An End to Business Methods Patents?
By Anthony Kammer – Edited by Anna Lamut
On October 30, 2008, an en banc panel of the Federal Circuit upheld a ruling by the Board of Patent Appeals and Interferences that a business method developed by Bernard Bilski and Rand Warsaw for hedging risks in commodities trading is not patentable under the U.S. Patent Act, 35 U.S.C. § 101.
The decision comes only a decade after the Federal Circuit first allowed business method patents in State Street Bank v. Signature Financial Group, by granting patent protection to a system for managing mutual fund accounts.
In the majority opinion, Chief Judge Michel explicitly rejects the “useful, concrete and tangible result” test the Federal Circuit had set forth in State Street in 1998. Relying on the Supreme Court opinions in Gottschalk v. Benson and Diamond v. Diehr, the court in Bilski states that in order to be eligible for a patent, a process must fulfill the “machine-or-transformation” test. According to this test, a process is patentable under 35 U.S.C. § 101 if “(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.”
Patently-O explores the case with detailed commentary, including potential applications to biotechnology and life sciences, software claims, and tax strategies.
Daniel Crowe, a patent litigator at Bryan Cave, states that it remains uncertain what will happen to the business-method patents that have been approved since 1998 that might not hold up under the Bilski test.
Randy Lipsitz, a patent specialist at Kramer Levin in New York predicts that the number of patent applications from the financial and software industries will decrease as a result of the decision.
Steve Seidenberg of InsideCounsel believes that State Street’s many critics, who see business patents as opening the doors to patent trolls, low-quality patents, and excessive litigation costs will be pleased with the Bilski decision.