On June 28, 2010, the Supreme Court of the United States issued its first opinion since 1980 on the difficult issue of deciding what type of subject matter is patentable in the case of Bilski v. Kappos. The opinion gives no clear guidelines, and directs the Court of Appeals for the Federal Circuit, which is the exclusive court for patent appeals, to come up with a new legal standard for determining what constitutes patentable subject matter. The previous standard claimed that an invention must involve a machine or apparatus, or involve the transformation of a physical object was held by the Court to not be the sole deciding factor. Justice Kennedy wrote:

"With ever more people trying to innovate and thus seeking patent protections for their inventions, the patent law faces a great challenge in striking the balance between protecting inventors and not granting monopolies over procedures that others would discover by independent, creative application of general principles."

The most controversial patents and patent applications are those that claim some type of "business method" which may or may not be carried out by use of a computer or other machine, such as methods of investing, managing risk or tax planning. It is not clear what types of innovations are too abstract to patent. As the digital era progresses and new business efficiencies and systems are created, there is presently no legal basis for denying patent protection to such innovation. However, four justices took the position that methods of conducting business do not constitute patentable subject matter.

The decision makes clear that the machine-or transformation test is not the only test for deciding whether an invention is a patent-eligible process. The justices were unanimous that the "machine or transformation" test will remain an important tool for determining the patentability of claimed business method inventions in the future.

The "machine-or-transformation" tests patent eligibility under which a claim to a process qualifies to be considered for patenting only if it:

(1) is implemented with a particular machine, that is, one specifically devised and adapted to carry out the process in a way that is not conventional and trivial; or

(2) transforms an article from one thing or state to another.

The case provides additional support for software patents to rely on a central computer as the machine carrying out the process.

The patent statute Section 101 includes "process[es]" as patentable subject matter and specifies that a "process" is defined to include a "method," and with no categorical exclusion of methods of doing business. Only the exclusion of patent protection for abstract ideas is used to deny patent protection for Bilski's method.

The court does not endorse the Federal Circuit's past interpretations of Section 101, and suggests "less extreme means of restricting business method patents." That could mean more allowances of business method patents which are more than abstract ideas, but also new bases for rejections. This case can be interpreted as pro-patent for business methods and software, but also a clean slate for the Patent Office to devise new and more difficult tests for patentability.

Roetzel's Intellectual Property and Information Technology attorneys help ensure that our clients understand the value of their IP and technology assets and counsel them towards maximizing the full value and benefits of these assets.