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CLIENT ALERT: Supreme Court publishes opinion in Bilski v Kappos

Today, June 28, 2010, The United States Supreme Court published its opinion in the Bilski v. Kappos case. The opinion stated that “Bilski’s risk-management method was not the type of innovation that may be patented” and that “the machine-or-transformation test is not the sole test for determining patentability.” (“Whether a ‘process’ must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing (‘machine-or-transformation’ test), to be eligible for patenting….”).

Bilski's patent application claimed a method in how to protect buyers and sellers against the risk of price fluctuation in the commodities and energy markets. The examiner rejected the application, stating that the invention was not part of a specific apparatus but an abstract idea. The ruling by the Federal Circuit was based on a test that was referred to as “the machine or transformation test” and that this was the sole test to be used for determining the patentability of a process under35 U.S.C. § 101. Applying this test, the Federal Circuit ruled that the application was not patent eligible. The Federal Circuit's opinion was issued on October 30, 2008 and held that the correct test for patentable subject matter under federal statute 35 U.S.C § 101 was whether it was 1) tied to a particular machine or apparatus or 2) transforms a particular article into a different state or thing (the machine-or-transformation test).

The case was appealed to the United States Supreme Court, which issued its opinion on June 28, 2010. Justice Kennedy, in writing the opinion, upheld the United States Patent and Trademark Office ruling which rejected the use of patents to protect abstract business processes used in business and software applications. More specifically Justice Kennedy detailed how the claims at issue parallel a similar issue in Parker v. Flook, 437 U.S. 584 (1978), noting that Flook established that limiting an abstract idea to one field of use or adding token postsolution components did not make the concept patentable. Justice Kennedy considered the petitioners’ claims regarding how hedging can be used in commodities and energy markets to be equivalent and thus, not patentable.

More importantly to businesses, software companies and biotechnology companies, the Supreme Court held that the machine or transformation test is not the sole test for patent eligibility under 35 U.S.C. § 101 and that the Federal Circuit was in error in ruling that this was the only test to determine whether an invention is patentable or not. The court declined to elaborate on what the specific rule should be, rather Justice Kennedy in his closing remarks indicated that “[t]he Court, therefore, need not define further what constitutes a patentable “process,” beyond pointing to the definition of that term provided in §100(b) and looking to the guideposts in Benson, Flook and Diehr.” Bilski v. Kappos, 561 U.S. slip. Op. at 16 (2010). In summary, no further guidelines were indicated other than re-stating that abstract ideas cannot be patented.

The full text is below.

http://www.supremecourt.gov/opinions/09pdf/08-964.pdf