Summary - Patentability of business processes and the
Tests for patentability developed in the Industrial Age may not
be adequate for determining patentability in the Information
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
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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