There's been an unexpected plot twist in the story line of business method patents. It looked to many like such inventions (including many software patents) were doomed following an en banc Federal Circuit decision that required process-based inventions to pass the "machine or transformation test" to remain eligible for patenting. Enter Bilski v. Kappos. Justice Kennedy, writing for the Court (except Justice Scalia), endorsed the use of the so-called machine or transformation test as "an important clue" in determining the eligibility of a process patent and affirmed the Federal Circuit's decision that the claimed invention at issue was ineligible for a patent because it sought to patent protection for an abstract idea. Still, saving the day for the imperiled business method patent, the Court refused to say that business methods are categorically unpatentable-leaving to the future the standards regarding the patentability of tomorrow's process technologies.
The invention at issue in Bilski claimed a process for hedging investments in the energy market. The PTO rejected the application because the invention failed to do more than manipulate an abstract idea, solving a purely mathematical problem. The Board of Patent Appeals agreed and affirmed. An en banc panel of the Federal Circuit also rejected the patentability of the claimed method. In reaching its conclusion, the court discarded its previous test which examined whether the claimed process produced a "useful, concrete, and tangible result." Instead, the court of appeals held that the sole test for determining patent eligibility of a process is the machine or transformation test. That test confers patentability if the claimed process is (1) tied to a particular machine or apparatus, or (2) transforms a particular article into a different state or thing.
In a much anticipated opinion, the Supreme Court specifically rejected the Federal Circuit's limiting use of the machine or transformation test. The Court said that while the test is both an important clue and a useful investigative tool in determining the patent eligibility of a process, it cannot serve as the sole method for doing so. According to Justice Kennedy, the limitations of the test would both violate rules of statutory construction and unduly restrict the patentability of future creations from the "Information Age" and beyond. Also left to the future are the appropriate standards and tests courts should use to balance the patent law's need to protect inventors while not granting monopolies over procedures that others "would discover by independent, creative application of general principles." The Court concluded it did not need to define that new standard in the instant action because the claimed process sought protection of what amounted to an abstract idea which, under settled precedent, is ineligible for patent protection under the terms of 35 U.S.C. §101.
After Bilski, questions still loom regarding the ability of "Information Age" inventions to survive PTO and court review. For now, any business method patent that lacks claims with a "machine" structure (such as a computer) or which results in a meaningful transformation of an article (such as a computer) will be very much at risk. And future opinions will have to sort out the full reach of patentable computer-implemented inventions such as computer software.
What then will come of the down-but-not-out business method patent? Can that at-risk software patent be saved? From what kind of invention will the new standards emerge? When will the standards be set? What's a patent litigator to do?
Tune in next time.
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