On June 28, 2010, the U.S. Supreme Court issued its long-awaited decision in Bilski v. Kappos. The patent application at issue involved a method of hedging against risk of price changes in energy market commodities. The lower court held that the invention was not patentable subject matter because it was a pure business method — not tied to a particular machine or apparatus, and not transformative of a particular article into a different state or thing.
The Supreme Court held that the so-called “machine or transformation” test is useful, but not a strict requirement for patentability. While holding that “attempts to patent abstract ideas” — and in particular the claims that Bilski sought — were not patentable, the Court’s opinion also said that business methods are not per se unpatentable subject matter. However, the Court offered no guidance as to what specific types of business methods may or may not be patentable. In fact, the Court’s opinion notes that the Federal Circuit may develop additional limiting tests. In addition, several members of Congress have spoken out about adding limitations through amendments to the Patent Act — despite the slow movement associated with previous attempts to reform the Patent Act.
In a quickly-issued memorandum to its patent examiners regarding the Bilski decision, the USPTO signaled that Bilski is unlikely to change the way that it reviews business method patent applications. The memorandum notes that methods that meet the machine-or-transformation test are likely patent-eligible. However, the memo also notes that:
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.
My colleagues Russ Barron, Mike Renaud, and Courtney Quish have published a more detailed analysis of the Bilski decision, available here. In the meantime, the Court’s opinion may encourage software developers and business process inventors to continue seeking patent protection for their inventions.
The Bilski ruling is growing on me. Nevertheless, it’s pretty easy to see that the issue of defining the limits of an “abstract idea” will likely be the focus of much patent litigation in the near future. I do rather wish that the Court had made more of an attempt to address this. Lacking guidance from above, lower courts will have to address the issue case-by-case, and we’ll likely end up with some kind of piecemeal, undefined, “I know it when I see it” means of determining which inventions are too abstract. I wouldn’t be surprised if the issue ends up going back up to the Supreme Court again very soon — maybe in Prometheus or Classen.