Bilski Decision Gives Test for Scope of Patentable Subject Matter for U.S. Patents

The much anticipated decision by the U.S. Court of Appeal for the Federal Circuit in Re Bilski is the latest development in the ongoing debate over the scope of patentable subject matter in the United States. More specifically, the case gave the Court an opportunity to re-examine the subject matter requirements for business method, software and other process patents. The case was heard en banc (before the whole court) and resulted in a nine member majority, with a two member concurrence, and three separate dissents.

The patent that Bilski sought was for a method of hedging risk in commodities trading. His patent was rejected by the examiner and then again by the Board of Patent Appeals for not being directed to patent-eligible subject matter. The central issue is where the line should be drawn between unpatentable fundamental principles or abstract ideas and properly patentable subject matter.

The majority endorsed a “machine-or-transformation” test wherein a valid process claim must either be tied to a particular machine or transform a particular article into a different state or thing. The Court then went through a more detailed examination of the transformation branch, which was the branch relevant to these facts, and chose to leave further discussion of the machine branch for another day.

In applying the transformation branch of the test to the facts, the Court found that Bilski’s claims did not transform any article to a different state or thing because “public or private legal obligations or relationships, business risks, or other such abstractions cannot meet the test because they are not physical objects or substances, and they are not representative of physical objects or substances”.

The full impact of this decision remains to be seen as it leaves certain questions unanswered (including what the full scope of the machine branch should be and what exactly will qualify as “representing a physical object or substance”). While clever claims drafters may be able to successfully characterize some of their claims in a manner that satisfies the test, it’s likely to force them to present some of the more abstract claims more narrowly – as either tied to a specific machine or as representing a specific physical object or substance.

As for the other opinions in the judgment, the first dissent argued the majority opinion was too restrictive; the second dissent argued the majority did not go far enough and that business method patents should be eliminated altogether; and the third dissent argued that a new test like this was flawed and not needed to conclude the claims covered an abstract idea. The concurring opinion simply responded to the claims in two of the dissents that the majority decision was not grounded in the statute.

I found the opinions interesting when read together, in part because they reveal how much the underlying issue is really a policy question more so than one of legal interpretation. As far as that question is concerned, while likely the most extreme position, I prefer the Mayer dissent arguing for the elimination of business method patents. I continue to fail to see how this particular brand of inventiveness needs the additional incentive of monopoly rights. Though I suppose Lord Justice Jacob would tell me that my opinion is coloured by my “suspicious view of patents as an inhibition of trade”.

For additional coverage and analysis of this important decision check out the PatentlyO blog here, here, here, here, here, and here!

  1. One of the first things that comes to mind is how the Bilski decision will impact software patents and ultimately free open source software. As I am typing this, I am using Firefox as my browser and checking my email through Thunderbird, both of which are open source software, and most definitely, my preferred applications. Sometimes I wonder why there isn’t any more open source software out there. While the purpose of patents is to foster innovation, they have hindered development in the open source community. I can imagine that contributors would find themselves treading lightly so they don’t inadvertently end up in the danger zone of lawsuits. I think the Bilski decision is wonderful news for the open source community and I am very much looking forward to seeing more open source software in the future.

  2. The scope of patent protection is definitely a hot topic when it comes to “method” patents and is not limited to only business methods. This issue is present in the medical sciences for medical method patents, a term usually given to patents which cover the manner in which a physician diagnoses or treats a patient. Commentators have acknowledged ( that the Bilski decision has potential to impact these types of patents as well. In the words of the majority, “a claimed process wherein all the process steps may be performed entirely in the human mind… would not be patentable.”

    For medical treatment patents, this seems like a reasonable limit – if the claimed subject-matter relates to the thought process inside a physician’s head, we are talking about a monopolizing a physician’s unique skill and judgment. On the other hand, as one Canadian judgment has noted (Merck & Co. v. Apotex Inc. [2005] F.C.J. No. 937), if the claims relate to a “vendible product having real economic value” the claims do not relate to a method of medical treatment.

  3. There has been much excitement over this decision and its potential impact on software patentability in the US. I tend to believe the actual impact of the decision will be small for several reasons. First, patent attorneys are clever drafters. The Bilski decision will lead the USPTO to adopt the machine-or-transformation argument during patent prosecutions. Though several test patents may fail it is inevitable that claim drafting will adapt to the meet this test while still retaining most if not all of the previous features of method and software claims. Predicting what language this will require is difficult but the USPTO is sure to tip their hand in the months to come. Second, the majority in Bilski intentionally left the door open for software patents, at p.21 “Therefore, although invited to do so by several amici, we decline to adopt a broad exclusion over software or any other such category of subject matter beyond the exclusion of claims drawn to fundamental principles set forth by the Supreme Court.” Though arguably such patents will be subject to the machine-or-transformation test. Third, the KSR and Ebay cases have shown that the Supreme Court is averse to applying rigid tests in the patent arena. Furthermore Benson, addressed in Bilski, establishes that the machine-or-transformation test is but one test in determining patentability. Together these cases suggest that although the application of the machine-or-transformation test in this case was determinative it is part and parcel of a wider more general approach to patents. To assume it will become the only or the determinative test in future cases is predicting a future that sits on shifting and flexible sands.

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