Post-Bilski: Business Method Patents Maintain a Tenuous Perch

On June 28, the U.S. Supreme Court issued its long-awaited decision in the case of Bilski v. Kappos, No. 08-964, 561 U.S. ___ ( 2010).  Many observers of the Court, including numerous patent practitioners, expected the Court to offer some clarification on the questions of whether patents could properly be issued for business methods and whether the Federal Circuit was correct in its earlier pronouncements in the case that for a process to be patentable it must meet the “machine or transformation” test (i.e., that the process must either be tied to a particular machine or apparatus or the process must tranform a particular article into a different state or thing). 

Although the Supreme Court agreed with the Federal Circuit’s finding that the subject matter at issue – a method for hedging risk within the energy industry – was merely equivalent to an abstract idea and was therefore not patentable, the Court disagreed with the lower court’s conclusion that the “machine or transformation” test was the sole basis to assess whether a patent was permissible for a method patent.  (The Court did note that the “machine or transformation” analysis provides a useful clue in assessing patentability of a claimed method, it is just cannot be said to be the sole available route.)  However, the endorsement by Justice Kennedy of business method patents in his opinion for the Supreme Court was joined by only a plurality of the Justices and that opinion elicited a fierce rejoinder by Justice Stevens, with whom three other justices concurred.  This posture should provide significant fodder for future challenges to business method patents, of which software patents are a subset.

Much has already been written about the Bilski decision in the month since the Court issued its ruling, so I won’t repeat that here.   An excellent summary of the case and citations to further commentary can be found on the site SCOTUS Wiki here.  Like many cases that rise to the attention of the Supreme Court, this case presented challenges that are not easily resolved, including, in this instance, real difficulties among the Court’s members in parsing through and understanding the nature of many recent technological innovations.  So, reaching a decision that might be haled as a consensus view was unlikely.  Yet, this was by no means a solid victory by proponents of business method patents.  Although nominally preserving the ability of patents to be issued in the appropriate situations for a business method, the Court, by directing practitioners and the lower courts to consider closely several key precedents in this area (notably Gottschalk v. Benson, 409 U.S. 63 (1972), Parker v. Flook, 437 U.S. 584 (1978), and Diamond v. Diehr, 450 U.S. 175, (1981)), made clear that the threshold that must be met by an applicant for a business method patent presents a very high bar.

What will be interesting is to see how the lower courts and the Patent Office in the months ahead and over the next year or so try to sort through the application of Bilski.  A number of notable business method cases are currently pending cases, which will provide an early indication of how this area will evolve.  When some of those decisions are rendered, I’ll post further updates.

Link to Supreme Court’s opinion in Bilski v. Kappos:

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