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Supreme Court “Punts” on Standard for Business Methods

By Joseph S. Heino

In perhaps the most anticipated patent case of the term, Bilksi v. Kappos, the Supreme Court relied on its precedent to find the claimed method in the Bilski patent unpatentability abstract without setting forth any new standard for evaluating patentable subject matter.

The Patent Act offers patent protection for “any new and useful process, machine, manufacture, or composition of matter.” Here, the Supreme Court’s focus was on the definition of a “process” because Bilski’s patent application was written to claim a method of hedging risk in commodities trading.

In evaluating the Bilski patent, the lower court, the Court of Appeals for the Federal Circuit, relied on the “machine-or-transformation” test and ruled that the method in the Bilski patent (1) wasn’t sufficiently tied to a machine and (2) failed to transform an article from one state to another. Bilski appealed arguing that (1) the machine or transformation test was too restrictive under the Patent Act and (2) the Federal Circuit’s “machine-or-transformation” test for patent eligibility contradicts Congress’ intent that patents protect business methods.

In its Bilski decision, the Supreme Court opined that, while the machine-or-transformation offers “a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under §101,” it was not the sole test for deciding whether an invention is a patent-eligible process. Instead, the Court indicated that while the machine or transformation test likely correlates with the existence of patentable subject matter, some patent claims that fail the machine or transformation test will still be patentable and other patent claims that pass the test will still be ineligible.

Rather than relying on the “machine-or-transformation” test, the Supreme Court identified with its longstanding precedent, that is, patentable subject matter should be limited by just three exceptions, namely “abstract ideas, laws of nature and natural phenomena.” The court concluded that Bilski’s claims were unpatentable subject matter because they were directed toward an abstract idea.

In view of the Bilski decision, the Patent Office has recently issued a new set of guidelines for Examiners at the Patent Office. As might be expected, the guidelines point towards patentability in cases not involving abstract ideas, laws of nature and natural phenomena, well as inventions directed to mere general concepts.

Contact Joseph S. Heino ( at 414-225-1452 or your Davis & Kuelthau attorney.