In Bilski v Kappos,1 the US Supreme Court held that the machine-or-transformation test2 is not the sole test for determining whether a process is patentable subject matter under 35 USC §101. While the decision did not directly address patentability of software, the principles articulated in Bilski should be considered when drafting software claims. This article explores the Bilski decision from a software perspective, and provides guidance for software claims in light of Bilski.

In Bilski the claims of the patent application were directed to a process of hedging against the risk of price changes for commodities in an energy market.3 The patent examiner rejected all the patent application claims, and the Board of Patent Appeals and Interferences (BPAI) affirmed the patent examiner’s decision. The Federal Circuit, en banc, affirmed the decision of the BPAI. The Federal Circuit rejected its prior test for determining whether a claimed invention was a patentable process under 35 USC §101, i.e., whether the claimed invention produces a useful, concrete, and tangible result, as articulated in State Street Bank & Trust Co. v. Signature Financial Group, Inc.4 and AT&T Corp. v. Excel Communications Inc.5 The Federal Circuit further held that a claimed process is only patent-eligible under section 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing (machine-or-transformation test).

After noting that Congress contemplated that the patent laws be given wide scope based on the plain language of section 101, the Supreme Court interpreted the term “process” in section 101. The Court rejected two categorical limitations on the term: (1) the machine-or-transformation test and; (2) the categorical exclusion of business method patents. The Court held that, while the machine-or-transformation test is a useful clue for determine whether an claimed invention is a “process” under section 101, the machine-or-transformation test is not the sole test for determining whether a claimed invention is a patent-eligible process. The Court further held that the plain and ordinary meaning of the Patent Act6 allows for the inclusion of business methods as patentable subject matter. Nevertheless, the Supreme Court affirmed the Federal Circuit’s decision, holding that the claims were directed to an abstract idea, which the Court identified was an exception to section 101’s broad patent-eligible categories.7

The Supreme Court briefly discussed the patentability of software, indicating that it had previously held that a procedure for molding rubber that included a computer program was patentable subject matter. The Court also identified that the machine-or-transformation test would create uncertainty as to the patentability of software.

The Court’s reliance upon an abstract idea analysis to determine the outcome strongly suggests that one should focus on whether a software claim merely describes an abstract idea, which would preempt use of the idea, or instead describes a practical application of the idea. Supreme Court and Federal Circuit precedents provide guideposts outlining the boundaries of unpatentable subject matter (abstract ideas), and patentable subject matter (practical applications of an idea).

The first guidepost, providing examples of unpatentable subject matter, includes the Supreme Court cases Gottschalk v. Benson8 and Parker v. Flook.9 Benson held that a process of converting binary code to pure binary was not a patentable process under 35 USC §101. The Court characterized the claimed process as a mere variation of ordinary arithmetic steps a human could use to mentally convert the numerals, and as being so abstract and sweeping as to cover both known and unknown uses of the binary code to pure-binary conversion. Likewise in Flook, which held that a process of updating alarm limits using a mathematical algorithm was not a patentable process under section 101, the Court characterized the adjustment of an alarm limit to a figure computed according to the mathematical algorithm as “post-solution” activity, and held that post-solution activity cannot transform an unpatentable abstract idea into a patentable process.

The Court did not hold that software must be tied to a particular structure or perform a function of transforming an article to a different state to constitute patentable subject matter, but merely that such a tying or transformation is an example of a practical application of an idea.

The second guidepost, providing examples of patentable subject matter, includes the Supreme Court case Diamond v. Diehr10 and the Federal Circuit case In re Allapat.11 Diehr held that a claimed process for molding synthetic rubber products utilizing an algorithm was patentable subject matter. The Supreme Court stated that, unlike the claimed process in Benson, where the sole purpose of the algorithm was the programming of a general purpose digital computer, and unlike the claimed process in Flook, where the sole purpose was to compute a number which represented an “alarm limit,” the algorithm in the claimed process of Diehr implemented the formula in a structure or process which performed a practical function, such as transforming or reducing an article to a different state or thing. The Court did not hold that software must be tied to a particular structure or perform a function of transforming an article to a different state to constitute patentable subject matter, but merely that such a tying or transformation is an example of a practical application of an idea.

Furthermore, in Allapat the Federal Circuit stated that Benson, Flook and Diehr did not create a fourth category of subject matter excluded from section 101 (i.e., algorithms) but merely explained that certain types of algorithms represent nothing but abstract ideas until reduced to some type of practical application. Applying this principle, the Federal Circuit held that the claimed invention was directed to a combination of interrelated elements which combined to form a machine that performed a specific function, as opposed to an abstract idea.

Therefore, in drafting a software claim, one should draft the claim to position it somewhere between the two guideposts delineating patentable subject matter and unpatentable subject matter. In other words, the claim should be drafted so that it can be fairly characterized as a practical application of an idea rather than a mere abstract idea. In Bilski the Supreme Court articulated that one way of positioning this claim between the two guideposts is to tie the claim to a particular machine or recite a transformation of underlying subject matter to a different state or thing.12 However, the Court also articulated that there are other ways to draft the claim so that it is directed to a practical application rather than an abstract idea, although the Supreme Court gave little guidance on how to draft the claim. Thus, a patent drafter should draft the software claim carefully not to be so overbroad that the software claim can be characterized as an abstract idea, and to ground the claim in an appropriate context that makes clear the software claim is directed to a practical application.