01 July 2010

The Blogosphere Vibrates: Bilski's Business Method Rejected but Software Remains Patent Eligible

Much as expected, the US Supreme Court affirmed the Federal Circuit's decision Bilski v. Kappos in that the rejection of Bilski's patent claims was upheld. While the Court considered the claims as impermissible attempt to patent abstract ideas, it explicitly left open the possibility of protecting "business method" inventions in more tangible contexts.

Even though Bilski's patent application relates to a pure business method ("method of hedging risk in the commodity and energy markets against price changes"), it has been widely expected that the Supreme Court would also comment on the question whether or not software-related inventions are patentable per se, which in fact has been the case.

The quintessence of the Supreme Court's opinion is that
  1. the claims of Bilski's application are not eligible subject matter because they merely claim abstract ideas;
  2. the machine or transformation test established by the CAFC is not the only possible test for providing guidance regarding the question whether or not a method represents eligible subject matter.
That is, while the decision of the CAFC has been substantively confirmed, the CAFC's grounds have been rejected as defective due to the CAFC's one-sided consideration of the machine or transformation test, according to which a method is patent eligible only if it (1) is tied to a particular machine or (2) transforms an article from one thing or state to another.

Since, however, the machine or transformation test may be interpreted - and in fact has been interpreted by USPTO examiners - such that business methods and software-related inventions are essentially excluded from patent protection, one can conclude from the Supreme Court's ruling that both business methods and software-related inventions remain patent eligible in the US.

This applicant-friendly opinion is in fact somewhat clouded by the ongoing uncertainty as to under which criteria (other than the machine or transformation test) software-implemented inventions may be considered patent eligible now and in furture. Such further criteria will now have to be determined by the USPTO and the competent courts. The USPTO has already issued a memorandum for guidance of Patent Examiners, according to which the PTO will continue to use the CAFC's machine or transformation test as the benchmark for patentability determinations under Section 101:
Examiners 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 section 101. If a claimed method meets the machine-or-transformation test, the method is likely patent-eligible under section 101 unless there is a clear indication that the method is directed to an abstract idea. If a claimed method does not meet the machine-or- transformation test, the examiner should reject the claim under section 101 unless there is a clear indication that the method is not directed to an abstract idea. If a claim is rejected under section 101 on the basis that it is drawn to an abstract idea, the applicant then has the opportunity to explain why the claimed method is not drawn to an abstract idea. The USPTO is reviewing the decision in Bilski and will be developing further guidance on patent subject matter eligibility under 35 U.S.C. § 10 1.
Blogosphere: The Bilski opinion was probably the most awaited patent-related opinion of the Supreme Court ever. So it's no surprise that it is extensively covered and widely discussed throughout patent-related blogs. In fact, the IP blogosphere vibrates:

Leagal Analysis:
Open Source Community:
Industry and Technology:
Justice's Opinions:
Software Patents and Business Methods:
Machine or Transformation Test: