In prior issues of MoFo Tax Talk,3 we discussed In re Bilski, No. 2007-1130 (Fed. Cir. Oct. 30, 2008) and tax patents. Bilski held that a method of hedging risk associated with volatile commodity prices by entering into swaps was not patentable because the claim was a “non-transformative process that encompasses a purely mental process of performing requisite calculations without the aid of a computer or any other device” and, as a result, it did not meet the court’s test of being tied to a particular machine or apparatus or transforming a particular article into a different state of things in order to be patent eligible. This test was at odds with an earlier decision in State Street & Trust Co. v. Signature Financial Group, 149 F.3d 1368 (Fed. Cir. 1998), which held that a business method is patent eligible as long as it produces a “useful, concrete, and tangible result.” On June 1, 2009, the U.S. Supreme Court granted certiorari for Bilski, and on June 28, 2010, the Supreme Court officially weighed in (Bernard L. Bilski et al. v. David J. Kappos, No. 08-964), affirming the Federal Circuit’s decision that Bilski’s particular business method for hedging consumption risk was not eligible for a patent. The Supreme Court, however, rejected the machine-or-transformation test as the “sole test” for patent eligibility. The Supreme Court also expressly stated that business methods are not categorically excluded from patent eligibility, instead opting for a more flexible approach. Accordingly, it appears the controversy surrounding tax patents will continue. For a discussion of the decision of the Supreme Court in Bilski, please see our client alert “Business Method Patents Survive Bilski.”
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