Supreme Court Sheds No New Light on Business-Method Patents

Decision against Bilski does little to clarify the issue, say experts

Photo: Franz Jantzen

30 June 2010—On Monday, the United States Supreme Court issued its much anticipated ruling regarding business method patents. The 5-4 ruling is in response to an October 2008 decision by the U.S. Court of Appeals for the Federal Circuit. That decision stated that in order to be considered patentable, a process or method must be related to a particular machine or itself transform an object. This so-called machine-or-transformation test sparked a long debate among legal professionals regarding exactly how its key terms—process and transformation—can be concretely defined. Monday’s ruling did little to clear up the confusion, experts say.

Despite predictions that the court would propose more stringent rules and put the debate to rest, the majority opinion, written by Justice Anthony M. Kennedy, instead took a moderate—and, experts say, vague—position. ”A business method is simply one kind of ’method’ that is, at least in some circumstances, eligible for patenting,” Justice Kennedy wrote. Though the court asserted that the machine-or-transformation test should not be the only criterion by which business methods are evaluated, the justices agreed to ”by no means foreclose the Federal Circuit’s development of limiting criteria.”

In other words, no new test was proposed, and the old test was neither endorsed nor ruled out. Rather, the court agreed that applications can be called into question if they attempt to patent laws of nature, mathematical formulas, and abstract ideas, but that applications that do not fall into these three categories could also be disputed.

The court unanimously agreed that Bernard Bilski and Rand Warsaw’s technology-independent method for managing fluctuations in the cost of energy commodities constitutes an abstraction and so, on the basis of long-standing precedent, was ineligible. However, the court shed no light on the criteria by which future patent applications would be judged. It offered no directives on how to draw the line between abstraction and invention.

The ambiguity of the pronouncement left legal scholars and patent lawyers shaking their heads in dismay. ”We waited eight months for this?” says Steven J. Frank, a Boston-based patent lawyer and partner at Goodwin Procter, who wrote about the Bilski case in the March 2009 issue of IEEE Spectrum. ”The court provided no new guidance” regarding patent eligibility, he says. In fact, he adds, the justices’ ruling ”raised more questions than it answered. Arguably, it has broadened the eligibility criteria for patentability, since subject matter that fails the machine-or-transformation test could conceivably qualify under some other test” that the court has not specified.

The ruling ”didn’t settle anything,” says Kirk Teska, an intellectual property attorney and a Spectrum contributor. Plaintiffs like Bilski and Warsaw will continue to push the envelope, he says, and the cases will have to be handled on an individual basis until a new test is proposed by the Court of Appeals or the Supreme Court takes up another case of this kind. For now, Teska says, ”the controversy continues.”

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