Much is being said among commentators regarding the recent decision of the Court of Appeals for the Federal Circuit in In Re Bilski.  Some commentators are suggesting that Bilski represents the death of business patents.  Other commentators believe that the case affirms that business patents are appropriate.  The truth lies somewhere in the middle.

In Bilski, the inventor attempted to obtain a patent on a method of reducing risk in commodities trading.  Claim 1 read as follows:

                A method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price comprising the steps of:

                (a) initiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumers purchase said commodity at a fixed rate based upon historical averages, said fixed rate corresponding to a risk position of said consumer;

                (b) identifying market participants for said commodity having a counter-risk position to said consumers; and

                (c) initiating a series of transactions between said commodity provided and said market participants at a second fixed rate such that said series of market participant transactions balances the risk positions of said series of consumer transactions.

The patent office refused to grant a patent asserting that the claim was not patentable subject matter.  The Board of Appeals and Interferences found Bilski’s claim unpatentable under three separate tests for patentable subject matter under 35. U.S.C. § 101.  Namely, the board found that the claim failed the “transformation” test, the “abstraction” test and the “useful, concrete and tangible result” test.  On appeal to the Court of Appeals for the Federal Circuit, the Court affirmed the Board’s decision.

                One challenge of the Federal Circuit is that it had to try and create a cohesive standard out of several Supreme Court decisions which appeared to be somewhat inconsistent.  The Federal Circuit, however, read the Supreme Court precedent as requiring that in order for a method claim to be patentable, it must be either  1) tied to a particular machine or apparatus; or 2) it must transform a particular article into a different state or thing.  Thus, for example, a method which requires the use of a particular device to carry out would be patentable subject matter, as would a method which changes the shape of an item being produced.  However, a mere abstract concept would not be patentable subject matter.  The federal circuit opinion, however, does not give guidance as to what type of machine is necessary, or how substantial the change to the object must be.  Thus, for example, it is unclear whether simply using a computer to carry out part of the process is adequate, or whether simply changing a data set would constitute an adequate transformation. 

While the Bilski decision does not provide a bright-line test for practitioners, it does give sufficient guidance that anyone seeking a patent for a business method should carefully review their claims to ensure that there is the use of a machine or a transformation of a product set forth in the claims.