In a sweeping decision, which, according to Federal Circuit Judge Randall R. Rader, "links patent eligibility to the age of iron and steel at a time of subatomic particles and terabytes,"1 the U.S. Court of Appeals for the Federal Circuit held on Oct. 30, 2008, that claims for new and useful processes are eligible for patenting if, and only if, those claims are "tied to a particular machine" or recite a process that "transforms an article into a different state or thing."2 Labeling this the "machine-or-transformation test," the court acting en banc advised practitioners and the U.S. Patent and Trademark Office (USPTO) alike that prior cases announcing other tests for patent eligibility, such as the Freman-Walter-Abele test and the "useful, concrete, and tangible result" test, as well as the USPTO's "technological results" test, should "no longer be relied on."3 Unfortunately for Bilski, his claimed method for hedging risk in the field of commodities trading did not meet the machine-or-transformation test and so was found to be ineligible for patent protection.4

For those unfamiliar with the patent law in the United States, the need for a ruling such as that handed down in Bilski may seem odd. After all, the USPTO's Manual of Patent Examining Procedure provides:

Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.5

Seemingly then, any new or useful process would be eligible for patenting, provided it met the other statutory conditions and requirements. However, as the Bilski court explained, not all processes are statutory processes under § 101. Indeed, determining whether or not a claimed process is a statutory process is a "threshold inquiry" and failing this test will negate patentability even if all of the other requirements and conditions of the statute are met.6 The question thus presented in Bilski was "exactly what sort of processes are statutory processes?"

To answer this question, the court turned to several prior decisions of the U.S. Supreme Court and reasoned that the definitive test for determining whether or not a claimed process was indeed a statutory process examines whether or not that process (1) is tied to a particular machine or apparatus, or (2) transforms a particular article into a different state or thing.7 According to the court, this inquiry is required so that patents will not pre-empt substantially all uses of fundamental principles, and instead reserves those monopolies to specifically enunciated variants thereof.8

Simply reciting the use of a machine or the presence of a transformation in a patent claim does not guarantee patent eligibility. The Bilski court determined that what is needed is language that imparts meaningful limits on a claim's scope; insignificant extra-solution activity will not be sufficient.9 Moreover, any "transformation must be central to the purpose of the claimed process."10

As Bilski's claims were not directed to the use of any particular machine, the court did not address whether or when recitation of a computer or other machine suffices to tie a process claim to a particular machine11, and instead focused its analysis on the transformation branch of the machine-or-transformation test. In doing so, the Federal Circuit revisited some of its older cases to see how they fared. This required the court to opine on just what sort of things are proper "articles" which can undergo transformation for patent eligibility.

According to the court, "it is virtually self-evident that a process for a chemical or physical transformation of physical objects or substances is patent-eligible subject matter."12 When it comes to electronic signals and electronically-manipulated data, however, the court intimated that such data must either be representative of physical and tangible objects, or be electronically transformed into a visual depiction thereof (if there is no actual physical transformation of the object represented by the data) in order for a process directed to such data to be eligible for patenting.13 Such criteria are not met merely by "adding a data-gathering step to an algorithm."14 In Bilski's case, because the process sought to be patented did not transform any article to a different state or thing, it was ineligible for patent protection, even if it were deemed to be new and nonobvious.15

If left unchanged16, the Bilski decision will have far ranging implications for computer-related inventions, as much for what it says as for what it does not say. For example, the court refused to elaborate on "the precise contours of machine implementation, as well as the answers to particular questions, such as whether or when recitation of a computer suffices to tie a process claim to a particular machine."17 These questions will now have to be addressed on an application-by-application basis within the USPTO as applicants and patent examiners struggle to determine just how much tying is required.

Moreover, the validity of previously issued patents in the Internet and financial service sector may be called into question. In the wake of the Federal Circuit's decision in State St. Bank18, many more so-called "business method" patents were issued. While Bilski does not affirmatively do away with such patents, it does call into serious question those that recite processes that are unlinked to a processing system, linked only to general purpose computers, or which have no or minimal "transformative" operations.