Supreme Court Issues Bilski Decision On Patentable Subject Matter Refusing To Categorically Strike Down Software and Business Method Patents

On the last day of this year’s term, the Supreme Court refused to categorically strike down software and business method patents. Bilski v. Kappos, No. 08-964, 561 U.S. ___ (June 28, 2010).

On October 30, 2008 the Court of Appeals for the Federal Circuit held that to be patentable subject matter an invention must either be tied to a particular machine or transform an article from one thing or state to another. This decision was widely believed to be a response to growing criticism of “business method” patents. An appeal of the Federal Circuit’s decision was accepted and the Supreme Court heard oral argument on November 9, 2009.

While the Supreme Court was unanimous in the judgment, (that the patent claims at issue were directed to an abstract idea and therefore unpatentable as non-statutory subject matter), as well as unanimous in the decision that the machine-or-transformation test, while useful, was not the exclusive test to determine patentability, it was divided on the question of patentability of business methods.

The Court unanimously held that the machine-or-transformation test was too rigid in its application to enjoy exclusive use, and warned such exclusivity might lead to withholding patent protection from unforeseeable but important future developments.

The majority opinion, authored by Justice Kennedy, refused to categorically strike down business method patents, noting that “business methods” are difficult to define and that the Patent Act’s definition of “process” may include such methods. A lengthy concurrence, written by Justice Stevens and joined by Justices Ginsburg, Breyer and Sotomayor, would have categorically struck down business method patents and attacked them from a historical, practical, and statutory perspective. A separate concurrence by Justice Breyer and joined by Justice Scalia focused on points of agreement among the Justices and suggested that while the machine-or-transformation test is not an exclusive test, it still may have value in deciding questions of patentability.

If you have questions or concerns about the potential patentability of a software related invention, or possible “business method” invention, please contact a member of the Seyfarth Shaw Intellectual Property Practice Group.