On 30th October, the US Court of Appeals for the Federal Circuit (CAFC) revisited the issue of whether business ideas are patentable. In the case In re Bilski (Bilski)¹, the court looked at the concept of whether a method of hedging commodities transactions, which does not involve the use of a computer or any other machine, were patentable.

The CAFC took the opportunity to reaffirm the machine or transformation test as set out in an earlier Supreme Court decision in Gottschalk v. Benson (Benson)². In Benson, it was held that in order to be patentable, the process must involve the use of a particular machine or apparatus, or must transform an article into a different state or thing.

By a resounding majority of ten to two, the CAFC held that the method of hedging commodities transactions did not satisfy this test and was therefore not patentable. The decision, which is potentially reversible by the Supreme Court, throws into doubt the validity of some patents already granted and may have a detrimental effect on the number of US business method patents in the future.

It is only since the case of State Street Bank & Trust Co. v. Signature Financial Group Inc (State Street)³, which dealt with a patent for a data processing system used to implement an investment structure, that any form of business method could be deemed to be patentable. In that case, the court took account of the practical utility of the subject matter and considered the fact that the system produced a "useful concrete and tangible result" to be important.

The examiner initially refused the patent application in Bilski, because the system did not meet the "technological arts" test under US patent law. The Board of Appeals rejected this finding but found that the claims of the patent application were not patentable on the basis that they failed to indicate that the invention accomplished any type of physical transformation. The applicant then appealed to the CAFC, who took the opportunity to review the standards required for patent eligibility in terms of section 101 of Title 35 of the United States Code.

In its decision in Bilski, the CAFC followed the test laid down by the Supreme Court in Benson. However, the CAFC accepted that the test might not be ideal for modern business practices, given the way that computers and the Internet have influenced the way in which so many businesses are conducted. The CAFC also stated that it accepted that the Supreme Court might ultimately alter or adapt the machine or transformation test to accommodate emerging technologies.

The decision will most likely result in fewer registered business patent methods in the US. The case attracted enormous interest (there were 39 amicus briefs filed) and it is certainly likely that another case will appear before the Supreme Court soon. European patent authorities have long taken a much more restrictive approach to business method patents than those in the United States and it is at least arguable that this case may bring European and US patent law a step closer to each other in this regard.