Federal Circuit’s In re Bilski decision promises continued uncertainty for business method and software patents

On October 30, 2008, the US Court of Appeals for the Federal Circuit issued its long-awaited decision in In re Bilski, which was an appeal of the USPTO’s rejection of business method patent claims as non-eligible subject matter.  The decision rejected several prior tests for subject-matter eligibility and stated that a process is patent-eligible if “(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.

The most interesting part of the Court’s decision may be its express disavowal of being the final word on the patentability of business method and software patents.  The Court acknowledges the temporary nature of its decision, stating that:

we recognize that the Supreme Court may ultimately decide to alter or perhaps even set aside this test to accommodate emerging technologies.  And we certainly do not rule out the possibility that this court may in the future refine or augment the test or how it is applied.

Nonetheless, the Court’s decision (32 pages of the majority decision, 132 total pages with all concurring decisions and dissents) includes much guidance for patent holders seeking patent protection today.  Specifically:

  • A general purpose computer can be a “specific apparatus” on which a patent-eligible process can run, so long as the process also has utility apart from the computer. “[A] claim’s tie to a digital computer [does] not reduce the pre-emptive footprint of the claim since all uses of the algorithm were still covered by the claim.”
  • “The ‘useful, concrete and tangible result’ inquiry [of the State Street Bank case] is inadequate” and no longer is the appropriate test to apply for subject matter eligibility.
  • The Court refused to adopt the “technological arts” test that several amici promoted.
  • Business methods are still patentable so long as they satisfy the machine-or-transformation test.  “We further reject calls for categorical exclusions . . . business method claims (and indeed all process claims) are ‘subject to the same legal requirements for patentabilityas applied to any other process or method.'”
  • Whether or not a method claim includes physical steps is irrelevant to the subject-matter eligibility determination.  “[A] claim that recites ‘physical steps’ but neither recites a particular machine or apparatus, nor transforms any article into a different state or thing, is not drawn to patent-eligible subject matter.  Conversely, a claim that purportedlylacks any ‘physical steps’ but is still tied to a machine or achieves an eligible transformation passes muster under § 101.”

The decision also includes a few examples to illustrate what types of software patent claims may or may not be patentable.  For example, the Court points to previous decisions holding that (i) a process operating on a computerized rubber curing apparatus, and (ii) a process that transforms data into a visual depiction, are each patentable.  Conversely, the Court stated that merely “adding a data-gathering step to an algorithm is insufficient to convert that algorithm into a patent-eligible process.”   The Court also viewed particular claims that resulted in “transactions” or “mathematical optimization” as not covering patentable-eligible subject matter.

The Court’s three dissenting opinions go in very different directions.  Judge Mayer’s dissent views the Court’s decision as too generous to business method patents.  On the other hand, Judge Newman notes that the Court is doing away with a long history of precedent that established a broad view of subject-matter eligibility, and she thoughtfully comments that “[n]ot only past expectations, but future hopes, are disrupted by uncertainty as to application of the new restrictions on patent eligibility.”

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