On November 9, 2009, the Supreme Court of the United States heard oral arguments in what is shaping up to be perhaps one of the most important decisions related to U.S. patent law in the past century -- Bilski v. Kappos or In re Bilski. The key issue in the Bilski case is what the bounds are of “subject matter” that is patentable; or, put another way, “What exactly is patentable?”

The subject matter at issue is a method for calculating, managing and hedging risks in commodities trading. This type of patent claim falls into the category of subject matter loosely called a “business method.”

On October 30, 2008, the Federal Circuit Court of Appeals (the single appellate court for all appeals related to patents in the United States) issued a decision holding that the Bilski method does not constitute patentable subject matter. In doing so, the Federal Circuit adopted a definitive test for determining whether a process is patentable subject matter called “the machine-or-transformation test.” Under the Federal Circuit’s test, a claimed process or method is patentable subject matter only if (1) it is tied to a particular machine or apparatus or (2) it transforms an article into a different state or thing. The Federal Circuit held that the Bilski process encompassed purely a mental process and was not implemented by a machine; and that the Bilski process did not transform an article into a different state or thing.

The answer to the question of what processes are patentable or not is important to several industries, including the healthcare, internet, computer and software industries. Indeed, several categories of patents and patent applications in these fields and others are subject to attack as a result of the Federal Circuit’s test articulated in In re Bilski, which is now being reviewed by the Supreme Court.

The Supreme Court should decide this case in the Spring of 2010. Stay tuned to learn the fate of the Federal Circuit’s patentability test and the thousands of patents and patent applications impacted by it.