On June 28, 2010, the United States Supreme Court issued its long-awaited decision in Bilski v. Kappos, 130 S. Ct. 3218 (2010), ruling on the Federal Circuit’s en banc decision that the so-called machine-or-transformation test is the sole test for determining whether a process is patentable under 35 U.S.C. §101, and more generally, whether business methods can be patentable. The Federal Circuit decision had created a penumbra of doubt about the patentability of certain technologies, ranging from software to medical diagnostic procedures and equipment.
The patent application at issue involved methods for hedging risk in commodities trading. The claims were classic “business method” claims in that they recited steps that were performed as part of a business operation. The Patent Office rejected the claims, and the rejection was then appealed to the Federal Circuit and ultimately was the subject of an en banc decision in In re Bilski¸ 545 F.3d 943 (Fed. Cir. 2008), holding that a claimed process is patentable only if it is tied to a particular machine or apparatus or it transforms a particular article into a different state or thing. The court referred to this as the “machine-or-transformation test.”
The Supreme Court issued its decision on the last day of the October 2009 term. Although many expected the Bilski decision to have a dramatic impact on the patent world, it is remarkable for how little it decided. The majority of the Court expressly agreed on only three points: (1) the Federal Circuit’s machine-or-transformation test is not the exclusive test for patent subject matter eligibility; (2) business methods are not categorically unpatentable; and (3) the invention at issue in Bilski is an unpatentable abstract idea.
Essentially, the majority opinion was a course correction. The Court affirmed the Federal Circuit’s ultimate judgment, but ruled that the Federal Circuit had an improperly narrow view of patent subject matter eligibility. However, the Court refrained from offering alternative tests or guidance, beyond reiterating that abstract ideas are not patentable. This vacuum likely will create new litigation battlefields. Future litigation likely will center on whether an asserted claim recites an abstract idea and whether any claim elements that the patent holder asserts are nonabstract are merely attempts to limit an abstract idea to one field of use or to add token post-solution components to an otherwise abstract idea.
The first post-Bilski guidance was provided by the US Patent and Trademark Office on July 27, 2010, when it issued Interim Guidelines in response to Bilski in the Federal Register, Volume 75, No. 143. The Guidelines provide criteria for Examiners to consider in deciding whether a claim recites an abstract idea. Notably, in an attempt to provide clarity on the types of business methods that are patentable, the guidelines state that the presence of a “general concept” in executing method steps “can be a clue that the claim is drawn to an abstract idea.” Examples provided by the Guidelines include basic economic practices or theories, mental activities, interpersonal interactions or relationships, and instructing how business should be conducted.
Bilski, and the many court and PTO decisions that surely will follow in its wake, will have a particularly strong impact on the life science, financial services and software industries – the focus of the articles that follow. The same issues discussed in Bilski also have arisen in Europe, and are the subject of a fourth article.