After the U.S. Supreme Court's long-awaited ruling in the Bilski v. Kappos case, business method patents became the zombies of the intellectual property world. For those unfamiliar with zombies, they are the living dead who shamble around in search of human flesh to feast on. They can be dispatched by only a shot or blunt trauma to the head. If you shoot or stab one in any other part of the body, it continues to stagger around, somewhat worse for the wear but still a force to be reckoned with.
Bilski v. Kappos is the legal equivalent of a headshot that batters the business methods zombie but fails to kill it. The zombie lives on -- but just barely.
Business method patents have terrorized both corporate lawyers and IT professionals since 1998, when the U.S. Court of Appeals first suggested in State Street Bank v. Signature Financial Group that general methods of conducting business more efficiently could be patentable if they produced a "useful, concrete and tangible result."
A flood of business method patents followed, to the point where businesses using common software and Internet ideas and practices (like the "one-click" shopping-cart fulfillment for e-tailers) started receiving infringement cease-and-desist letters and coy "invitations to license" from an ever-multiplying host of "patent trolls".
Cracking down on business method patents
Against this backdrop of laugh-inducing patents and expensive shakedowns, the United States Patent and Trademark Office and the federal courts started cutting off the oxygen to business method patents several years ago. The approval rate for business method patent applications fell below 10% by 2010, and the patent office instituted a mandatory re-examination process for the successful patents.
Flash forward to 2008, when inventors Bernard Bilski and Rand Warsaw appealed the Patent Office's denial of their application for a method of hedging weather-related risk in energy trading to the U.S. Court of Appeals for the Federal Circuit. In an unusual full-panel decision, the court upheld the rejection and drew a line in the sand.
To be eligible for a patent, an invention must fall into one of the categories listed in the Patent Act of 1952, namely: a "new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof." According to the court, to meet the minimum requirement of patent eligibility as a "process," a business method must satisfy the "machine-or-transformation test." The process must either be tied to a particular machine or apparatus, or transform a particular article into a different state or thing.
The U.S. Supreme Court heard oral arguments in the Bilski case in November. The case created intense interest among both IT and intellectual property law professionals because all sides understood that business method patents, and possibly software patents, were awaiting their final judgment and execution.
Bilski's idea unpatentable
As the Supreme Court term drew to a close, case after case was handed down, but there was still no decision on Bilski -- which only served to heighten speculation. When the opinions were finally issued on June 28, the last day of the term, the cause of the delay was immediately clear. Every justice agreed that Bilski's idea was unpatentable, specifically because it was an "abstract idea." Abstract ideas and principles, laws or phenomena of nature and mental processes are not patent-eligible subject matter, because they are the basic tools of scientific and technological work.
All of the justices also bashed the permissiveness of the 1998 State Street opinion, which opened the door to many business method patents. Finally, every justice also rejected the lower court's holding that the machine-or-transformation test was the sole standard for determining what could be a patentable "process" under the statute.
Unfortunately, "clues" are all Bilski has to offer. While there was no dispute that Bilski's invention failed to pass the smell test, the justices could not come to a consensus on what makes a process patentable. A close examination of the court's opinion reveals that business method patents have sustained a heavy body blow. Three, perhaps four, sitting justices and one recently retired justice believe that methods of conducting business should never be patentable.
Other justices appear to be troubled by their colleagues' vagueness, and the court's opinion strongly indicates that the bar for business methods should be set higher than for other types of patents. Still, the court failed to draw any clear, decapitating line. So, business method patents shamble on, like zombies whose human target is an incompetent shot.
In part two of this tip, Baer will offer a detailed analysis of the court's opinion, the various concurring opinions and their specific implications for the future of business method patents.
Andrew M. Baer is a contributing writer based in Philadelphia. Let us know what you think about the story; email firstname.lastname@example.org. Follow @ITCompliance for compliance news throughout the week.