Update on Patenting Business Methods in The US

A decision has just been rendered in Bilsky. The U.S. Court of Appeals for the Federal Circuit in Washington, D.C., has finally upheld (9-3) a ruling made by the U.S. Patent and Trademark Office, which denied a patent for a method of hedging risk in commodities trading.
This decision deals with 35 U.S.C. § 101 (patentable subject matter).
Claim 1 of the patent application reads 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 provider and said market participants at a second fixed rate such that said series of market participant transactions balances the risk position of said series of consumer transactions".

The Court has pointed out that:

"The Supreme Court, however, has enunciated a definitive test to determine whether a process claim is tailored narrowly enough to encompass only a particular application of a fundamental principle rather than to pre-empt the principle itself. A claimed process is surely patent-eligible under § 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing."

and noted:

"We now turn to the facts of this case. As outlined above, the operative question before this court is whether Applicants' claim 1 satisfies the transformation branch of the machine-or-transformation test.
We hold that the Applicants' process as claimed does not transform any article to a different state or thing. Purported transformations or manipulations simply of public or private legal obligations or relationships, business risks, or other such abstractions cannot meet the test because they are not physical objects or substances, and they are not representative of physical objects or substances. Applicants' process at most incorporates only such ineligible transformations." (emphasis added)

This decision may therefore have a significant impact on the patentability of business methods in the US. The famous requirement under State Street that a method had to satisfy the "useful, concrete, and tangible result" test is now over and this may affect the validity of a lot of existing business method patents.

Links of Interest:

• Wall Street Journal article
• New York Times article
• Law.com article