On June 28, 2010, the Supreme Court issued a long-awaited decision in Bilski v. Kappos, 561 U.S. ___ (2010), which relates to the extent that processes, especially business methods and processes implemented in computer software, can be patented. Although the patent applicant in Bilski lost, the Supreme Court refused to declare business methods unpatentable or to impose a strict test for patentable processes. The Court refused to endorse any restriction on patentable processes, other than a ban on process patents that cover “laws of nature, physical phenomena [or] abstract ideas.” The door is still open on business method patents.
Bernard Bilski and Rand Warsaw were listed as inventors on a patent application claiming a method of trading in energy commodities that involved the use of a mathematical formula to decide which commodities to buy or sell. The U.S. Patent and Trademark Office (PTO) rejected the application under 35 U.S.C. § 101 as not directed to patentable subject matter because it “is not implemented on a specific apparatus … [and] is not directed to the technological arts.” In 2008, the Federal Circuit affirmed the PTO’s decision. In so doing, the U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”) held that the section of the patent law providing for patents on “processes” only applied to those processes that are “tied to a particular machine or apparatus,” and those that “transform[] a particular article into a different state or thing.” This was called the “Machine or Transformation Test,” which replaced an earlier, much broader standard, under which any process that produced a “useful, concrete and tangible result” could be patented. Under the Federal Circuit’s new strict rule, an inventor of a process may not receive a patent on the process if the process did not meet one of those two criteria.
The Supreme Court held this week that the Federal Circuit’s “Machine or Transformation Test” is too rigid, and that the patent law, as enacted by Congress, contains no such limitation on what processes may be patented. The Supreme Court instead held that the limitations on the types of processes entitled to patent protection are that the patent may not cover “laws of nature, physical phenomena [or] abstract ideas.” The Court did not go so far as to endorse the very broad “useful, concrete and tangible result” test, or to declare that it will not endorse limits in the future, but it would not endorse the Machine or Transformation Test. However, the Court held that the Machine or Transformation question was an important one; as a “clue” to whether a process is patentable or whether it falls into one of the exceptions.
Applying the broader rule and the exceptions, the Court announced that Bilski’s patent claim on how to hedge on energy commodity transactions was an “abstract idea,” and therefore unpatentable.
Four dissenting Justices agreed with the majority that Bilski’s claims were unpatentable, but on different grounds; namely, that so called “business methods” could not be patented. This was the minority view, however, and as such, is not law.
Like all Supreme Court opinions, this opinion can be overturned by Congress through legislation.
The bottom line is that a process cannot be patented if it is merely a law of nature, physical phenomena or an abstract idea. However, if the process is new, non-obvious to one of skill in the particular field of invention, and described with sufficient detail in the patent application -- and produces a useful, concrete and tangible result -- the process may be patentable.
If you have any questions about the Bilski opinion, or other Intellectual Property matters, please contact Robert McKinley, rmckinley@klehr.com or Ari Indik, aindik@klehr.com.
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