Supreme Court Renders Narrow Decision in Bilski Patent Case

News Analysis: The U.S. Supreme Court renders a narrow decision in the Bilski vs. Kappos case in which it upheld a lower court's rejection of a patent on a computerized business process for managing energy hedge funds. But the decision doesn't bar business process or software patents in general. The decision also fails to define a general test for granting business process patents.

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"

Wayne Rash

Wayne Rash

Wayne Rash is a freelance writer and editor with a 35 year history covering technology. He’s a frequent speaker on business, technology issues and enterprise computing. He covers Washington and...