Summary - Patentability of business processes and the Bilski case

Tests for patentability developed in the Industrial Age may not be adequate for determining patentability in the Information Age.

Background to the Bilski case

The US Supreme Court recently handed down an important and much anticipated decision concerning the patentability of business processes. In 1997, Bernard Bilski and Rand Warsaw filed a patent application for a method of hedging commodity prices in the energy market. The US Patent Office rejected the application as not comprising patentable subject matter as it merely disclosed an abstract idea.

The United States Court of Appeals for the Federal Circuit upheld this decision, stating that the method was not able to be the subject of a valid patent because the invention was neither tied to a particular machine or apparatus, nor did it transform a particular article into a different state or thing.

Abstract ideas and patentability

The US Supreme Court upheld the decision that mere abstract ideas are not valid subject matter for a patent application and the claimed method was an abstract idea. In doing so, however, the Court did not clearly define an "abstract idea". We will need to wait for further decisions to further refine the meaning of an "abstract idea" following this judgement.

Machine or transformation test

However, the US Supreme Court disagreed with the US Federal Court in relation to the machine or transformation test. The Court held that the machine or transformation test is not the sole test for determining the patentability of a process, but rather a useful indicator of patentability.

Inventions in the Information Age

Further, the Court considered that the machine or transformation test, while useful in evaluating processes in the Industrial Age (for example, inventions grounded in a physical or tangible form) should not be determinative in assessing the patentability of inventions in the Information Age. Inventions in the Information Age include, but are not limited to, software, advanced diagnostic medicine techniques and inventions based on linear programming, data compression and the manipulation of digital signals. Whilst the Court cited these inventions, it reserved its position as to the patentability under each specific example.

The Court was split on whether business methods are "processes" for the purpose of patent law (as a patent must cover a process). This decision still leaves open the issue of the patentability of business methods. This issue may need to be revisited by the Court in the near future.

Useful, concrete and tangible result test

No Australian Court has handed down a decision to alter the Australian approach to business methods and software which is currently heavily influenced by the "useful, concrete and tangible result" test as adopted from the US State Street Bank case. This test was followed by the Federal Court of Australia decision in Welcome Real-Time SA v Catuity Inc (2001) which held that an invention is patentable when applied to produce a particular practical and useful result.

Patentability of business methods in Australia

It is yet to be seen whether Australian courts will be influenced by the Bilski decision, in particular by the principles expressed by the US Supreme Court in its interpretation of the machine or transformation test.

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