Bilski – Great News for Software Patent Holders

Bill NaifehIP Management, USPTO Regulations

The Supreme Court issued its ruling in the infamous “In re Bilski” case today.    The bottom line:  Bad news for Bilski, but probably good news for software patent holders.

Bilski attempted to claim a hedging method as his invention.  Specifically, “a method of provide one of a good or service to at least one entity at one of a payment, rate, or price that is capped at a predetermined amount, comprising.  .  .”

The Patent Office rejected this claim (along with several other claims) and the Federal Circuit upheld the rejection.  Not only did the Federal Circuit reverse its earlier “State Street” decision which allowed business method patents, it went further with a decision that could have destroyed many true software patents.

In Bilski, the Federal Circuit re-introduced an old rule called the “machine-or-transformation” test.  Specifically, the Federal Circuit held that a process is not patent eligible unless: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.  The Federal Circuit also concluded that this “machine-or-transformation test” is the sole test for determining patent eligibility of a “process” under section 101 of the patent statute.

A literal application of the “machine-or-transformation” test could have invalidated many existing software patents.

The Supreme Court held that it was wrong for the Federal Circuit to hold that the machine-or-transformation is the sole test for determining patent eligibility.  They also stated that business method patents might be patentable even if the particular claims in Bilski were not.  The Supreme Court held that the claims of Bilski were directed to abstract ideas.  Consequently, they were not patentable.

The Supreme Court, however, did not specifically address software patents and kept its discussion focused on business method patents.  Consequently, it appears that software patents are indeed safe.  Of course, the question for patent attorneys is how to distinguish an abstract idea from a process claim in a software patent.  The Supreme Court did not provide a way to determine abstract ideas from concrete steps.  But then, the  Court has never been known for actually developing workable rules.

One relatively safe approach might be to follow our European counterparts.  In Europe, software patents are not patentable per se. However, such restrictions are easily avoided by claiming a computer running a particular process.  It seems that such a claiming strategy might be a safe bet for the U.S. until the lower courts can add more definitive rules.