The United States Supreme Court issued its widely-anticipated decision in Bilski v. Kappos, 561 U.S. ___ (2010). The Bilski decision addressed whether so-called “business” methods can be eligible for patent protection. Bilski is of particular significance in the financial, software, and computer sciences fields, where many business method patents originate. The Court upheld the rejection of the Bilski application by the Patent Office and the Federal Circuit, but did so on grounds that differ significantly from those relied upon by the Patent Office or the Federal Circuit.
Bilski’s patent application sought protection for procedures for allowing energy suppliers and consumers to minimize risks resulting from demand and price fluctuations in energy markets. At issue was whether such techniques are eligible subject matter for patent protection as a “process” under Section 101 of the Patent Act, which restricts the categories of inventions eligible for protection to processes, machines, manufacturers and compositions of matter.
Below, the Federal Circuit had held in its en banc Bilski decision that the test for patent eligibility of a process or method was whether the process was "tied to a particular machine or apparatus" or whether it "transforms a particular article into a different state or thing." This was called the "machine-or-transformation test." On appeal from that decision, the Supreme Court addressed three arguments advanced for why the claimed invention does not fall within the scope of Section 101 patentable subject matter: (1) it does not satisfy the machine-or-transformation test; (2) it is directed to a business method; and (3) it is merely an abstract idea.
The Supreme Court found "reasons to doubt whether the [machine-or-transformation] test should be the sole criterion for determining the patentability of inventions in the Information Age." The Court held that the Federal Circuit's view was too limiting and that the "machine-or-transformation test" is not the exclusive test for patent eligibility. The Court noted that, while the machine-or-transformation test can be a useful tool in evaluating patent eligibility, the Patent Act is more expansive in scope, and offers the possibility of patent protection for a broader range of processes than those delimited by the "machine-or-transformation test." Noting that one provision of the Act explicitly contemplates the existence of business method patents, the Court also refused to categorically exclude business methods from the scope of patentable subject matter contemplated by Section 101. The Court, however, went on to conclude that the claims of the Bilski patent application are outside the scope of Section 101 because they are directed to an abstract idea in violation of established precedent holding that abstract ideas are unpatentable.