U.S. Supreme Court in Bilski In Bilski v.
Kappos, the U.S. Supreme Court decided the patentability of
the Bilski patent application in issue, as well as addressed
broader questions of whether business methods can be categorically
excluded from patentability and how to determine the patentability
of a "process" under 35 U.S.C. §101 of the
United States Patent Act.
The claims in the Bilski patent application were generally
directed to methods for managing investors' risk in a
commodities market. The U.S. Patent Office argued before the
Supreme Court that the claimed invention was not patentable
because: 1) the claimed invention was not tied to a particular
machine or did not transform an article to a different form or
state; 2) the claimed invention involved a method of conducting
business; and 3) the claimed invention was merely an abstract
The Supreme Court accepted the final argument and rejected the
claimed invention as being merely an abstract idea. The Court
described the main claims as directed to the basic concept of
hedging and commented that allowing the petitioners to patent risk
hedging would preempt use of the approach in all fields,
effectively granting a monopoly over an abstract idea.
On the broader issue of whether business methods were
patentable, the Court found no statutory support for the contention
that the term "process" in §101 categorically
excludes business methods. Rather, the Court found support for the
understanding that a business method is simply one kind of method
that was, in some circumstances, patentable, and recognized the
need to provide potential patent protection to new and emerging
technologies. As a result, business methods are not precluded from
patentability simply upon being categorized as business
As for the appropriate test for determining the patentability of
a process, the Supreme Court rejected the Court of Appeals'
endorsement of the machine-or-transformation test as the
exclusive test for the patentability of a process. It
reasoned that to do so would improperly read limitations and
conditions into patent laws which the legislature had not
expressed. The Supreme Court held that while its previous decisions
establish the machine-or-transformation test as a useful and
important clue for determining whether some claimed inventions are
processes under §101, it was not the sole test for deciding
whether an invention was a patent-eligible process. Although the
Supreme Court itself presented no alternative test for business
method patents, it encouraged the Federal Circuit to develop a less
extreme means of restricting business method patents through other
limiting criteria that furthered the Patent Act's
purposes and were not inconsistent with its text.
Subsequent to the Supreme Court's decision in
Bilski, the United States Patent and Trademark Office
issued a brief Memorandum providing interim guidance to patent
examiners. The Patent Office acknowledged that in accordance with
Bilski, the machine-or-transformation test was not the
sole test for patent-eligibility of processes under §101, and
that "the machineor- transformation test is a useful and
important clue, an investigation tool, for determining whether some
claimed inventions are processes under §101". In this
regard, patent examiners are directed to examine pending and future
patent applications for compliance with §101 using the
existing guidelines concerning the machine-or-transformation test
as a tool for determining whether the claimed invention is a
process under §101, and "[i]f a claimed method does not
meet the machine-or-transformation test, the examiner should reject
the claim under §101 unless there is a clear indication that
the method is not directed to an abstract idea".
In view of this decision, the U.S. Supreme Court has concluded
that business method patents are not excluded from patentability,
and that the machine-or-transformation test is not the sole test
for determining patentability of a process. While the Supreme Court
has left the door open with respect to the patentability of
business methods, patent applicants are well advised to review
their applications to ensure that what they are attempting to
patent is not merely an abstract concept or idea.
Technology Update edited by Robert Irani
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A recent Saskatchewan Court of Queen's Bench decision allowed a court-appointed receiver to sell and transfer intellectual property rights free and clear of encumbrances, finding that a license to use improvements of an invention was a contractual interest and not a property interest.
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