are claims 1, 2, 5, 6, and 7 of U.S. Patent 5,747,282 (the '282 patent), claim 1 of U.S. Patent 5,693,473 (the '473 patent), and claims 1, 6, and 7 of U.S. Patent 5,837,492 (the '492 patent).

      61

      [3] Myriad continues to challenge Dr. Ostrer's Declaratory Judgment Act standing in this Court. Brief for Respondents 17-22. But we find that, under the Court's decision in MedImmune, Inc. v. Genentech, Inc., Dr. Ostrer has alleged sufficient facts "under all the circumstances, [to] show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." 549 U.S. 118, 127, 127 S.Ct. 764, 166 L.Ed.2d 604 (2007) (internal quotation marks omitted).

      62

      [4] The full relevant text of the Detailed Description of the Patent is as follows:

      63

      "It is a discovery of the present invention that the BRCA1 locus which predisposes individuals to breast cancer and ovarian cancer, is a gene encoding a BRCA1 protein, which has been found to have no significant homology with known protein or DNA sequences.... It is a discovery of the present invention that mutations in the BRCA1 locus in the germline are indicative of a predisposition to breast cancer and ovarian cancer. Finally, it is a discovery of the present invention that somatic mutations in the BRCA1 locus are also associated with breast cancer, ovarian cancer and other cancers, which represents an indicator of these cancers or of the prognosis of these cancers. The mutational events of the BRCA1 locus can involve deletions, insertions and point mutations." App. 749.

      64

      Notwithstanding Myriad's repeated use of the phrase "present invention," it is clear from the text of the patent that the various discoveries are the "invention."

      65

      [5] "Starting from a region on the long arm of human chromosome 17 of the human genome, 17q, which has a size estimated at about 8 million base pairs, a region which contains a genetic locus, BRCA1, which causes susceptibility to cancer, including breast and ovarian cancer, has been identified." Ibid.

      66

      [6] Myriad first identified groups of relatives with a history of breast cancer (some of whom also had developed ovarian cancer); because these individuals were related, scientists knew that it was more likely that their diseases were the result of genetic predisposition rather than other factors. Myriad compared sections of their chromosomes, looking for shared genetic abnormalities not found in the general population. It was that process which eventually enabled Myriad to determine where in the genetic sequence the BRCA1 and BRCA2 genes reside. See, e.g., id., at 749, 763-775.

      67

      [7] Myriad also argues that we should uphold its patents so as not to disturb the reliance interests of patent holders like itself. Brief for Respondents 38-39. Concerns about reliance interests arising from PTO determinations, insofar as they are relevant, are better directed to Congress. See Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. ___, ___, 132 S.Ct. 1289, 1304-05, 182 L.Ed.2d 321 (2012).

      68

      [8] Some viruses rely on an enzyme called reverse transcriptase to reproduce by copying RNA into cDNA. In rare instances, a side effect of a viral infection of a cell can be the random incorporation of fragments of the resulting cDNA, known as a pseudogene, into the genome. Such pseudogenes serve no purpose; they are not expressed in protein creation because they lack genetic sequences to direct protein expression. See J. Watson et al., Molecular Biology of the Gene 142, 144, fig. 7-5 (6th ed. 2008). Perhaps not surprisingly, given pseudogenes' apparently random origins, petitioners "have failed to demonstrate that the pseudogene consists of the same sequence as the BRCA1 cDNA." Association for Molecular Pathology v. United States Patent and Trademark Office, 689 F.3d 1303, 1356, n. 5 (C.A.Fed.2012). The possibility that an unusual and rare phenomenon might randomly create a molecule similar to one created synthetically through human ingenuity does not render a composition of matter nonpatentable.

      69

      [9] We express no opinion whether cDNA satisfies the other statutory requirements of patentability. See, e.g., 35 U.S.C. §§ 102, 103, and 112; Brief for United States as Amicus Curiae 19, n. 5.

    • 5.3 Mayo Collaborative Services. v. Prometheus Labs, Inc.

      1

      132 S.Ct. 1289 (2012)

      2
      MAYO COLLABORATIVE SERVICES, dba Mayo Medical Laboratories, et al., Petitioners
      v.
      PROMETHEUS LABORATORIES, INC.
      3

      No. 10-1150.

      4

      Supreme Court of the United States.

      5

      Argued December 7, 2011.
      Decided March 20, 2012.

      6

      [1293] Stephen M. Shapiro, Los Angeles, CA, for Petitioners.

      7

      Donald B. Verrilli, Jr., Solicitor General, for the United States, as amicus curiae, by special leave of the Court.

      8

      Richard P. Bress for Respondent.

      9

      Jonathan Singer, John Dragseth, Deanna Reichel, Fish & Richardson P.C., Minneapolis, MN, Stephen M. Shapiro, Counsel of Record, Timothy S. Bishop, Jeffrey W. Sarles, Mayer Brown LLP, Chicago, IL, Eugene Volokh, Los Angeles, CA, Joseph M. Colaiano, James A. Rogers, III, Mayo Clinic, Rochester, MN, Charles Rothfeld, Mayer Brown LLP, Washington, D.C., for Petitioners.

      10

      Richard P. Bress, Counsel of Record, J. Scott Ballenger, Maximilian A. Grant, Matthew J. Moore, Gabriel K. Bell, Latham & Watkins LLP, Washington, DC, for Respondent.

      11
      Justice BREYER delivered the opinion of the Court.
      12

      Section 101 of the Patent Act defines patentable subject matter. It says:

      13

      "Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title." 35 U.S.C. § 101.

      14

      The Court has long held that this provision contains an important implicit exception. "[L]aws of nature, natural phenomena, and abstract ideas" are not patentable. Diamond v. Diehr, 450 U.S. 175, 185, 101 S.Ct. 1048, 67 L.Ed.2d 155 (1981); see also Bilski v. Kappos, 561 U.S. ___, ___, 130 S.Ct. 3218, 3233-3234, 177 L.Ed.2d 792 (2010); Diamond v. Chakrabarty, 447 U.S. 303, 309, 100 S.Ct. 2204, 65 L.Ed.2d 144 (1980); Le Roy v. Tatham, 14 How. 156, 175, 14 L.Ed. 367 (1853); O'Reilly v. Morse, 15 How. 62, 112-120, 14 L.Ed. 601 (1854); cf. Neilson v. Harford, Webster's Patent Cases 295, 371 (1841) (English case discussing same). Thus, the Court has written that "a new mineral discovered in the earth or a new plant found in the wild is not patentable subject matter. Likewise, Einstein could not patent his celebrated law that E=mc2; nor could Newton have patented the law of gravity. Such discoveries are `manifestations of ... nature, free to all men and reserved exclusively to none.'" Chakrabarty, supra, at 309, 100 S.Ct. 2204 (quoting Funk Brothers Seed Co. v. Kalo Inoculant Co., 333 U.S. 127, 130, 68 S.Ct. 440, 92 L.Ed. 588 (1948)).

      15

      "Phenomena of nature, though just discovered, mental processes, and abstract intellectual concepts are not patentable, as they are the basic tools of scientific and technological work." Gottschalk v. Benson, 409 U.S. 63, 67, 93 S.Ct. 253, 34 L.Ed.2d 273 (1972). And monopolization of those tools through the grant of a patent might tend to impede innovation more than it would tend to promote it.

      16

      The Court has recognized, however, that too broad an interpretation of this exclusionary principle could eviscerate patent law. For all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas. Thus, in Diehr the Court pointed out that "`a process is not unpatentable simply because it contains a law of nature or a mathematical algorithm.'" 450 U.S., at 187, 101 S.Ct. 1048 (quoting Parker v. Flook, 437 U.S. 584, 590, 98 S.Ct. 2522, 57 L.Ed.2d 451 (1978)). It added that "an application of a law of nature or mathematical [1294] formula to a known structure or process may well be deserving of patent protection." Diehr, supra, at 187, 101 S.Ct. 1048. And it emphasized Justice Stone's similar observation in Mackay Radio & Telegraph Co. v. Radio Corp. of America, 306 U.S. 86, 59 S.Ct. 427, 83 L.Ed. 506 (1939):

      17

      "`While a scientific truth, or the mathematical expression of it, is not a patentable invention, a novel and useful structure created with the aid of knowledge of scientific truth may be.'" 450 U.S., at 188, 101 S.Ct. 1048 (quoting Mackay Radio, supra, at 94, 59 S.Ct. 427).

      18

      See also Funk Brothers, supra, at 130, 68 S.Ct. 440 ("If there is to be invention from [a discovery of a law of nature], it must come from the application of the law of nature to a new and useful end").

      19

      Still, as the Court has also made clear, to transform an unpatentable law of nature into a patent-eligible application of such a law, one must do more than simply state the law of nature while adding the words "apply it." See, e.g., Benson, supra, at 71-72, 93 S.Ct. 253.

      20

      The case before us lies at the intersection of these basic principles. It concerns patent claims covering processes that help doctors who use thiopurine drugs to treat patients with autoimmune diseases determine whether a given dosage level is too low or too high. The claims purport to apply natural laws describing the relationships between the concentration in the blood of certain thiopurine metabolites and the likelihood that the drug dosage will be ineffective or induce harmful side-effects. We must determine whether the claimed processes have transformed these unpatentable natural laws into patent-eligible applications of those laws. We conclude that they have not done so and that therefore the processes are not patentable.

