Patentability of business methods, Bilski v. Kappos, 08-964

by Allen M Lee28. June 2010 08:44

On June 28, 2010, the U.S. Supreme Court finally ruled in Bilski v. Kappos, 08-964, on the long contentious issues of whether business methods are patentable subject matter under the patent laws, and whether the Federal Circuit’s machine-or-transformation test was the exclusive test in making this determination.       

To provide some context, the patent laws provide that there are four independent categories of inventions or discoveries that are patentable: (1) processes, (2) machines, (3) manufactures, and (4) compositions of matter.  The Supreme Court has held that there are three specific exceptions to these categories that do not constitute patentable matter: (i) laws of nature, (ii) physical phenomena, and (iii) abstract ideas.   

In Bilski, the Supreme Court held that “process” does not categorically exclude business methods.  Rather, a business method is simply one kind of “method” that is, at least in some circumstances, patent-eligible. 

The Court also held that the Federal Circuit’s machine-or-transformation test, while useful, is not the sole or exclusive test for deciding whether an invention is patent-eligible.  Under the machine-or-transformation test, an invention is a “process” only if (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.     

In deciding Bilski, the Court declined to determine whether petitioners’ underlying patent application for hedging against the risk of price fluctuations in the commodities and energy market constituted patentable “processes,” or to define further what constitutes a patentable “process” beyond the definitions provided in Section 100(b) of the Patent Act or the Court’s guideposts in Gottschalk v. Benson, 409 U. S. 63 (1972), Parker v. Flook, 437 U. S. 584 (1978) and Diamond v. Diehr, 450 U. S. 175 (1981).  Instead, the Court held that the petitioners’ patent application was not patentable simply because it claimed an abstract idea. 

Allen M. Lee.  Mr. Lee’s practice focuses on business, corporate and intellectual property matters, including the creation, protection and exploitation of intellectual property assets.  He counsels clients on business formation, general corporate matters, trademark, copyright, trade secret, patent, licensing, internet and domain name issues, among other things.  For more information contact: Allen M. Lee, a Professional Law Corporation, Tel: (408) 249-2735, Fax: (408) 260-8263, Email:, Internet:


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