Putting the Brakes on Process

The use of patents to protect abstract business processes used in software have been limited by the U.S. Supreme Court.

In the so-called Bilski case, the Supreme Court upheld a U.S. Patent and Trademark Office ruling, but didn’t address the broader question of whether certain business concepts are patentable. Read the full ruling here (pdf).

Justices agreed with an appeals court ruling that threw out Bernard Bilski and Rand Warsaw’s application for a patent on a method for hedging weather-related energy commodities trading risk.

But they did not need to look beyond previous case law to make the decision.

“Because petitioners’ patent application can be rejected under the Court’s precedents on the unpatentability of abstract ideas, the Court need not define further what constitutes a patentable ‘process,’” Justice Anthony Kennedy wrote for the court.

The ruling likely will be unsatisfying for businesspeople and intellectual property attorneys who had hoped for a definitive answer on whether certain business methods—including software, tax strategies and medical diagnostic techniques—are patentable.

“Wow, the Supreme Court ended its 2010 session with a bang," said Stephen Schreiner, a partner with the law firm Goodwin Procter LLP. "The Court launched the United States Patent System into the Information Age with the Bilski v. Kappos decision today. Rejecting the chorus from some demanding the Patent System be limited to Industrial Age technology, the Court answered with a flat ‘no,’ finding patents are available for software, business methods, medical diagnostic techniques, and other products of the Information Age. In sum, everything is ‘back up in the air’ again.”

Many companies have been granted patents on business concepts since 1998, when a ruling in a case involving State Street Bank & Trust Co. opened the door to such patents.

Since then hundreds, if not thousands, have been granted, among them Amazon.com’s “one-click” online checkout system, Netflix’s rental movie delivery system, and Priceline’s Dutch auction-style ticket-buying system.

In 2008, the U.S. Court of Appeals for the Federal Circuit said that a process is patentable only if it is “tied to a particular machine or apparatus” or if it “transforms a particular article into a different state or thing.”

Kennedy wrote that the court did not endorse that idea as the sole method of determining patentability, although it “may be a useful and important clue or investigative tool.”