      21

      Our conclusion rests upon an examination of the particular claims before us in light of the Court's precedents. Those cases warn us against interpreting patent statutes in ways that make patent eligibility "depend simply on the draftsman's art" without reference to the "principles underlying the prohibition against patents for [natural laws]." Flook, supra, at 593, 98 S.Ct. 2522. They warn us against upholding patents that claim processes that too broadly preempt the use of a natural law. Morse, supra, at 112-120; Benson, supra, at 71-72, 93 S.Ct. 253. And they insist that a process that focuses upon the use of a natural law also contain other elements or a combination of elements, sometimes referred to as an "inventive concept," sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the natural law itself. Flook, supra, at 594, 98 S.Ct. 2522; see also Bilski, supra, at ___, 130 S.Ct. at 3230 ("[T]he prohibition against patenting abstract ideas `cannot be circumvented by attempting to limit the use of the formula to a particular technological environment' or adding `insignificant postsolution activity'" (quoting Diehr, supra, at 191-192, 101 S.Ct. 1048)).

      22

      We find that the process claims at issue here do not satisfy these conditions. In particular, the steps in the claimed processes (apart from the natural laws themselves) involve well-understood, routine, conventional activity previously engaged in by researchers in the field. At the same time, upholding the patents would risk disproportionately tying up the use of the underlying natural laws, inhibiting their use in the making of further discoveries.

      23
      I
      24
      A
      25

      The patents before us concern the use of thiopurine drugs in the treatment of autoimmune [1295] diseases, such as Crohn's disease and ulcerative colitis. When a patient ingests a thiopurine compound, his body metabolizes the drug, causing metabolites to form in his bloodstream. Because the way in which people metabolize thiopurine compounds varies, the same dose of a thiopurine drug affects different people differently, and it has been difficult for doctors to determine whether for a particular patient a given dose is too high, risking harmful side effects, or too low, and so likely ineffective.

      26

      At the time the discoveries embodied in the patents were made, scientists already understood that the levels in a patient's blood of certain metabolites, including, in particular, 6-thioguanine and its nucleotides (6-TG) and 6-methyl-mercaptopurine (6-MMP), were correlated with the likelihood that a particular dosage of a thiopurine drug could cause harm or prove ineffective. See U.S. Patent No. 6,355,623, col.8, ll.37-40, 2 App. 10. ("Previous studies suggested that measurement of 6-MP metabolite levels can be used to predict clinical efficacy and tolerance to azathioprine or 6-MP" (citing Cuffari, Théorêt, Latour, & Seidman, 6-Mercaptopurine Metabolism in Crohn's Disease: Correlation with Efficacy and Toxicity, 39 Gut 401 (1996))). But those in the field did not know the precise correlations between metabolite levels and likely harm or ineffectiveness. The patent claims at issue here set forth processes embodying researchers' findings that identified these correlations with some precision.

      27

      More specifically, the patents—U.S. Patent No. 6,355,623 (623 patent) and U.S. Patent No. 6,680,302 (302 patent)—embody findings that concentrations in a patient's blood of 6-TG or of 6-MMP metabolite beyond a certain level (400 and 7000 picomoles per 8×108 red blood cells, respectively) indicate that the dosage is likely too high for the patient, while concentrations in the blood of 6-TG metabolite lower than a certain level (about 230 picomoles per 8×108 red blood cells) indicate that the dosage is likely too low to be effective.

      28

      The patent claims seek to embody this research in a set of processes. Like the Federal Circuit we take as typical claim 1 of the 623 Patent, which describes one of the claimed processes as follows:

      29

      "A method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder, comprising:

      "(a) administering a drug providing 6-thioguanine to a subject having said immune-mediated gastrointestinal disorder; and

      "(b) determining the level of 6-thioguanine in said subject having said immune-mediated gastrointestinal disorder,

      "wherein the level of 6-thioguanine less than about 230 pmol per 8×108 red blood cells indicates a need to increase the amount of said drug subsequently administered to said subject and

      "wherein the level of 6-thioguanine greater than about 400 pmol per 8×108 red blood cells indicates a need to decrease the amount of said drug subsequently administered to said subject." 623 patent, col.20, ll.10-20, 2 App. 16.

      30

      For present purposes we may assume that the other claims in the patents do not differ significantly from claim 1.

      31
      B
      32

      Respondent, Prometheus Laboratories, Inc. (Prometheus), is the sole and exclusive licensee of the 623 and 302 patents. It sells diagnostic tests that embody the processes the patents describe. For some time petitioners, Mayo Clinic Rochester and Mayo Collaborative Services (collectively Mayo), bought and used those tests. [1296] But in 2004 Mayo announced that it intended to begin using and selling its own test—a test using somewhat higher metabolite levels to determine toxicity (450 pmol per 8×108 for 6-TG and 5700 pmol per 8×108 for 6-MMP). Prometheus then brought this action claiming patent infringement.

      33

      The District Court found that Mayo's test infringed claim 7 of the 623 patent. App. to Pet. for Cert. 110a-115a. In interpreting the claim, the court accepted Prometheus' view that the toxicity-risk level numbers in Mayo's test and the claim were too similar to render the tests significantly different. The number Mayo used (450) was too close to the number the claim used (400) to matter given appropriate margins of error. Id., at 98a-107a. The District Court also accepted Prometheus' view that a doctor using Mayo's test could violate the patent even if he did not actually alter his treatment decision in the light of the test. In doing so, the court construed the claim's language, "indicates a need to decrease" (or "to increase"), as not limited to instances in which the doctor actually decreases (or increases) the dosage level where the test results suggest that such an adjustment is advisable. Id., at 107a-109a; see also Brief for Respondent i (describing claimed processes as methods "for improving... treatment ... by using individualized metabolite measurements to inform the calibration of ... dosages of ... thiopurines" (emphasis added)).

      34

      Nonetheless the District Court ultimately granted summary judgment in Mayo's favor. The court reasoned that the patents effectively claim natural laws or natural phenomena—namely the correlations between thiopurine metabolite levels and the toxicity and efficacy of thiopurine drug dosages—and so are not patentable. App. to Pet. for Cert. 50a-83a.

      35

      On appeal, the Federal Circuit reversed. It pointed out that in addition to these natural correlations, the claimed processes specify the steps of (1) "administering a [thiopurine] drug" to a patient and (2) "determining the [resulting metabolite] level." These steps, it explained, involve the transformation of the human body or of blood taken from the body. Thus, the patents satisfied the Circuit's "machine or transformation test," which the court thought sufficient to "confine the patent monopoly within rather definite bounds," thereby bringing the claims into compliance with § 101. 581 F.3d 1336, 1345, 1346-1347 (2009) (internal quotation marks omitted).

      36

      Mayo filed a petition for certiorari. We granted the petition, vacated the judgment, and remanded the case for reconsideration in light of Bilski, 561 U.S. ___, 130 S.Ct. 3218, 177 L.Ed.2d 792, which clarified that the "machine or transformation test" is not a definitive test of patent eligibility, but only an important and useful clue. Id., at ___ - ___, 130 S.Ct., at 3234-3235. On remand the Federal Circuit reaffirmed its earlier conclusion. It thought that the "machine-or-transformation test," understood merely as an important and useful clue, nonetheless led to the "clear and compelling conclusion ... that the ... claims ... do not encompass laws of nature or preempt natural correlations." 628 F.3d 1347, 1355 (2010). Mayo again filed a petition for certiorari, which we granted.

      37
      II
      38

      Prometheus' patents set forth laws of nature—namely, relationships between concentrations of certain metabolites in the blood and the likelihood that a dosage of a thiopurine drug will prove ineffective or cause harm. Claim 1, for example, states that if the levels of 6-TG in the blood (of a [1297] patient who has taken a dose of a thiopurine drug) exceed about 400 pmol per 8×108 red blood cells, then the administered dose is likely to produce toxic side effects. While it takes a human action (the administration of a thiopurine drug) to trigger a manifestation of this relation in a particular person, the relation itself exists in principle apart from any human action. The relation is a consequence of the ways in which thiopurine compounds are metabolized by the body—entirely natural processes. And so a patent that simply describes that relation sets forth a natural law.

      39

      The question before us is whether the claims do significantly more than simply describe these natural relations. To put the matter more precisely, do the patent claims add enough to their statements of the correlations to allow the processes they describe to qualify as patent-eligible processes that apply natural laws? We believe that the answer to this question is no.

      40
      A
      41

      If a law of nature is not patentable, then neither is a process reciting a law of nature, unless that process has additional features that provide practical assurance that the process is more than a drafting effort designed to monopolize the law of nature itself. A patent, for example, could not simply recite a law of nature and then add the instruction "apply the law." Einstein, we assume, could not have patented his famous law by claiming a process consisting of simply telling linear accelerator operators to refer to the law to determine how much energy an amount of mass has produced (or vice versa). Nor could Archimedes have secured a patent for his famous principle of flotation by claiming a process consisting of simply telling boat builders to refer to that principle in order to determine whether an object will float.

      42

      What else is there in the claims before us? The process that each claim recites tells doctors interested in the subject about the correlations that the researchers discovered. In doing so, it recites an "administering" step, a "determining" step, and a "wherein" step. These additional steps are not themselves natural laws but neither are they sufficient to transform the nature of the claim.

