The Supreme Court, which rarely rules on patent law
issues, yesterday opined on the issue of patents directed to
business methods. In particular, the Court ruled
that the test used by the Court of Appeals for the
Federal Circuit - the so-called "machine or transformation"
test - provides merely a "clue" to whether a particular
business method can be patented and is not the singular test
for determining the patentability of any business
method. As a result, the opportunity to obtain patents
directed to business methods is still very much available
although there may be some undefined snares along
the way.
On the narrow issue of the patentability
of a claimed method in the particular patent application
before the Court (here called "Bilski" after the
inventor), the Supreme Court held that the business method of
hedging in a particular market was unpatentable.
Specifically the Court's opinion relies on the finding that
the Bilski method is directed to a mathematical formula, which
the Court considered to be a mere abstract concept and was
therefore not directed to patentable subject matter (in
general, laws of nature, physical phenomena, and abstract
ideas are not patentable). However, the Court's opinion
does not include any test for distinguishing between subject
matter that is limited to an abstract concept from subject
matter which includes patentable content.
The more general question, which the Court did
not resolve, is the standard for determining the patentability
of business methods. In general, determining
patentability is a two step process. Step one is
deciding whether the manner of presenting the invention fits
it into a short list of patentable categories. Those
categories are processes, machines, manufactures, and new
compositions of matter. Step two is deciding whether
there is an invention, i.e. whether there is something new,
useful, and not obvious. Lower federal courts, in
particular the Court of Appeals for the Federal Circuit, have
been trying to formulate a bright-line test for determining
whether a business method is patentable at step one. In
that regard, the claims of the Bilski patent application were
previously rejected by the Court of Appeals for the Federal
Circuit. The Appeals Court imposed a "machine or
transformation" test based on perceived precedent of the
Supreme Court; this test was used to determine that the Bilski
invention was not patentable in that it did not involve
operation of a machine nor did it transform matter in some
way.
In the Supreme Court's decision, the Court
said that it never intended the machine or transformation test
to be a gateway for determining the patentability of business
methods. That test can be used as a "clue" in order to
determine if a business method is patentable but should not be
used to determine that a business method is
unpatentable. Stated differently, the machine or
transformation test is still a good test, but just not the
only test. However, the Supreme Court failed to
articulate any other test.
The Supreme
Court's
Bilski decision does not present a clear
standard for determining which business methods are
unpatentable. That most important issue was sidestepped
by the Supreme Court, and the prior attempt of the Court of
Appeals for the Federal Circuit to simplify step one was
effectively negated. Thus, the law regarding business
methods now arguably reverts to where it was before the Court
of Appeals for the Federal Circuit attempted to simplify the
first step of the patentability analysis.
Accordingly, by leaving the test for determining
business method patentability undefined, the Supreme Court has
effectively opened the door for later challenges. And
until such challenges occur, the United States Patent and
Trademark Office is left with minimal guidance for rejecting
applications for business method patents. So at least
for now, the opportunity for obtaining business method patents
very much remains alive and well.
The Supreme
Court's decision in
Bilski v. Kappos, No. 08-964 (2010)
can be found
here.
