ALERT - Supreme Court Decides Process Patents

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July 7, 2010

Does your company own or want to obtain a United States Patent on a “process” or “business method?”  If so, you should be aware that a new United States Supreme Court decision provides important guidance for inventors and their employers.

In this much-anticipated Bilski v. Kappos decision, the Supreme Court held that the so-called “machine or transformation test” for a claimed process is not the sole test for patentability under Section 101 of the Patent Act.  The Supreme Court rejected this “machine or transformation test” which the U.S. Court of Appeals for the Federal Circuit previously held to be the only patentability test for a “process.” In doing so, the Supreme Court upheld the Court’s previous case law, finding the particular patent application at issue unpatentable, but as an “abstract idea.”  Although such abstract ideas are unpatentable, this decision will somewhat alleviate the fear that a process or business method can be rejected by the U.S. Patent and Trademark Office (USPTO) by only looking at one aspect of the invention, namely, whether the invention is tied to a machine and/or transforms an article.

Claims 1 and 4 of the Bilski patent application were directed to steps instructing how commodities buyers and sellers in the energy market can protect, or hedge, against the risk of price changes.  Previously, the USPTO rejected the application on the grounds that the invention is not implemented on a specific apparatus, but merely manipulates an abstract idea, and solves a purely mathematical problem.  The Federal Circuit upheld this ruling and formulated the “machine or transformation test” as the only test for patent eligibility for a process.

In overturning the Federal Circuit’s determination that the “machine or transformation test” is the only test for patent eligibility for a process, the Court did leave the door open for the USPTO to use this test as a “useful and important clue, an investigative tool, for determining whether some claimed inventions are processes” under Section 101.  But it may not be used as an exclusive test.

The Court also held that so-called “business method” patents are not categorically excluded by the Patent Act.  The Court recognized the fear, expressed by some, that patent examiners and courts could be flooded by such patent applications, but again used its precedents on the unpatentability of abstract ideas as a limiting principle.  The Court also noted that existing statutory requirements for patentability: novelty, non-obviousness, and full description, would help to “adjust the tension present in patent law, between stimulating innovation by protecting inventors and impeding progress by granting patents when not justified by the statutory design.”

The decision still leaves undecided what constitutes a patentable “process.” The Court noted that it was not endorsing past interpretations of Section 101 by the Federal Circuit, such as the “useful, concrete and tangible result” test of State Street Bank & Trust v. Signature Financial Group, Inc., 149 F.3d 1368, 1373 (CA Fed. 1998).

Moreover, business method patents may still be the subject of litigation: while some business method patents may be allowable, the Court noted that it was not suggesting broad patentability of such inventions.

The opinion was written by Justice Kennedy.  Justice Stevens wrote separately, concurring.  Justices Ginsburg, Breyer and Sotomayor joined in Justice Stevens’s opinion.

For more information, contact your Briggs and Morgan attorney or a member of the Intellectual Property Practice Group.

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