      43

      First, the "administering" step simply refers to the relevant audience, namely doctors who treat patients with certain diseases with thiopurine drugs. That audience is a pre-existing audience; doctors used thiopurine drugs to treat patients suffering from autoimmune disorders long before anyone asserted these claims. In any event, the "prohibition against patenting abstract ideas `cannot be circumvented by attempting to limit the use of the formula to a particular technological environment.'" Bilski, supra, at ___, 130 S.Ct., at 3230 (quoting Diehr, 450 U.S., at 191-192, 101 S.Ct. 1048).

      44

      Second, the "wherein" clauses simply tell a doctor about the relevant natural laws, at most adding a suggestion that he should take those laws into account when treating his patient. That is to say, these clauses tell the relevant audience about the laws while trusting them to use those laws appropriately where they are relevant to their decisionmaking (rather like Einstein telling linear accelerator operators about his basic law and then trusting them to use it where relevant).

      45

      Third, the "determining" step tells the doctor to determine the level of the relevant metabolites in the blood, through whatever process the doctor or the laboratory wishes to use. As the patents state, methods for determining metabolite levels [1298] were well known in the art. 623 patent, col.9, ll.12-65, 2 App. 11. Indeed, scientists routinely measured metabolites as part of their investigations into the relationships between metabolite levels and efficacy and toxicity of thiopurine compounds. 623 patent, col.8, ll.37-40, id., at 10. Thus, this step tells doctors to engage in well-understood, routine, conventional activity previously engaged in by scientists who work in the field. Purely "conventional or obvious" "[pre]-solution activity" is normally not sufficient to transform an unpatentable law of nature into a patent-eligible application of such a law. Flook, 437 U.S., at 590, 98 S.Ct. 2522; see also Bilski, 561 U.S., at ___, 130 S.Ct., at 3230 ("[T]he prohibition against patenting abstract ideas `cannot be circumvented by'... adding `insignificant post-solution activity'" (quoting Diehr, supra, at 191-192, 101 S.Ct. 1048)).

      46

      Fourth, to consider the three steps as an ordered combination adds nothing to the laws of nature that is not already present when the steps are considered separately. See Diehr, supra, at 188, 101 S.Ct. 1048 ("[A] new combination of steps in a process may be patentable even though all the constituents of the combination were well known and in common use before the combination was made"). Anyone who wants to make use of these laws must first administer a thiopurine drug and measure the resulting metabolite concentrations, and so the combination amounts to nothing significantly more than an instruction to doctors to apply the applicable laws when treating their patients.

      47

      The upshot is that the three steps simply tell doctors to gather data from which they may draw an inference in light of the correlations. To put the matter more succinctly, the claims inform a relevant audience about certain laws of nature; any additional steps consist of well-understood, routine, conventional activity already engaged in by the scientific community; and those steps, when viewed as a whole, add nothing significant beyond the sum of their parts taken separately. For these reasons we believe that the steps are not sufficient to transform unpatentable natural correlations into patentable applications of those regularities.

      48
      B
      49
      1
      50

      A more detailed consideration of the controlling precedents reinforces our conclusion. The cases most directly on point are Diehr and Flook, two cases in which the Court reached opposite conclusions about the patent eligibility of processes that embodied the equivalent of natural laws. The Diehr process (held patent eligible) set forth a method for molding raw, uncured rubber into various cured, molded products. The process used a known mathematical equation, the Arrhenius equation, to determine when (depending upon the temperature inside the mold, the time the rubber had been in the mold, and the thickness of the rubber) to open the press. It consisted in effect of the steps of: (1) continuously monitoring the temperature on the inside of the mold, (2) feeding the resulting numbers into a computer, which would use the Arrhenius equation to continuously recalculate the mold-opening time, and (3) configuring the computer so that at the appropriate moment it would signal "a device" to open the press. Diehr, 450 U.S., at 177-179, 101 S.Ct. 1048.

      51

      The Court pointed out that the basic mathematical equation, like a law of nature, was not patentable. But it found the overall process patent eligible because of the way the additional steps of the process integrated the equation into the process as a whole. Those steps included "installing rubber in a press, closing the mold, constantly [1299] determining the temperature of the mold, constantly recalculating the appropriate cure time through the use of the formula and a digital computer, and automatically opening the press at the proper time." Id., at 187, 101 S.Ct. 1048. It nowhere suggested that all these steps, or at least the combination of those steps, were in context obvious, already in use, or purely conventional. And so the patentees did not "seek to pre-empt the use of [the] equation," but sought "only to foreclose from others the use of that equation in conjunction with all of the other steps in their claimed process." Ibid. These other steps apparently added to the formula something that in terms of patent law's objectives had significance—they transformed the process into an inventive application of the formula.

      52

      The process in Flook (held not patentable) provided a method for adjusting "alarm limits" in the catalytic conversion of hydrocarbons. Certain operating conditions (such as temperature, pressure, and flow rates), which are continuously monitored during the conversion process, signal inefficiency or danger when they exceed certain "alarm limits." The claimed process amounted to an improved system for updating those alarm limits through the steps of: (1) measuring the current level of the variable, e.g., the temperature; (2) using an apparently novel mathematical algorithm to calculate the current alarm limits; and (3) adjusting the system to reflect the new alarm-limit values. 437 U.S., at 585-587, 98 S.Ct. 2522.

      53

      The Court, as in Diehr, pointed out that the basic mathematical equation, like a law of nature, was not patentable. But it characterized the claimed process as doing nothing other than "provid[ing] a[n unpatentable] formula for computing an updated alarm limit." Flook, supra, at 586, 98 S.Ct. 2522. Unlike the process in Diehr, it did not "explain how the variables used in the formula were to be selected, nor did the [claim] contain any disclosure relating to chemical processes at work or the means of setting off an alarm or adjusting the alarm limit." Diehr, supra, at 192, n. 14, 101 S.Ct. 1048; see also Flook, 437 U.S., at 586, 98 S.Ct. 2522. And so the other steps in the process did not limit the claim to a particular application. Moreover, "[t]he chemical processes involved in catalytic conversion of hydrocarbons[,] ... the practice of monitoring the chemical process variables, the use of alarm limits to trigger alarms, the notion that alarm limit values must be recomputed and readjusted, and the use of computers for `automatic monitoring-alarming'" were all "well known," to the point where, putting the formula to the side, there was no "inventive concept" in the claimed application of the formula. Id., at 594, 98 S.Ct. 2522. "[P]ost-solution activity" that is purely "conventional or obvious," the Court wrote, "can[not] transform an unpatentable principle into a patentable process." Id., at 589, 590, 98 S.Ct. 2522.

      54

      The claim before us presents a case for patentability that is weaker than the (patent-eligible) claim in Diehr and no stronger than the (unpatentable) claim in Flook. Beyond picking out the relevant audience, namely those who administer doses of thiopurine drugs, the claim simply tells doctors to: (1) measure (somehow) the current level of the relevant metabolite, (2) use particular (unpatentable) laws of nature (which the claim sets forth) to calculate the current toxicity/inefficacy limits, and (3) reconsider the drug dosage in light of the law. These instructions add nothing specific to the laws of nature other than what is well-understood, routine, conventional activity, previously engaged in by those in the field. And since they are steps that must be taken in order to apply the laws in question, the effect is simply to [1300] tell doctors to apply the law somehow when treating their patients. The process in Diehr was not so characterized; that in Flook was characterized in roughly this way.

      55
      2
      56

      Other cases offer further support for the view that simply appending conventional steps, specified at a high level of generality, to laws of nature, natural phenomena, and abstract ideas cannot make those laws, phenomena, and ideas patentable. This Court has previously discussed in detail an English case, Neilson, which involved a patent claim that posed a legal problem very similar to the problem now before us. The patent applicant there asserted a claim

      57

      "for the improved application of air to produce heat in fires, forges, and furnaces, where a blowing apparatus is required. [The invention] was to be applied as follows: The blast or current of air produced by the blowing apparatus was to be passed from it into an air-vessel or receptacle made sufficiently strong to endure the blast; and through or from that vessel or receptacle by means of a tube, pipe, or aperture into the fire, the receptacle be kept artificially heated to a considerable temperature by heat externally applied." Morse, 15 How., at 114-115.

      58

      The English court concluded that the claimed process did more than simply instruct users to use the principle that hot air promotes ignition better than cold air, since it explained how the principle could be implemented in an inventive way. Baron Parke wrote (for the court):

      59

      "It is very difficult to distinguish [Neilson's claim] from the specification of a patent for a principle, and this at first created in the minds of some of the court much difficulty; but after full consideration, we think that the plaintiff does not merely claim a principle, but a machine embodying a principle, and a very valuable one. We think the case must be considered as if the principle being well known, the plaintiff had first invented a mode of applying it by a mechanical apparatus to furnaces; and his invention then consists in this—by interposing a receptacle for heated air between the blowing apparatus and the furnace. In this receptacle he directs the air to be heated by the application of heat externally to the receptacle, and thus he accomplishes the object of applying the blast, which was before of cold air, in a heated state to the furnace." Neilson v. Harford, Webster's Patent Cases, at 371.

