On June 28, 2010, the Supreme Court of the United States released a long-awaited opinion regarding the patentability of business method patents. The Supreme Court upheld a decision which found a process for hedging commodities was non-patentable subject matter. In 1997, Bernard Bilski and Rand Warsaw filed a patent application for a procedure for hedging commodities. The United States Patent and Trademark Office (USPTO) rejected the application, and the Federal Circuit upheld the rejection because the application claimed non-patentable subject matter. The Federal Circuit Court of Appeals created a “machine-or-transformation” test which required a process to be tied to a machine or transform an article from one form to another. The Federal Circuit found that the process claimed in Bilski’s application only manipulated abstract ideas and was neither tied to a machine nor transformed an article into another form.
The Supreme Court upheld the ruling that Bilski’s application claimed non-patentable subject matter. The Supreme Court rejected the Federal Circuit’s holding that the “machine or transformation” test was the sole test for determining patentability. Instead, the Court stated that the test was merely a factor to consider. Kennedy’s majority opinion specifically stated that “[t]his Court’s precedents establish that the machine-or-transformation test is a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under §101.” Additionally, the Court held that business method patents could still be patentable, but Bilski’s application was not patentable. 35 U.S.C. 101 states that a “process” is patentable subject matter; however, the statute states that laws of nature, physical phenomenon, and abstract ideas are not patentable. The Supreme Court held that Bilski’s patent application only manipulated an abstract idea and was, therefore, unpatentable. In conclusion, the Supreme Court seems to have established that processes or business method claims which do not satisfy the machine-or-transformation test may still be patentable if they do not claim abstract ideas.
The USPTO released an internal memo to examiners explaining that they should continue to “examine patent applications for compliance with section 101 using the existing guidance concerning the machine-or-transformation test as a tool for determining whether the claimed invention is a process under 101.” If a claimed method satisfies the test, then the method is likely patentable unless it is clearly an abstract idea. On the other hand, if the claimed method does not meet the test, the examiner should reject the application unless there is a clear indication that it is not an abstract idea.
For more information, the actual opinion can be found at: http://www.supremecourt.gov/opinions/09pdf/08-964.pdf
Image from: http://static.fsf.org/fsforg/img/bilski.jpg