The Spaeth Firm

Intellectual Property Law

JUNE 28, 2010: THE UNITED STATES SUPREME COURT ADDRESSES BUSINESS METHOD PATENTS IN BILSKI v. KAPPOS
On Monday June 28, 2010, the United States Supreme Court handed down the long-awaited decision in Bilski v. Kappos, setting the standard for the treatment of business methods as potentially patentable inventions under U.S. law. The claims at issue in the Bilski et al. patent application defined a method for hedging risk in the field of commodities trading by making sales of a commodity to consumers and making purchases of the commodity from market participants to balance the consumer sales. The United States Patent and Trademark Office (PTO) had rejected Bilskis claims because they did not require the use of a computer or other machine and did not result in a physical transformation of an object or material, i.e., the claims did not satisfy a machine-ortransformation (MOT) test. Bilski appealed to the Court of Appeals for the Federal Circuit (CAFC), which agreed with the PTO that U.S. law only allows patents on methods that satisfy the MOT test. Bilski appealed to the U.S. Supreme Court. The Supreme Court affirmed that Bilskis claims were not eligible for patent protection under U.S., but rejected the MOT test as the sole criterion for identifying patent-eligible processes under U.S. law. The Court also refused to recognize a so-called business method exception to the scope of patent-eligible inventions. The Supreme Court justified its rejection of Bilskis claims by finding that they were directed to an abstract idea (hedging against financial risk) and so fell into one of three well-known exclusions from patentable subject matter (the other two being physical phenomena and laws of nature). Despite concluding that Bilskis claims were not eligible for patent protection, the Court declined to explain what would constitute a patentable "process," beyond pointing to the definition of that term provided in 100(b) and to its pertinent prior decisions. Nevertheless, the Court warned: 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.

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The U.S. PTO and U.S. courts should therefore be expected to maintain current challenges to many patent claims for business methods. The bases of the challenges are likely to shift from the machine-or-transformation test and its corollaries to an abstract idea test, with its own corollaries. Whether this conceptual shift will change the conclusions of the U.S. PTO or U.S. courts in such challenges for others besides Bilski remains to be seen. However, owners of issued U.S. patents or patent applications for technologies such as software, advanced diagnostic medicine techniques, linear programming, data compression and other Information Age technologies, may benefit from the shift, since the Court stated that the patentability of such inventions would have been uncertain under the MOT test. * For more information contact: The Spaeth Firm 100 Pearl Street 14th Floor Hartford, Connecticut 06103 Tel. 860-578-4290 email: info@spaethlaw.com www.spaethlaw.com * *