      60

      Thus, the claimed process included not only a law of nature but also several unconventional steps (such as inserting the receptacle, applying heat to the receptacle externally, and blowing the air into the furnace) that confined the claims to a particular, useful application of the principle.

      61

      In Bilski the Court considered claims covering a process for hedging risks of price changes by, for example, contracting to purchase commodities from sellers at a fixed price, reflecting the desire of sellers to hedge against a drop in prices, while selling commodities to consumers at a fixed price, reflecting the desire of consumers to hedge against a price increase. One claim described the process; another reduced the process to a mathematical formula. 561 U.S., at ___ - ___, 130 S.Ct., at 3223-3224. The Court held that the described "concept of hedging" was "an unpatentable abstract idea." Id., at ___, 130 S.Ct., 3239. The fact that some of the claims limited hedging to use in commodities and energy markets and specified that "well-known random analysis techniques [could be used] to help establish some of [1301] the inputs into the equation" did not undermine this conclusion, for "Flook established that limiting an abstract idea to one field of use or adding token postsolution components did not make the concept patentable." Id., at ___, ___, 130 S.Ct., at 3231.

      62

      Finally, in Benson the Court considered the patentability of a mathematical process for converting binary-coded decimal numerals into pure binary numbers on a general purpose digital computer. The claims "purported to cover any use of the claimed method in a general-purpose digital computer of any type." 409 U.S., at 64, 65, 93 S.Ct. 253. The Court recognized that "`a novel and useful structure created with the aid of knowledge of scientific truth'" might be patentable. Id., at 67, 93 S.Ct. 253 (quoting Mackay Radio, 306 U.S., at 94, 59 S.Ct. 427). But it held that simply implementing a mathematical principle on a physical machine, namely a computer, was not a patentable application of that principle. For the mathematical formula had "no substantial practical application except in connection with a digital computer." Benson, supra, at 71, 93 S.Ct. 253. Hence the claim (like the claims before us) was overly broad; it did not differ significantly from a claim that just said "apply the algorithm."

      63
      3
      64

      The Court has repeatedly emphasized this last mentioned concern, a concern that patent law not inhibit further discovery by improperly tying up the future use of laws of nature. Thus, in Morse the Court set aside as unpatentable Samuel Morse's general claim for "`the use of the motive power of the electric or galvanic current... however developed, for making or printing intelligible characters, letters, or signs, at any distances,'" 15 How., at 86. The Court explained:

      65

      "For aught that we now know some future inventor, in the onward march of science, may discover a mode of writing or printing at a distance by means of the electric or galvanic current, without using any part of the process or combination set forth in the plaintiff's specification. His invention may be less complicated—less liable to get out of order—less expensive in construction, and in its operation. But yet if it is covered by this patent the inventor could not use it, nor the public have the benefit of it without the permission of this patentee." Id., at 113.

      66

      Similarly, in Benson the Court said that the claims before it were "so abstract and sweeping as to cover both known and unknown uses of the [mathematical formula]." 409 U.S., at 67, 68, 93 S.Ct. 253. In Bilski the Court pointed out that to allow "petitioners to patent risk hedging would pre-empt use of this approach in all fields." 561 U.S., at ___, 130 S.Ct., at 3231. And in Flook the Court expressed concern that the claimed process was simply "a formula for computing an updated alarm limit," which might "cover a broad range of potential uses." 437 U.S., at 586, 98 S.Ct. 2522.

      67

      These statements reflect the fact that, even though rewarding with patents those who discover new laws of nature and the like might well encourage their discovery, those laws and principles, considered generally, are "the basic tools of scientific and technological work." Benson, supra, at 67, 93 S.Ct. 253. And so there is a danger that the grant of patents that tie up their use will inhibit future innovation premised upon them, a danger that becomes acute when a patented process amounts to no more than an instruction to "apply the natural law," or otherwise forecloses more future invention than the underlying discovery could reasonably justify. See generally [1302] Lemley, Risch, Sichelman, & Wagner, Life After Bilski, 63 Stan. L.Rev. 1315 (2011) (hereinafter Lemley) (arguing that § 101 reflects this kind of concern); see also C. Bohannan & H. Hovenkamp, Creation without Restraint: Promoting Liberty and Rivalry in Innovation 112 (2012) ("One problem with [process] patents is that the more abstractly their claims are stated, the more difficult it is to determine precisely what they cover. They risk being applied to a wide range of situations that were not anticipated by the patentee"); W. Landes & R. Posner, The Economic Structure of Intellectual Property Law 305-306 (2003) (The exclusion from patent law of basic truths reflects "both... the enormous potential for rent seeking that would be created if property rights could be obtained in them and ... the enormous transaction costs that would be imposed on would-be users [of those truths]").

      68

      The laws of nature at issue here are narrow laws that may have limited applications, but the patent claims that embody them nonetheless implicate this concern. They tell a treating doctor to measure metabolite levels and to consider the resulting measurements in light of the statistical relationships they describe. In doing so, they tie up the doctor's subsequent treatment decision whether that treatment does, or does not, change in light of the inference he has drawn using the correlations. And they threaten to inhibit the development of more refined treatment recommendations (like that embodied in Mayo's test), that combine Prometheus' correlations with later discovered features of metabolites, human physiology or individual patient characteristics. The "determining" step too is set forth in highly general language covering all processes that make use of the correlations after measuring metabolites, including later discovered processes that measure metabolite levels in new ways.

      69

      We need not, and do not, now decide whether were the steps at issue here less conventional, these features of the claims would prove sufficient to invalidate them. For here, as we have said, the steps add nothing of significance to the natural laws themselves. Unlike, say, a typical patent on a new drug or a new way of using an existing drug, the patent claims do not confine their reach to particular applications of those laws. The presence here of the basic underlying concern that these patents tie up too much future use of laws of nature simply reinforces our conclusion that the processes described in the patents are not patent eligible, while eliminating any temptation to depart from case law precedent.

      70
      III
      71

      We have considered several further arguments in support of Prometheus' position. But they do not lead us to adopt a different conclusion. First, the Federal Circuit, in upholding the patent eligibility of the claims before us, relied on this Court's determination that "[t]ransformation and reduction of an article `to a different state or thing' is the clue to the patentability of a process claim that does not include particular machines." Benson, supra, at 70-71, 93 S.Ct. 253 (emphasis added); see also Bilski, supra, at ___, 130 S.Ct., at 3225-3227; Diehr, 450 U.S., at 184, 101 S.Ct. 1048; Flook, supra, at 588, n. 9, 98 S.Ct. 2522; Cochrane v. Deener, 94 U.S. 780, 788, 24 L.Ed. 139 (1877). It reasoned that the claimed processes are therefore patent eligible, since they involve transforming the human body by administering a thiopurine drug and transforming the blood by analyzing it to determine metabolite levels. 628 F.3d, at 1356-1357.

      72

      [1303] The first of these transformations, however, is irrelevant. As we have pointed out, the "administering" step simply helps to pick out the group of individuals who are likely interested in applying the law of nature. See supra, at 1297. And the second step could be satisfied without transforming the blood, should science develop a totally different system for determining metabolite levels that did not involve such a transformation. See supra, at 1302. Regardless, in stating that the "machine-or-transformation" test is an "important and useful clue" to patentability, we have neither said nor implied that the test trumps the "law of nature" exclusion. Bilski, supra, at ___, 130 S.Ct., at 3225-3227 (emphasis added). That being so, the test fails here.

      73

      Second, Prometheus argues that, because the particular laws of nature that its patent claims embody are narrow and specific, the patents should be upheld. Thus, it encourages us to draw distinctions among laws of nature based on whether or not they will interfere significantly with innovation in other fields now or in the future. Brief for Respondent 42-46; see also Lemley 1342-1344 (making similar argument).

      74

      But the underlying functional concern here is a relative one: how much future innovation is foreclosed relative to the contribution of the inventor. See supra, at 1301-1302. A patent upon a narrow law of nature may not inhibit future research as seriously as would a patent upon Einstein's law of relativity, but the creative value of the discovery is also considerably smaller. And, as we have previously pointed out, even a narrow law of nature (such as the one before us) can inhibit future research. See supra, at 1301-1302.

      75

      In any event, our cases have not distinguished among different laws of nature according to whether or not the principles they embody are sufficiently narrow. See, e.g., Flook, 437 U.S. 584, 98 S.Ct. 2522, 57 L.Ed.2d 451 (holding narrow mathematical formula unpatentable). And this is understandable. Courts and judges are not institutionally well suited to making the kinds of judgments needed to distinguish among different laws of nature. And so the cases have endorsed a bright-line prohibition against patenting laws of nature, mathematical formulas and the like, which serves as a somewhat more easily administered proxy for the underlying "building-block" concern.

      76

      Third, the Government argues that virtually any step beyond a statement of a law of nature itself should transform an unpatentable law of nature into a potentially patentable application sufficient to satisfy § 101's demands. Brief for United States as Amicus Curiae. The Government does not necessarily believe that claims that (like the claims before us) extend just minimally beyond a law of nature should receive patents. But in its view, other statutory provisions—those that insist that a claimed process be novel, 35 U.S.C. § 102, that it not be "obvious in light of prior art," § 103, and that it be "full[y], clear[ly], concise[ly], and exact[ly]" described, § 112—can perform this screening function. In particular, it argues that these claims likely fail for lack of novelty under § 102.

