On June 28, 2010, the United States Supreme Court issued its long-awaited decision in Bilski et al. v. Kappos. At issue was whether business methods were eligible for patent protection. There had been some concern expressed in the press that the Supreme Court would use the Bilski case as a vehicle to determine that business methods and/or software were not patentable. However, the Court declined to do so, finding that no particular class of methods or processes was or was not inherently patent-eligible subject matter. The Court instead articulated that its basic guidance on the determination of whether a method defines patent-eligible subject matter should be applied on a case-by-case basis.
The process of deciding whether an innovation can be protected by a United States patent has two steps. First, the innovation must be patent-eligible subject matter, falling within one of the classes established by the patent statute: a process, machine, manufacture, or composition of matter, or any improvement thereof. Second, the innovation is examined to determine if it is useful, novel, non-obvious, adequately described in writing, and disclosed sufficiently to enable one of ordinary skill in the field to make and use the innovation.
Bilski had applied for patent protection for a method of hedging against the risk of price changes of commodities in the energy market. Bilski's patent application had been rejected by both the Patent Office and the lower court (the Court of Appeals for the Federal Circuit or CAFC). In affirming the Patent Office rejection, the CAFC had articulated what it decided to be the sole test for determining whether a process defined patent-eligible subject matter - the 'Machine or Transformation' test. The 'Machine or Transformation' test requires that the process involve either a 'particular machine' (which the CAFC left undefined) or the transformation of something from one state to another (e.g., a process for transforming rubber from its raw state to its commercially-usable finished state). The Supreme Court unanimously held that the Bilski process was not eligible for patent protection, but not because of the 'Machine or Transformation' test. However, the justices were split in their reasoning.
The Supreme Court has for many years held that abstract ideas, laws of nature and physical phenomena are not eligible for patent protection. The Bilski majority concluded that Bilski was attempting to patent an abstract idea, which was not allowed under the Court's long-standing precedent. Resolving the question of patent eligibility of software or business methods was not required for the majority's rejection of the claimed invention, and thus was not addressed directly. The majority also held that the 'Machine or Transformation' test is a useful measure of patent eligibility but is not the sole test. The minority agreed that Bilski should not be awarded a patent, but based its conclusion on its contention that business methods should not be patent eligible. However, since the minority decision does not set precedent, the Bilski decision does not categorically exclude software and business methods from patent protection.
The Bilski decision provides some guidance to inventors of processes and methods. It is critical that the patent application make clear that the inventive method does not fall into the categories of laws of nature, physical phenomena, or abstract ideas. Further, while the 'machine or transformation' test will not be the exclusive requirement for patent eligibility of methods, if the patent application can be written so as to meet this test, patent eligibility will likely not be a problem.