In 1998, the U.S. Court of Appeals for the Federal Circuit (the “Federal Circuit”), the federal court that hears all appeals in patent cases in the United States, decided the State Street Bank v. Signature Financial Group case. That case held that a business method could be patentable if it produced a “useful, concrete and tangible result” (and if the other tests for patentability were met – novelty and non-obviousness).
The U.S. courts, the U.S. Patent and Trademark Office (USPTO), and the public interpreted this case broadly, with conventional wisdom developing that even pure business methods (not necessarily driven by a computer, for example) could be patented. The floodgates were opened for patent protection for business method inventions (both automated, and in their pure form), causing a spike in the number of patent applications for such inventions (and resulting in many such patent applications issuing as patents by the USPTO in later years).
Meanwhile, the European Patent Office (EPO) (the regional patent-granting authority for member states of the European Patent Convention) continues to consider methods for doing business as unpatentable per se, unless the invention has a technical characteristic. Thus, the USPTO and the EPO have been at odds over the years as to whether business methods can be patentable, with the USPTO generally taking a more expansive view (business methods are patentable), and the EPO generally taking a more restrictive view (business methods are not patentable).
This all changed with the In re Bilski case.
In Bilski, the inventors filed a patent application with the USPTO on a method of hedging risks in commodity trading. The USPTO rejected the claims of the patent application as being too abstract and not producing a “useful, concrete and tangible result” (as required by the State Street Bank decision). After the inventors appealed to the Federal Circuit, that court in 2008 ultimately agreed that Bilski’s risk-hedging invention was not patentable subject matter.
Specifically, the Federal Circuit created a new rule that holds that a method can be patentable subject matter only if:
- it is tied to a particular machine or apparatus, or
- it transforms a particular article into a different state or thing.
Thus, the Federal Circuit pulled back on the expansive approach it previously took ten years before in the State Street Bank case of 1998, when it held that business methods can broadly be patentable. With the Bilski case, the patentability of business method patents in the U.S. is now more in line with the EPO’s standard, by which the invention must have a technical characteristic.
Not content with the Federal Circuit’s ruling of unpatentability, the inventor Bilski appealed to the U.S. Supreme Court, the highest court in the land. While the U.S. Supreme Court traditionally has not considered many patent cases, it decided to hear the Bilski case. Each side (Bilski and the USPTO) are currently in the midst of preparing and filing written briefs with their arguments, and numerous third-parties have also filed their own amicus (friend of the court) briefs. Oral arguments are scheduled for November 2009, with a decision by the Supreme Court sometime thereafter.
This case is being closely watched within the legal and business communities, on both sides of the Atlantic. It has the potential to change once again the landscape for business method patents in the U.S. (and other types of method patents as well).
Whether U.S. and European patent law will be further harmonized, or further differentiated, remains to be seen. Stay tuned!