      77

      This approach, however, would make the "law of nature" exception to § 101 patentability a dead letter. The approach is therefore not consistent with prior law. The relevant cases rest their holdings upon section 101, not later sections. Bilski, 561 U.S. ___, 130 S.Ct. 3218, 177 L.Ed.2d 792; Diehr, supra; Flook, supra; Benson, 409 U.S. 63, 93 S.Ct. 253, 34 L.Ed.2d 273. See also H.R.Rep. No. 1923, 82d Cong., 2d Sess., 6 (1952) ("A person may have `invented' a machine or a manufacture, [1304] 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" (emphasis added)).

      78

      We recognize that, in evaluating the significance of additional steps, the § 101 patent-eligibility inquiry and, say, the § 102 novelty inquiry might sometimes overlap. But that need not always be so. And to shift the patent-eligibility inquiry entirely to these later sections risks creating significantly greater legal uncertainty, while assuming that those sections can do work that they are not equipped to do.

      79

      What role would laws of nature, including newly discovered (and "novel") laws of nature, play in the Government's suggested "novelty" inquiry? Intuitively, one would suppose that a newly discovered law of nature is novel. The Government, however, suggests in effect that the novelty of a component law of nature may be disregarded when evaluating the novelty of the whole. See Brief for United States as Amicus Curiae 27. But §§ 102 and 103 say nothing about treating laws of nature as if they were part of the prior art when applying those sections. Cf. Diehr, 450 U.S., at 188, 101 S.Ct. 1048 (patent claims "must be considered as a whole"). And studiously ignoring all laws of nature when evaluating a patent application under §§ 102 and 103 would "make all inventions unpatentable because all inventions can be reduced to underlying principles of nature which, once known, make their implementation obvious." Id., at 189, n. 12, 101 S.Ct. 1048. See also Eisenberg, Wisdom of the Ages or Dead-Hand Control? Patentable Subject Matter for Diagnostic Methods After In re Bilski, 3 Case W. Res. J.L. Tech. & Internet 1, ___ (forthcoming, 2012) (manuscript, at 85-86, online at http://www.patentlyo.com/files/eisenberg.wisdomordeadhand.patentlyo.pdf (as visited Mar. 16, 2012, and available in Clerk of Court's case file)); 2 D. Chisum, Patents § 5.03[3] (2005).

      80

      Section 112 requires only a "written description of the invention ... in such full, clear, concise, and exact terms as to enable any person skilled in the art ... to make and use the same." It does not focus on the possibility that a law of nature (or its equivalent) that meets these conditions will nonetheless create the kind of risk that underlies the law of nature exception, namely the risk that a patent on the law would significantly impede future innovation. See Lemley 1329-1332 (outlining differences between §§ 101 and 112); Eisenberg, supra, at ___ (manuscript, at 92-96) (similar). Compare Risch, Everything is Patentable, 75 Tenn. L.Rev. 591 (2008) (defending a minimalist approach to § 101) with Lemley (reflecting Risch's change of mind).

      81

      These considerations lead us to decline the Government's invitation to substitute §§ 102, 103, and 112 inquiries for the better established inquiry under § 101.

      82

      Fourth, Prometheus, supported by several amici, argues that a principle of law denying patent coverage here will interfere significantly with the ability of medical researchers to make valuable discoveries, particularly in the area of diagnostic research. That research, which includes research leading to the discovery of laws of nature, is expensive; it "ha[s] made the United States the world leader in this field"; and it requires protection. Brief for Respondent 52.

      83

      Other medical experts, however, argue strongly against a legal rule that would make the present claims patent eligible, invoking policy considerations that point in the opposite direction. The American Medical Association, the American College of Medical Genetics, the American Hospital Association, the American Society of [1305] Human Genetics, the Association of American Medical Colleges, the Association for Molecular Pathology, and other medical organizations tell us that if "claims to exclusive rights over the body's natural responses to illness and medical treatment are permitted to stand, the result will be a vast thicket of exclusive rights over the use of critical scientific data that must remain widely available if physicians are to provide sound medical care." Brief for American College of Medical Genetics et al. as Amici Curiae 7; see also App. to Brief for Association Internationale pour la Protection de la Propriete Intellectuelle et al. as Amici Curiae A6, A16 (methods of medical treatment are not patentable in most of Western Europe).

      84

      We do not find this kind of difference of opinion surprising. Patent protection is, after all, a two-edged sword. On the one hand, the promise of exclusive rights provides monetary incentives that lead to creation, invention, and discovery. On the other hand, that very exclusivity can impede the flow of information that might permit, indeed spur, invention, by, for example, raising the price of using the patented ideas once created, requiring potential users to conduct costly and time-consuming searches of existing patents and pending patent applications, and requiring the negotiation of complex licensing arrangements. At the same time, patent law's general rules must govern inventive activity in many different fields of human endeavor, with the result that the practical effects of rules that reflect a general effort to balance these considerations may differ from one field to another. See Bohannan & Hovenkamp, Creation without Restraint, at 98-100.

      85

      In consequence, we must hesitate before departing from established general legal rules lest a new protective rule that seems to suit the needs of one field produce unforeseen results in another. And we must recognize the role of Congress in crafting more finely tailored rules where necessary. Cf. 35 U.S.C. §§ 161-164 (special rules for plant patents). We need not determine here whether, from a policy perspective, increased protection for discoveries of diagnostic laws of nature is desirable.

      86

      * * *

      87

      For these reasons, we conclude that the patent claims at issue here effectively claim the underlying laws of nature themselves. The claims are consequently invalid. And the Federal Circuit's judgment is reversed.

      88

      It is so ordered.

  • 6 [This resource no longer exists on H2O because its owner deleted it.]

  • 7 Week 7: Trademarks, Genericism, and Functionality

    • 7.1 TrafFix Devices, Inc. v. Marketing Displays, Inc.

      1

      532 U.S. 23 (2001)

      2
      TRAFFIX DEVICES, INC.
      v.
      MARKETING DISPLAYS, INC.
      3

      No. 99-1571.

      4

      United States Supreme Court.

      5

      Argued November 29, 2000.
      Decided March 20, 2001.

      6

      CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

      7

      [25] [25] Kennedy, J., delivered the opinion for a unanimous Court.

      8

      John G. Roberts, Jr., argued the cause for petitioner. With him on the briefs were Gregory G. Garre and JeanneMarie Marshall.

      9

      Deputy Solicitor General Wallace argued the cause for the United States as amicus curiae urging reversal. With him on the brief were Solicitor General Waxman, Assistant Attorney General Ogden, Jeffrey A. Lamken, Anthony J. Steinmeyer, and Mark S. Davies.

      10

      John A. Artz argued the cause for respondent. With him on the brief were John S. Artz, Robert P. Renke, and Lisa A. Sarkisian.[1]

      11
      Justice Kennedy, delivered the opinion of the Court.
      12

      Temporary road signs with warnings like "Road Work Ahead" or "Left Shoulder Closed" must withstand strong gusts of wind. An inventor named Robert Sarkisian obtained two utility patents for a mechanism built upon two springs (the dual-spring design) to keep these and other outdoor signs upright despite adverse wind conditions. The holder of the now-expired Sarkisian patents, respondent Marketing Displays, Inc. (MDI), established a successful business in the manufacture and sale of sign stands incorporating the patented feature. MDI's stands for road signs were recognizable to buyers and users (it says) because the dual-spring design was visible near the base of the sign.

      13

      [26] This litigation followed after the patents expired and a competitor, TrafFix Devices, Inc.,sold sign stands with a visible spring mechanism that looked like MDI's. MDI and TrafFix products looked alike because they were. When TrafFix started in business, it sent an MDI product abroad to have it reverse engineered, that is to say copied. Complicating matters, TrafFix marketed its sign stands under a name similar to MDI's. MDI used the name "WindMaster," while TrafFix, its new competitor, used "WindBuster."

      14

      MDI brought suit under the Trademark Act of 1946 (Lanham Act), 60 Stat. 427, as amended, 15 U. S. C. § 1051 et seq., against TrafFix for trademark infringement (based on the similar names), trade dress infringement (based on the copied dual-spring design), and unfair competition. TrafFix counterclaimed on antitrust theories. After the United States District Court for the Eastern District of Michigan considered cross-motions for summary judgment, MDI prevailed on its trademark claim for the confusing similarity of names and was held not liable on the antitrust counterclaim; and those two rulings, affirmed by the Court of Appeals, are not before us.

      15
      I
      16

      We are concerned with the trade dress question. The District Court ruled against MDI on its trade dress claim. 971 F. Supp. 262 (ED Mich. 1997). After determining that the one element of MDI's trade dress at issue was the dualspring design, id., at 265, it held that "no reasonable trier of fact could determine that MDI has established secondary meaning" in its alleged trade dress, id., at 269. In other words, consumers did not associate the look of the dualspring design with MDI. As a second, independent reason to grant summary judgment in favor of TrafFix, the District Court determined the dual-spring design was functional. On this rationale secondary meaning is irrelevant because there can be no trade dress protection in any event. In ruling on the functional aspect of the design, the District Court [27] noted that Sixth Circuit precedent indicated that the burden was on MDI to prove that its trade dress was nonfunctional, and not on TrafFix to show that it was functional (a rule since adopted by Congress, see 15 U. S. C. § 1125(a)(3) (1994 ed., Supp. V)), and then went on to consider MDI's arguments that the dual-spring design was subject to trade dress protection. Finding none of MDI's contentions persuasive, the District Court concluded MDI had not "proffered sufficient evidence which would enable a reasonable trier of fact to find that MDI's vertical dual-spring design is non functional." 971 F. Supp., at 276. Summary judgment was entered against MDI on its trade dress claims.

