Litigation

Business method patents ride Bilski to the Supreme Court

By Rick Boyd

In 1998, the Court of Appeals for the Federal Circuit (CAFC), affirmed the patentability of business methods in State Street Bank v. Signature Financial Group,  prompting a flood of business method applications into the U.S. Patent and Trademark Office.  However, in 2008, an en banc CAFC emphatically (9-3) proclaimed, 'Enough!'  Bernard Bilski and Randall Warsaw's claimed method for hedging risks in commodities trading was found unpatentable.  With certiorari recently granted, questions regarding the scope of patentable business methods now move to the Supreme Court.
 
In State Street, the CAFC required only that a claimed invention provide a ?useful, concrete and tangible result?.  True, "a...process is surely patent-eligible under § 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."  In Bilski however, the CAFC for the first time stated these two alternatives not as indicators, but as the exclusive 'machine-or-transformation' requirements for business method patentability.
 
Almost immediately, the U.S. Patent and Trademark Office (USPTO) began rejecting, based on Bilski, numerous computer-implemented processes that are not 'business methods'.  Why?  Apparently, in the eyes of the USPTO, a 'particular machine or apparatus' does not include general purpose machines (e.g. computers and processors) if they are not specially configured for the claimed process.
 
Until the Supreme Court rules, business method patents remain vulnerable to invalidity challenges, and many pending process patents face a new and formidable obstacle to allowance.  Key questions remain.  How much 'transformation' is sufficient?  What constitutes a 'particular machine'?  For now, to avoid losing rights due to the holdings in Bilski and their implementation by the USPTO, applicants must pay to keep their applications alive pending Supreme Court action. 
 
Our predictions?  The Supreme Court will reject the rigid and exclusive new 'machine-or-transformation' rule, while reciting and renewing precedent already fat with patentability indicators.  Bilski will be remanded to the CAFC, where the applicants will ultimately lose as they should have, for claiming an overly broad and abstract idea.  Ultimately, we believe the validity of already granted business method patents will be left to case-by-case evaluation through litigation, with the apple cart remaining happily upright and rolling down a well trodden road.

Full post as published by Northwest Business Litigation Blog on July 02, 2009 (boomark / email).