Supreme Court Renders Narrow Decision in Bilski Patent Case

By Wayne Rash  |  Posted 2010-06-29

Supreme Court Renders Narrow Decision in Bilski Patent Case

The U.S. Supreme Court has decided that lower courts and the U.S. Patent and Trademark Office were correct in rejecting a patent for a method for handling energy hedge funds in its long-awaited decision in the case of Bilski v. Kappos.  

The Court ruled that the Bilski claim was based on an abstract idea, and as such was not eligible for a patent. However, the court also rejected the ruling by the U.S. Court of Appeals for the Federal Circuit that a concept called the machine-or-transformation test was the only test that could be allowed for considering whether a a patent should be granted. That test considers whether the patent involves a machine or in some way transforms some object from one state to another. 

According to Robert Tosti, an intellectual property attorney and Partner at Brown Rudnick in Boston, the U.S. Court of Appeals decision had a real impact on the ability of businesses to patent innovative ideas. The June 28 decision eases the restrictions a little. Tosti said that the appeals court decision had led to interpretations that came down pretty hard on any method to patent a business process. 

Now, he said, the Supreme Court has made it clear that the law didn't provide for such limits. Instead, the court ruled that the machine-or-transformation test wasn't the only consideration, Tosti said. "More broadly, they said the result was right, but the test is only one way to see whether something is patentable, however, it's not the only way," said Tosti. 

While it rejected the Bilski patent, the court did not provide any definitive test that could be used to determine what business processes might be patentable even though it agreed with the decision that abstract ideas could not be patented.  

The Court also rejected the idea that business processes and methods aren't patentable. Professor Edgar also said that it was clear that the Court was concerned about allowing such patents to be too easy, according to Professor Harold Edgar at Columbia University School of Law. "Justice Kennedy talked about the need for a high bar for patents on business systems," in his opinion on the case, he said.  

Professor Edgar said that the Court's decision was really quite narrow. It upheld the lower court decision rejecting the patent, and it rejected the test the lower court had been using to determine whether something was patentable, but it did not provide more than general guidance as to what constituted a valid test of patentability. He said this was because the Court found the decision very difficult to reach. "The fact that it came out on the last day shows that it's the longest in gestation this term," he said. "It shows that they see the issues as extremely difficult"

Court Eschews Broad Guidelines on Business Process Patents

The difficulty, he said, stems from the concept of process in the information age, and the problems involved with determining what actually constitutes an invention and what doesn't. "What will happen is that the court made it clear that if you pass the machine or transformation test you're good," he said, and noted that many inventors will try to meet this test. "People will try to tie something to a machine or transformation," Professor Edgar said.

But then he said that the next question will be, "What do you have to have on top of a general purpose computer to meet the machine test?" That, he said, raises the issue of software patents.

Ultimately, the court left the determination of what constitutes additional valid tests for patentability to the lower courts and to the Patent and Trademark Office. "The PTO is going to have to grapple with coming up with operational rules to guide examiners," Professor Edgar noted. He said that while the machine-or-transformation test is still valid, the fact is that there may be other tests, the nature of which the courts and PTO will have to determine.

"This removes software patents from the crosshairs of the Bilski decision, to mean software isn't patentable," said Lawrence Hadley, a Partner in Henigan, Bennett and Dorman in Los Angeles. "You can't take an abstract idea and implement it through software and make it patentable. A patentable idea is still patentable in software."

Hadley said that the lower courts had been applying the machine-or-transformation test so rigidly that patents for software or processes had essentially become impossible. Now, "It's a factor they can look at, but it's not exclusive," he said.

The result of the Supreme Court decision on Bilski v. Koppos wasn't a definitive end to software patents, as some had hoped. Nor did it throw the door wide open. Instead, the Court took a moderate ground that continued to uphold existing laws that gave protection to companies that use business processes they'd developed, while ruling that there has to be more to a patent than an abstract idea that had been in general use in business, and just happened to be put into use in a computer program.

To many, this lack of a definitive answer was unsatisfying. To others, however, it perpetuated a practice the Court has had for years in which it has left the details of implementing its decisions to others. In this case the Court required that lower courts and the PTO pay attention to all of its previous decisions and use them for guidance, rather than simply rejecting all process patents out of hand.

Rocket Fuel