      17

      The Court of Appeals for the Sixth Circuit reversed the trade dress ruling. 200 F. 3d 929 (1999). The Court of Appeals held the District Court had erred in ruling MDI failed to show a genuine issue of material fact regarding whether it had secondary meaning in its alleged trade dress, id., at 938, and had erred further in determining that MDI could not prevail in any event because the alleged trade dress was in fact a functional product configuration, id., at 940. The Court of Appeals suggested the District Court committed legal error by looking only to the dual-spring design when evaluating MDI's trade dress. Basic to its reasoning was the Court of Appeals' observation that it took "little imagination to conceive of a hidden dual-spring mechanism or a tri or quad-spring mechanism that might avoid infringing [MDI's] trade dress." Ibid. The Court of Appeals explained that "[i]f TrafFix or another competitor chooses to use [MDI's] dual-spring design, then it will have to find some other way to set its sign apart to avoid infringing [MDI's] trade dress." Ibid. It was not sufficient, according to the Court of Appeals, that allowing exclusive use of a particular feature such as the dual-spring design in the guise of trade dress would "hinde[r] competition somewhat." Rather, "[e]xclusive use of a feature must `put competitors at a significant non-reputation-related disadvantage' before trade [28] dress protection is denied on functionality grounds." Ibid. (quoting Qualitex Co. v. Jacobson Products Co., 514 U. S. 159, 165 (1995)). In its criticism of the District Court's ruling on the trade dress question, the Court of Appeals took note of a split among Courts of Appeals in various other Circuits on the issue whether the existence of an expired utility patent forecloses the possibility of the patentee's claiming trade dress protection in the product's design. 200 F. 3d, at 939. Compare Sunbeam Products, Inc. v. West Bend Co., 123 F. 3d 246 (CA5 1997) (holding that trade dress protection is not foreclosed), Thomas & Betts Corp. v. Panduit Corp., 138 F. 3d 277 (CA7 1998) (same), and Midwest Industries, Inc. v. Karavan Trailers, Inc., 175 F. 3d 1356 (CA Fed 1999) (same), with Vornado Air Circulation Systems, Inc. v. Duracraft Corp., 58 F. 3d 1498, 1500 (CA10 1995) ("Where a product configuration isa significant inventive component of an invention covered by a utility patent . . . it cannot receive trade dress protection"). To resolve the conflict, we granted certiorari. 530 U. S. 1260 (2000).

      18
      II
      19

      It is well established that trade dress can be protected under federal law. The design or packaging of a product may acquire a distinctiveness which serves to identify the product with its manufacturer or source; and a design or package which acquires this secondary meaning, assuming other requisites are met, is a trade dress which may not be used in a manner likely to cause confusion as to the origin, sponsorship, or approval of the goods. In these respects protection for trade dress exists to promote competition. As we explained just last Term, see Wal-Mart Stores, Inc. v. Samara Brothers, Inc., 529 U. S. 205 (2000), various Courts of Appeals have allowed claims of trade dress infringement relying on the general provision of the Lanham Act which provides a cause of action to one who is injured when a person uses "any word, term name, symbol, or device, or any [29] combination thereof . . . which is likely to cause confusion . . . as to the origin, sponsorship, or approval of his or her goods." 15 U. S. C. § 1125(a)(1)(A). Congress confirmed this statutory protection for trade dress by amending the Lanham Act to recognize the concept. Title 15 U. S. C. § 1125(a)(3) (1994 ed., Supp. V) provides: "In a civil action for trade dress infringement under this chapter for trade dress not registered on the principal register, the person who asserts trade dress protection has the burden of proving that the matter sought to be protected is not functional." This burden of proof gives force to the well-established rule that trade dress protection may not be claimed for product features that are functional. Qualitex, supra, at 164-165; Two Pesos, Inc. v. Taco Cabana, Inc., 505 U. S. 763, 775 (1992). And in Wal-Mart, supra, we were careful to caution against misuse or over extension of trade dress. We noted that "product design almost invariably serves purposes other than source identification." Id., at 213.

      20

      Trade dress protection must subsist with the recognition that in many instances there is no prohibition against copying goods and products. In general, unless an intellectual property right such as a patent or copyright protects an item, it will be subject to copying. As the Court has explained, copying is not always discouraged or disfavored by the laws which preserve our competitive economy. Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U. S. 141, 160 (1989). Allowing competitors to copy will have salutary effects in many instances. "Reverse engineering of chemical and mechanical articles in the public domain often leads to significant advances in technology." Ibid.

      21

      The principal question in this case is the effect of an expired patent on a claim of trade dress infringement. A prior patent, we conclude, has vital significance in resolving the trade dress claim. A utility patent is strong evidence that the features therein claimed are functional. If trade dress protection is sought for those features the strong evidence [30] of functionality based on the previous patent adds great weight to the statutory presumption that features are deemed functional until proved otherwise by the party seeking trade dress protection. Where the expired patent claimed the features in question, one who seeks to establish trade dress protection must carry the heavy burden of showing that the feature is not functional, for instance by showing that it is merely an ornamental, incidental, or arbitrary aspect of the device.

      22

      In the case before us, the central advance claimed in the expired utility patents (the Sarkisian patents) is the dualspring design; and the dual-spring design is the essential feature of the trade dress MDI now seeks to establish and to protect. The rule we have explained bars the trade dress claim, for MDI did not, and cannot, carry the burden of overcoming the strong evidentiary inference of functionality based on the disclosure of the dual-spring design in the claims of the expired patents.

      23

      The dual springs shown in the Sarkisian patents were well apart (at either end of a frame for holding a rectangular sign when one full side is the base) while the dual springs at issue here are close together (in a frame designed to hold a sign by one of its corners). As the District Court recognized, this makes little difference. The point is that the springs are necessary to the operation of the device. The fact that the springs in this very different-looking device fall within the claims of the patents is illustrated by MDI's own position in earlier litigation. In the late 1970's, MDI engaged in a long-running intellectual property battle with a company known as Winn-Proof. Although the precise claims of the Sarkisian patents cover sign stands with springs "spaced apart," U. S. Patent No. 3,646,696, col. 4; U. S. Patent No. 3,662,482, col. 4, the Winn-Proof sign stands (with springs much like the sign stands at issue here) were found to infringe the patents by the United States District Court for the District of Oregon, and the Court of Appeals for the [31] Ninth Circuit affirmed the judgment. Sarkisian v. WinnProof Corp., 697 F. 2d 1313 (1983). Although the WinnProof traffic sign stand (with dual springs close together) did not appear, then, to infringe the literal terms of the patent claims (which called for "spaced apart" springs), the WinnProof sign stand was found to infringe the patents under the doctrine of equivalents, which allows a finding of patent infringement even when the accused product does not fall within the literal terms of the claims. Id., at 1321-1322; see generally Warner-Jenkinson Co. v. Hilton Davis Chemical Co., 520 U. S. 17 (1997). In light of this past ruling—a ruling procured at MDI's own insistence—it must be concluded the products here at issue would have been covered by the claims of the expired patents.

      24

      The rationale for the rule that the disclosure of a feature in the claims of a utility patent constitutes strong evidence of functionality is well illustrated in this case. The dual-spring design serves the important purpose of keeping the sign upright even in heavy wind conditions; and, as confirmed by the statements in the expired patents, it does so in a unique and useful manner. As the specification of one of the patents recites, prior art "devices, in practice, will topple under the force of a strong wind." U. S. Patent No. 3,662,482, col. 1. The dual-spring design allows sign stands to resist toppling in strong winds. Using a dual-spring design rather than a single spring achieves important operational advantages. For example, the specifications of the patents note that the "use of a pair of springs . . . as opposed to the use of a single spring to support the frame structure prevents canting or twisting of the sign around a vertical axis," and that, if not prevented, twisting "may cause damage to the spring structure and may result in tipping of the device." U. S. Patent No. 3,646,696, col. 3. In the course of patent prosecution, it was said that "[t]he use of a pair of spring connections as opposed to a single spring connection . . . forms an important part of this combination" because it [32] "forc[es] the sign frame to tip along the longitudinal axis of the elongated ground-engaging members." App. 218. The dual-spring design affects the cost of the device as well; it was acknowledged that the device "could use three springs but this would unnecessarily increase the cost of the device." Id., at 217. These statements made in the patent applications and in the course of procuring the patents demonstrate the functionality of the design. MDI does not assert that any of these representations are mistaken or inaccurate, and this is further strong evidence of the functionality of the dual-spring design.

