A majority of the US Supreme Court handed down a decision yesterday which draws a fuzzy line between valid patents which claim business methods and invalid ones which merely claim abstract ideas. The decision, Bilski v Kappos, can be found here.
The decision concerned an application for a patent which claimed a method involving transactions between energy providers and consumers which hedged against weather related risk. The Washington Post has described the application as “an infuriating sort of intellectual property over-reach.” The Patent Office rejected the application for not being a valid process.
On appeal, the Federal Court found that the patent was invalid for not satisfying either limb of the “machine or transformation” test, requiring that a process patent must either be tied to a machine or transform something. The Supreme Court has now rejected the application of the “machine or transformation test” as the sole test for patentable subject matter. It has determined that the only limitations on patentable matter are laws of nature, physical phenomena, and abstract ideas, albeit noting that the test is “a useful and important cue” for determining whether a process is patentable.
Unfortunately for Bilski, the Supreme Court nevertheless affirmed the Federal Court’s conclusion that the process was not patentable. The Supreme Court decided that the process was merely an “abstract idea”. The Court reached this conclusion by applying earlier decisions which found that algorithms which convert binary codes and processes for monitoring catalytic conversion processes are abstract ideas, while other business methods that are simply one kind of patentable method are eligible for patent protection. The case is certainly worth a read, if only to obverse the musings of the bench on the patentability of diverse topics such as original methods of treating anti-trust law and, more notably, speed dating…
Most importantly however, the majority of the Court declined to adopt the reasoning of Justice Stevens who was of the view that business methods should not be patentable per se.
The decision is an important one which preserves the patentability of business methods which are not merely abstract ideas, and which do not fall within one of the other exceptions. Interestingly, while the majority declined to develop additional limiting criteria to the question of patentable subject matter, it invited other courts to clarify the boundaries by developing limiting principles which are not inconsistent with the Patent Act.