The Supreme Court of the United States granted certiorari on June 1, 2009 In re Bilski, 545 F.3d 943 (Fed. Cir. 2008) and handed down their findings, under the title Bilski v. Kappos on 28 June 2010. In brief, while the Supreme Court affirmed the judgement of the US Court of Appeals for the Federal Circuit in re Bilski, it rejected the assertion that the “machine-or-transformation” test is the sole test for patent eligibility of business method patents.
This Article provides context to the findings of the US Supreme Court by chronologically reviewing, albiet in brief, modern US case law on the eligibility of business method patents in the United States.
Section 101 of Title 35 U.S.C. sets out the subject matter that can be patented in the US:
“Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”
• Gottschalk v. Benson, 409 U.S. 63 (1972)
• Parker v. Flook, 437 U.S. 584 (1978)
• Diamond v. Diehr, 450 U.S. 175 (1981)
These cases established that the “clue” to whether a patent might be granted on a process was whether the process was carried out by a particular apparatus or otherwise effected a transformation of an article from one state or thing to another state or thing. In Benson it was said that “Phenomena of nature, though just discovered, mental processes, and abstract intellectual concepts are not patentable”. In Flook, where the sole departure from the prior art was concededly the formula or algorithm, the process was simply not the kind of process that could be patented.
In the 1981 case of Diamond v. Diehr, the United States Supreme Court ordered the grant of a patent on an invention, a substantial part of which involved use of a computer program which used a well-known formula (the Arrhenius Equation) for calculating the time when rubber was cured and thus when a mold could be opened. The Supreme Court stated that in this case, the invention was not merely a mathematical algorithm, but a process for molding rubber, which was therefore patentable. In the Diehr case, there was no concession that the implementation was conventional, and the process did effect a transformation of substances (from uncured rubber to cured rubber).
Related to a “Data Processing System for Hub and Spoke Financial Services Configuration”: The “spokes” were mutual funds that pool assets in a central “hub”.
The test for patentability cited in the judgement was whether the invention produced a “useful, concrete and tangible result”. This test decisively widened the scope of patentable subject matter to include all business method patents where there was a real, commercial result.
The patent in question related to a method of hedging risks in commodities trading and was held to be ineligible for patent
Bilski held that the “useful, concrete and tangible result” test was insufficient in terms of an assessment of patentability and affirmed the “machine-or-transformation test” that effectively arose from the Patent-Eligibility Trilogy as the test to be applied.
Bilski, however, went one step further, and made the test dispositive, the sole test to be used in the determination of patentability of business method related inventions.
The machine-or-transformation test can be summarized as follows, a business method is patentable subject matter if:
(1) It is tied to a particular machine or apparatus, or
(2) It transforms a particular article into a different state or thing.
The case didn’t properly address the question of ‘what is an article’ in terms of electronic signals and electronically-manipulated data. However, it is clear that this test left little room open for business method patents that:
1. Were not limited to implementation by a computer or other machine specifically adapted to assist in the carrying out of the method, or
2. Did not involve a technical transformation of data (as opposed to a financial or legal transformation).
The Supreme Court of the United States granted certiorari on June 1, 2009 and oral argument on the patent applicants’ appeal. The decision of the Supreme Court was handed down on 28 June 2010.
The Supreme Court held that the machine-or-transformation test is not the sole test for determining the patent eligibility of a process, but rather “a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under S 101.”
The Court looked to Gottschalk v. Benson and Parker v. Flook (of the Patent-Eligibility Trilogy) and noted that both had explicitly refused to rely on the machine-or-transformation test as the sole test for patent eligibility.
The Court emphasized that a process claim meets the requirements of S101 if when, “considered as a whole,” it “is performing a function which the patent laws were designed to protect (e.g. transforming or reducing an article to a different state or thing.”
However, the Court balanced this view by rejecting the notion proposed in the State Street Bank case that anything which produces a “useful, concrete, and tangible result” is patentable.