      25
      III
      26

      In finding for MDI on the trade dress issue the Court of Appeals gave insufficient recognition to the importance of the expired utility patents, and their evidentiary significance, in establishing the functionality of the device. The error likely was caused by its misinterpretation of trade dress principles in other respects. As we have noted, even if there has been no previous utility patent the party asserting trade dress has the burden to establish the nonfunctionality of alleged trade dress features. MDI could not meet this burden. Discussing trademarks, we have said "`[i]n general terms, a product feature is functional,' and cannot serve as a trademark, `if it is essential to the use or purpose of the article or if it affects the cost or quality of the article.' " Qualitex, 514 U. S., at 165 (quoting Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U. S. 844, 850, n. 10 (1982)). Expanding upon the meaning of this phrase, we have observed that a functional feature is one the "exclusive use of [which] would put competitors at a significant nonreputation-related disadvantage." 514 U. S., at 165. The Court of Appeals in the instant case seemed to interpret this language to mean that a necessary test for functionality is "whether the particular product configuration is a competitive necessity." 200 F. 3d, at 940. See also Vornado, 58 F. 3d, at 1507 ("Functionality, by contrast, has been defined [33] both by our circuit, and more recently by the Supreme Court, in terms of competitive need"). This was incorrect as a comprehensive definition. As explained in Qualitex, supra, and Inwood, supra, a feature is also functional when it is essential to the use or purpose of the device or when it affects the cost or quality of the device. The Qualitex decision did not purport to displace this traditional rule. Instead, it quoted the rule as Inwood had set it forth. It is proper to inquire into a "significant non-reputation-related disadvantage" in cases of esthetic functionality, the question involved in Qualitex. Where the design is functional under the Inwood formulation there is no need to proceed further to consider if there is a competitive necessity for the feature. In Qualitex, by contrast, esthetic functionality was the central question, there having been no indication that the green-gold color of the laundry press pad had any bearing on the use or purpose of the product or its cost or quality.

      27

      The Court has allowed trade dress protection to certain product features that are inherently distinctive. Two Pesos, 505 U. S., at 774. In Two Pesos, however, the Court at the outset made the explicit analytic assumption that the trade dress features in question (decorations and other features to evoke a Mexican theme in a restaurant) were not functional. Id., at 767, n. 6. The trade dress in those cases did not bar competitors from copying functional product design features. In the instant case, beyond serving the purpose of informing consumers that the sign stands are made by MDI (assuming it does so), the dual-spring design provides a unique and useful mechanism to resist the force of the wind. Functionality having been established, whether MDI's dual-spring design has acquired secondary meaning need not be considered.

      28

      There is no need, furthermore, to engage, as did the Court of Appeals, in speculation about other design possibilities, such as using three or four springs which might serve the same purpose. 200 F. 3d, at 940. Here, the functionality of the spring design means that competitors need not explore [34] whether other spring juxtapositions might be used. The dual-spring design is not an arbitrary flourish in the configuration of MDI's product; it is the reason the device works. Other designs need not be attempted.

      29

      Because the dual-spring design is functional, it is unnecessary for competitors to explore designs to hide the springs, say, by using a box or framework to cover them, as suggested by the Court of Appeals. Ibid. The dual-spring design assures the user the device will work. If buyers are assured the product serves its purpose by seeing the operative mechanism that in itself serves an important market need. It would be at cross-purposes to those objectives, and something of a paradox, were we to require the manufacturer to conceal the very item the user seeks.

      30

      In a case where a manufacturer seeks to protect arbitrary, incidental, or ornamental aspects of features of a product found in the patent claims, such as arbitrary curves in the legs or an ornamental pattern painted on the springs, a different result might obtain. There the manufacturer could perhaps prove that those aspects do not serve a purpose within the terms of the utility patent. The inquiry into whether such features, asserted to be trade dress, are functional by reason of their inclusion in the claims of an expired utility patent could be aided by going beyond the claims and examining the patent and its prosecution history to see if the feature in question is shown as a useful part of the invention. No such claim is made here, however. MDI in essence seeks protection for the dual-spring design alone. The asserted trade dress consists simply of the dual-spring design, four legs, a base, an upright, and a sign. MDI has pointed to nothing arbitrary about the components of its device or the way they are assembled. The Lanham Act does not exist to reward manufacturers for their innovation in creating a particular device; that is the purpose of the patent law and its period of exclusivity. The Lanham Act, furthermore, does not protect trade dress in a functional design simply [35] because an investment has been made to encourage the public to associate a particular functional feature with a single manufacturer or seller. The Court of Appeals erred in viewing MDI as possessing the right to exclude competitors from using a design identical to MDI's and to require those competitors to adopt a different design simply to avoid copying it. MDI cannot gain the exclusive right to produce sign stands using the dual-spring design by asserting that consumers associate it with the look of the invention itself. Whether a utility patent has expired or there has been no utility patent at all, a product design which has a particular appearance may be functional because it is "essential to the use or purpose of the article" or "affects the cost or quality of the article." Inwood, 456 U. S., at 850, n. 10.

      31

      TrafFix and some of its amici argue that the Patent Clause of the Constitution, Art. I, § 8, cl. 8, of its own force, prohibits the holder of an expired utility patent from claiming trade dress protection. Brief for Petitioner 33-36; Brief for Panduit Corp. as Amicus Curiae 3; Brief for Malla Pollack as Amicus Curiae 2. We need not resolve this question. If, despite the rule that functional features may not be the subject of trade dress protection, a case arises in which trade dress becomes the practical equivalent of an expired utility patent, that will be time enough to consider the matter. The judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion.

      32

      It is so ordered.

      33

      [1] Briefs of amici curiae urging reversal were filed for the Holmes Group, Inc.,by James W. Dabney; for Panduit Corp. by Roy E. Hofer, Jerome Gilson, Cynthia A. Homan, and Philip A. Jones; and for Malla Pollack, pro se.

      34

      Briefs of amici curiae urging affirmance were filed for the American Intellectual Property Association by Louis T. Pirkey; and for Thomas & Betts Corp. by Sidney David and Roy H. Wepner.

      35

      Theodore H. Davis, Jr., Marie V. Driscoll, and Helen Hill Minsker filed a brief for the International Trademark Association as amicus curiae.

    • 7.2 Owning Mark(et)s, by Mark A. Lemley & Mark P. McKenna, 109 Mich. L. Rev. 137 (2010)

    • 7.3 "Marks on Marks," by Sara Stradler, JOTWELL

    • 7.4 Board of Supervisors for Louisiana State University Agricultural and Mechanical College v. Smack Apparel Co.

      1

      550 F.3d 465 (2008)

      2
      BOARD OF SUPERVISORS FOR LOUISIANA STATE UNIVERSITY AGRICULTURAL AND MECHANICAL COLLEGE; Board of Regents of the University of Oklahoma; Ohio State University; University of Southern California, Plaintiffs-Appellees,
      v.
      SMACK APPAREL CO.; Wayne Curtiss, Defendants-Appellants.
      Board of Supervisors for Louisiana State University Agricultural and Mechanical College; Board of Regents of the University of Oklahoma; Ohio State University; University of Southern California; Collegiate Licensing Company, Plaintiffs-Appellants,
      v.
      Smack Apparel Co.; Wayne Curtiss, Defendants-Appellees.
      3

      Nos. 07-30580, 07-30887.

      4

      United States Court of Appeals, Fifth Circuit.

      5

      November 25, 2008.

      6

      [471] Richard Charles Henn (argued), Jerre B. Swann, Alex S. Fonoroff, Kilpatrick Stockton, Atlanta, GA, Stephen R. Doody, Roy, Kiesel, Keegan & DeNicola, Baton Rouge, LA, Brett Allen North, Garvey, Smith, Nehrbass & North, Metairie, LA, for Plaintiffs-Appellees.

      7

      James William Tilly (argued), Tilly Law Firm, Tulsa, OK, for Defendants-Appellants.

      8

      Bruce P. Keller, Steven Zev Parnass, Debevoise & Plimpton, New York City, for Major League Baseball Properties, Inc., NBA Properties, Inc., NFL Properties, LLC, NHL Enterprises, LP, Amici Curiae.

      9

      Louis T. Pirkey, PirkeyBarber, Austin, TX, for Bd. of Trustess of University of AL, Bd. of Trustees of University of AR, Auburn University, Baylor University, Boise State University and others, Amici Curiae.

      10

      Before REAVLEY, STEWART and OWEN, Circuit Judges.

      11
      REAVLEY, Circuit Judge:
      12

      These consolidated appeals concern a trademark dispute between four universities and an apparel company and its principal. The Universities alleged in the district court that the defendants violated the Lanham Act and infringed their trademarks by selling t-shirts with the schools' color schemes and other identifying indicia referencing the games of the schools' football teams. The district court granted summary judgment to the Universities for trademark infringement and conducted a jury trial as to damages, with the jury returning a verdict favoring the plaintiffs. The defendants appeal the summary judgment order, and the Universities appeal the district court's denial of their post-verdict motion for attorneys' fees. We conclude that the colors, content, and context of the offending t-shirts are likely to cause confusion as to their source, sponsorship, or affiliation, and we AFFIRM.

      13
      I. Background
      14

      The plaintiffs are Louisiana State University (LSU), the University of Oklahoma (OU), Ohio State University (OSU), the University of Southern California (USC), and Collegiate Licensing Company (CLC), [472] which is the official licensing agent for the schools.[1] The defendants are Smack Apparel Company and its principal, Wayne Curtiss (collectively Smack).

