The nation’s top court has issued its long anticipated opinion rejecting the patentability of

the controversial Bilski case. The decision is both surprising for what it does and for

what it does not do. The Justices did not offer a clear interpretation as to what constitutes

patentable subject matter in the narrow classification known as ‘business methods.’ But

they did clarify certain points of the lower court’s ruling. Inventors and businesses

seeking patent coverage are well advised to study the oracles emanating from the

Supreme Court in order to get a patent that can pass muster in the existing case law.

The field of ‘business method’ patents includes a variety of transactions having to do

with commerce, banking, taxation, electronic transaction processing and more. Patents

have been granted in this field for at least two centuries before the present case even saw

the light of day. However, the policy of the government agency overseeing patents, the

United States Patent & Trademark Office (USPTO), has evolved from those earlier grants

to one that assumed that patents could not be granted for these very same methods.

Since the advent of the web, a rainstorm of patents claiming financial transaction

processing began to arrive at the doors of the USPTO forcing a change in direction. The

patent office was compelled by the deluge to examine numerous cases having both a

technological application as well as crossing the line into financial processes that it would

have preferred not to. As a matter of daily practice, the office simply instructed

examiners not to evaluate a patent application to determine if it could be a business

method or not. This would change when the Federal Circuit Court decided the landmark

State Street Bank decision (1998).

This decision swung open the gates of what could be patented generating a chorus of

complaints against State Street even though many informed observers point out that it

may not have been entirely responsible after all. In any case, the Federal Circuit did

indeed indicate that an invention would be eligible for a patent if it involved some

practical application and produced a useful, concrete and tangible result. The US Patent

Office responded by making it part of their official policy to require a technological

connection for the method to be patentable. In doing so, the agency overstepped the

bounds of its constitutional mandate since it could not be proved that these requirements

existed in the current body of law (Ex Parte Lundgren, BPAI 2005).

In the year 2008 business methods hit a brick wall with the Federal Circuit’s Bilski

decision wherein business methods were rendered patentable only if they passed certain

tests. In particular, the Federal Circuit indicated that processes transforming an item

from one thing into another are patentable and that those processes not having a

transformative step may be granted a patent if attached to a machine. This nebulous twoprong

test left many patent attorneys scratching their heads since what items could be

considered transformable was left clouded in mystery. The transformation of minerals

with the application of mercury into silver dust was clearly a patentable item but how

about the manipulation of financial information in a computer register through a complex

financial algorithm? Could this be considered an item under transformation?

Additionally, what constituted a machine that could render non-transformative processes

into patentable processes? Nor was there an answer to the most basic question of

whether or not the machine itself had to be unobvious or would the blending of the

machine with the non-transformative process be sufficient to permit patentability?

All of these questions were in play when the highest court prepared to decide Bilski. To

some observers its recent decision to reject the patentability for a method of hedging risks

because it represented an abstract concept left many unanswered questions. In doing so it

modified the Federal Circuit’s opinion in a variety of ways. In particular and most

importantly, the Supreme Justices ensured that the lower court’s test involving a machine

or transformation was utilized only as a test of patentability, not as a general rule for

denying protection. Inventions that do not pass this test may still be patentable under the

new decision; as a consequence, inventors having an idea that neither is attached to a

machine nor transforms an item still might be eligible for a patent grant.

Adding to the confusion were four Justices who indicated that they believed that

historically speaking, business methods were not favored with a patent and that the

practice of not patenting them should continue. Another four of the Justices contradicted

the first set by stating that the opposite was true; that indeed certain methods of doing

business could be granted patent protection. However, in indicating this they did not

provide a coherent methodology of how to determine this nor did they offer examples to

guide the community. Absent legislation or further guidance from lower courts the

system will muddle on in the penumbra of abstractions so typical of legal rulings.

The US patent system is presently choking with an enormous backlog of cases many of

which are directed to this very same subject matter. When guidance will come from the

legislature or lower courts only Heaven knows.