The State of Business Method Patents After Bilski
Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title. –U.S. Patent Act
The United States has one of the most inclusive sets of standards in the world for patentable subject matter. In addition to meeting the above statutory requirement that the patent cover a process, machine, manufacture, or composition of matter, the claimed invention must be novel, useful, and nonobvious to receive a patent. Supreme Court precedent also provides three specific exceptions to the broad eligibility principles established by the statute: laws of nature, physical phenomena, and abstract ideas.
In the age of software and the Internet, determining which inventions are patentable can be confusing and difficult, because the patent laws were designed in an age of machines and manufacturing. Even though business method patents have been awarded since the nineteenth century, the relatively recent technology boom has drastically altered the landscape. Adding to this confusion is the United States Court of Appeals for the Federal Circuit [1] decision in the State Street Bank case, which in 1998 allowed a flood of “business method patents,” by adopting a new test for patentability. A business method patent is a process patent that claims a new method for doing business, such as e-commerce, insurance, banking or tax compliance.
According to State Street, a method involving the use of a computer and producing a “useful, concrete, and tangible result” was patentable. This decision was controversial because it now seemed possible that fundamental principles or everyday activities could be patented. One of the well-known, and controversial, patents that ensued was Amazon’s “one-click” patent—a “method and system for placing a purchase order via a communications network,” which covers an online ordering method whereby a previously registered consumer may complete an order with a single mouse click. A patent assigned to Priceline.com is a “method and apparatus for the sale of airline-specified flight tickets,” based on the e-tailer’s reverse auction method for airline ticket sales. A recently issued non-Internet business method patent was on claims relating to the use of focus groups in marketing research.
Not quite ten years after State Street, the applicants in the In re Bilski case sought patent protection on a method for hedging risk in commodities trading. After three rejections and three subsequent appeals, the case completed its run to the United State Supreme Court in June of 2010 with a decision that for the most part overruled State Street but left open the possibility of business method patents.
Prior to State Street, the benchmark for patentability was the “machine-or-transformation” test, a test that was reaffirmed in Bilski but actually dates back to the nineteenth century. The Federal Circuit, in its Bilski opinion, explained that to fulfill the test, a claim must by “tied to a particular machine or apparatus,” or “transform a particular article into a different state or thing,” with the transformation being central to the purpose of the claimed process. In simple terms, the inventor must invent a thing, or convert something into something else. According to the Federal Circuit, the process claimed in Bilski did not fulfill these requirements.
The Supreme Court affirmed the Federal Circuit decision, but on different grounds: the method which Bilski sought to patent was too abstract. The Supreme Court contradicted the Federal Circuit in averring that the “machine-or-transformation” test is not the only test to follow, however the court failed to establish clear guidelines as to what else the PTO or the court may consider when determining patentability.
The result in Bilski was good news for patent-holders in the software, Internet, and biotechnology fields, but bad news for those wishing to restrict patent rights to technological inventions. Too many patents and too many patent lawsuits “crush real innovators,” says a spokesman for the Computer & Communications Industry Association. The decision to reject State Street’s “useful, concrete and tangible result” test seemingly overrules many business method patents awarded in the past ten years, which is probably why the Supreme Court declined to overrule State Street completely.
The Future of Business Method Patents
In a nutshell, the Bilski decision means that business methods are patentable so long as the claimed process is not an abstract idea. The Supreme Court stated that while the “machine or transformation” test is not the sole test to apply to patent-eligible processes, it is a “useful and important clue, an investigative tool, for determining whether some claimed inventions are processes” according to the patent statute.
The PTO is currently developing guidance for patent-eligibility post-Bilski, and in the meantime offered this brief guidance in a memo released immediately following the Supreme Court decision:
If a claimed method meets the machine-or-transformation test, the method is likely patent-eligible under section 101 unless there is a clear indication that the method is directed to an abstract idea. 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. If a claim is rejected under section 101 on the basis that it is drawn to an abstract idea, the applicant then has the opportunity to explain why the claimed method is not drawn to an abstract idea.
In addition to meeting the “machine or transformation” test, and not being directed to an abstract idea, a process claim or business method patent must still conform to the requirements of novelty, usefulness, and nonobviousness.
If your business method meets these requirements, and you as the inventor can prove that the process was your conception and that you have reduced the invention to practice, then your next step is to start the business method patent application process with the PTO and start reaping the benefits of a twenty-year monopoly on the use of your invention.
Of course, these type of patent applications like any can be very complicated to navigate on your own. It is always highly recommended to seek the help of a competent patent professional to protect your interests and mitigate costly mistakes.