      15

      Each university has adopted a particular two-color scheme as its school colors (purple and gold for LSU, crimson and creme for OU, scarlet and gray for OSU, and cardinal and gold for USC). The Universities have used their respective color combinations for over one hundred years, and the color schemes are immediately recognizable to those who are familiar with the Universities. The schools use these color schemes in many areas associated with university life, including on campus signs and buildings, on printed brochures, journals, and magazines, and on materials sent to potential donors. The Universities also use the color schemes extensively in connection with their athletic programs, particularly on team uniforms, resulting in wide-spread recognition of the colors among college sports fans. Each university operates a successful collegiate football program, and the respective football teams have appeared on numerous occasions in nationally televised football games that have been viewed by millions of people.

      16

      The schools also grant licenses for retail sales of products, including t-shirts, that bear the university colors and trademarks. In recent years, the total annual sales volume of products bearing the school colors along with other identifying marks has exceeded $93 million for all the Universities combined. The Universities hold registered trademarks in their respective names and commonly used initials. They do not, however, possess registered trademarks in their color schemes.

      17

      Smack Apparel Company is located in Tampa, Florida. Since 1998 Smack has manufactured t-shirts targeted toward fans of college sports teams, and it uses school colors and printed messages associated with the Universities on its shirts. Smack sells some of the shirts over the Internet, but most are sold wholesale to retailers and t-shirt vendors. The shirts frequently appear alongside those that have been officially licensed by the Universities. The instant case involves six of Smack's t-shirt designs that concern the appearance of the OU and LSU football teams in the 2004 Sugar Bowl in New Orleans, Louisiana, and the number of national championships previously won by OSU and USC. The district court described these Smack shirt designs as follows:

      18

      • OU (2 shirt designs): (1) "Bourbon Street or Bust" (with the "ou" in "Bourbon" in a different typestyle) (front), "Show us your beads!" (with the "ou" in "your" in a different typestyle) and "Sweet as Sugar!" (back) (2) "Beat Socal" (front), "And Let's Make it Eight!" (back). These shirts refer to 2004 Sugar Bowl contest in New Orleans between the OU and LSU football teams. A victory in the Sugar Bowl could have given OU a claim to an eighth national football championship. One of OU's principal rivals to this claim was USC.

      • LSU (2 shirt designs): (1) "Beat Oklahoma" (front), "And Bring it Back to the Bayou!" and "2003 College Football National Championship" (back) (2) "2003 College Football National Champions" (front), colored circular depiction of game scores, with "2003 College Football National Champions" and "Sweet as Sugar" (back). These shirts refer to the 2004 Sugar Bowl contest in New Orleans between OU and LSU, which was played [473] to determine the Bowl Championship Series national football champion.

      • OSU: "Got Seven?" (front), "We do! 7 Time National Champs," with depiction of the state of Ohio and a marker noting "Columbus Ohio" (back). This shirt refers to the seven college football national titles claimed by OSU.

      • USC: "Got eight?" (front), "We Do! Home of the 8 Time National Champions!" and depiction of the state of California with a star marked "SoCal" (back). This design refers to USC's claim to eight college national football championships.

      19

      Bd. of Supervisors of LA State Univ. v. Smack Apparel Co.[2] In addition to the messages described above, each shirt included Smack's own logo in a space approximately 2.5 inches wide and the words "Talkin' the Talk."

      20

      The Universities sued Smack, alleging that the above six shirt designs infringed their trademark rights. The Universities alleged causes of action for federal trademark infringement and dilution, unfair competition, and deceptive trade practices under the Lanham Act, 15 U.S.C. §§ 1051-1141n; unfair trade practices under the Louisiana Unfair Trade Practices and Consumer Protection Act (LUTPA), LA.REV. STAT. § 51:1409; common law trademark infringement and unfair competition; and state trademark dilution. The plaintiffs alleged that each schools' color combination acts as a source-identifier for the respective schools, especially when used in connection with other indicia identifying or suggesting the schools. They alleged that Smack's shirts infringed their unregistered trademarks by "combining Plaintiffs' Marks with references to, inter alia, ... (a) well-known and highly-publicized athletic events in which a University participated; (b) a University's opponent in the referenced athletic event; (c) the geographic area in which the referenced event takes place; (d) titles and honors bestowed as a result of the referenced athletic event; (e) a University's earlier athletic successes and accomplishments; and (f) the geographic area in which the University is located or associated."

      21

      The Universities claimed that Smack's products are similar to and competed with goods sold or licensed by the Universities and are sold directly alongside merchandise authorized by the plaintiffs at or near events referenced in the shirts. In this way, according to the Universities, the sale of Smack's products is likely to deceive, confuse, and mislead consumers into believing that Smack's products are produced, authorized, or associated with the plaintiff Universities. The Universities sought injunctive relief, lost profits, damages, costs, and attorneys' fees.

      22

      The parties filed cross-motions for summary judgment on the issue of liability for trademark infringement. The district court granted summary judgment for the Universities, holding that the Universities' trademarks in their color schemes, logos, and designs on shirts referring to the schools or their accomplishments had acquired secondary meaning.[3] The district court concluded that the marks were strong, having been used for decades as a reference to the Universities, and that Smack's infringing shirts were likely to cause confusion as to the source, affiliation, or sponsorship of the shirts.[4] The district court found that the marks at issue were virtually identical. The court reasoned that Smack used the same color schemes [474] and similar logos and designs as the plaintiffs; that Smack marketed and sold its shirts in a manner similar to the Universities' products and sometimes alongside those of the Universities; and that Smack used the color schemes, logos, and designs with the specific intent to rely upon their drawing power in enticing fans of the Universities to purchase its shirts.[5] The court noted that Smack admitted using the school colors and other indicia with the intent of identifying the Universities as the subject of the message in the shirt designs.[6] The court also noted that a likelihood of confusion existed because the shirts, which are relatively inexpensive, are not purchased with a high degree of care by consumers.[7] The district court rejected Smack's defenses of functionality, nominative fair use, and laches.[8]

      23

      After deciding the liability issue, the district court conducted a jury trial on the issue of damages. Smack moved for judgment as a matter of law, arguing that there could be no actual damages because there had been no actual confusion. The district court denied the motion. The jury then returned a verdict in favor of the plaintiffs and answered special interrogatories finding that Smack's "infringement caused actual confusion of the public or caused the public to be deceived." The jury awarded the Universities actual damages of $10,506.80 and lost profits of $35,686. The district court also enjoined Smack from manufacturing, distributing, selling, or offering for sale any of the six t-shirt designs found to be infringing or any other similar designs.

      24
      II. Discussion
      25

      We review a district court's grant of summary judgment de novo. Noble Energy, Inc. v. Bituminous Cas. Co.[9] Summary judgment is appropriate "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law."[10] "No genuine issue of material fact exists if the summary-judgment evidence is such that no reasonable juror could find in favor of the nonmovant." Jenkins v. Methodist Hosps. of Dallas, Inc.[11] Although the secondary meaning of a mark and the likelihood of confusion are ordinarily questions of fact, Elvis Presley Enterprises, Inc. v. Capece,[12] summary judgment may be upheld if the summary judgment record compels the conclusion that the movant is entitled to judgment as a matter of law. Beef/Eater Rests., Inc. v. James Burrough Ltd.[13]

      26

      To prevail on their trademark infringement claim, the plaintiffs must show two things. First, they must establish ownership in a legally protectible mark, and second, they must show infringement by demonstrating a likelihood of confusion. Am. Rice, Inc. v. Producers Rice Mill, Inc.[14] Smack argues first that the district [475] court erroneously found no genuine issue of fact whether there are legally protectible marks at issue in this case.

      27
      A. Protectible trademark and secondary meaning
      28

      The Lanham Act provides that a trademark may be "any word, name, symbol, or device, or any combination thereof" that is used or intended to be used "to identify and distinguish" a person's goods "from those manufactured or sold by others and to indicate the source of the goods, even if that source is unknown."[15] A mark need not be registered in order to obtain protection because "[o]wnership of trademarks is established by use, not by registration." Union Nat'l Bank of Tex., Laredo v. Union Nat'l Bank of Tex., Austin.[16] The marks at issue in this case are unregistered, and, as noted by the district court, were described by the Universities as "color schemes in the context of merchandise that makes reference to the Plaintiff Universities or their accomplishments and is directed to their fans and other interested consumers."[17]

      29

      The protectability of unregistered marks is governed generally by the same principles that qualify a mark for registration under the Lanham Act. Two Pesos, Inc. v. Taco Cabana, Inc.[18] The key is whether the mark is "capable of distinguishing the applicant's goods from those of others."[19] Marks are generally classified as (1) generic, (2) descriptive, (3) suggestive, (4) arbitrary, or (5) fanciful.[20] The parties here do not articulate a classification for the marks at issue, but the briefs show that they, and indeed the district court, have treated the marks as descriptive. This type of mark is not inherently distinctive because it does not inherently identify a particular source of the product; instead, it requires secondary meaning to be protected under the Lanham Act.[21]

      30

      The parties correctly agree that a color scheme can be protected as a trademark when it has acquired secondary meaning and is non-functional. Qualitex Co. v. Jacobson Prods. Co.[22] Although the parties discuss color at length in their briefs, the Universities do not claim that every instance in which their team colors appear violates their respective trademarks. Instead, the claimed trademark is in the colors on merchan