The Bilski Case: US Supreme Court Rules on Business Method Patents

The long-awaited decision of the US Supreme Court (Supreme Court) in Bilski v Kappos has finally been released, with a majority finding that business methods may be patentable, and the Supreme Court unanimously rejecting the “machine or transformation” test as the sole test for determining whether a process claim is patentable. Bilski had sought a patent that claimed a process for hedging risk in commodities. The claims were rejected by the Court of Appeals for the Federal Circuit (Court of Appeals) as unpatentable because they neither, (i) were tied to a particular machine or apparatus, nor (ii) transformed a particular article into another state or thing. The Court of Appeals had held that this “machine or transformation” test was the sole test for determining whether a process claim is directed to patentable subject matter. The test was quickly adopted by the US Patent and Trademark Office (USPTO) and has been the basis of many rejections since then. However, on further appeal, the Supreme Court found that this approach is not consistent with its prior decisions, nor with the intent of the legislature. A majority of the Supreme Court Justices effectively rejected the “useful, concrete and tangible result” test from State Street Bank, which had also been rejected by the Court of Appeals. Nevertheless, the Supreme Court did not offer an alternate test, but rather endorsed the “machine or transformation” test as a “useful and important clue, an investigative tool” for assessing patentability. It focussed on the prohibition against patenting abstract ideas as the guiding principle, and expressly stated that at least some processes that can be described as business methods are patentable. The Supreme Court also noted that it is not clear what is a “business method”. The Supreme Court unanimously upheld the rejection of Bilski’s patent application for claiming unpatentable subject matter on the basis that the claims were directed to an abstract idea. Nevertheless, the Bilski decision does leave the door open to business method patents in the United States, unlike Canada, where the current Canadian Intellectual Property Office (CIPO) position excludes business methods from patentability. It is interesting to note that the CIPO exclusion is based on a Patent Appeal Board decision, currently under appeal, that relied on the Court of Appeals decision in Bilski that has now been over-ruled. In the US, the USPTO has instructed examiners to continue applying the “machine or transformation” test to assess whether a method claim is directed to patentable subject matter as long as the method is not directed to an abstract idea. Applicants will now be able to argue that claims rejected based on this test are not drawn to an abstract idea. While the Bilski decision did not address software patents directly, it is now clear that method claims for applications implemented in software running on a general purpose processor that perform some useful function are generally directed to patentable subject matter. For the full text of the Supreme Court’s decision in Bilski, see: http://www.supremecourt.gov/opinions/09pdf/08-964.pdf For the interim guidance provided to USPTO examiners, visit: http://tinyurl.com/33e35vh Summary by: Tom Feather