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As I see it:

Business Methods and Claim Drafting

The United States Court of Appeals for the Federal Circuit (CAFC)in its recent ruling: In re Bernard L. Bilski and Rand A. Warsaw (Bilski), has limited what can be patented.

The case concerned a method for hedging risk in the field of commodities trading. The issue before the court was whether the subject matter as claimed in the patent application (serial no. 08/833,892) was the kind of subject matter that is protectable by patent (in patent legal jargon, the court ruled as to whether the claimed subject matter was statutory under 35 U.S.C. § 101).

The CAFC evaluated the claimed method and based on a “machine or transformation” test decided the method was not the sort of thing that should be patentable.

The “machine” portion of the test used by the CAFC essentially checks if a claimed method or process is carried out by a machine, such as a computer. If the method is performed by a machine, it should pass the “machine or transformation” test. In Bilski, there was no language in the claim that tied the method to a machine such as a computer.

The “transformation” portion of the test checks if a claimed method or process is involved in physical transformation (such as happens during a manufacturing process) or the representation of physical transformation (such as occurs when something physical is displayed on a monitor). The CAFC noted that in the claimed method there were only manipulations of public or private legal obligations, business obligations or other abstractions that did not qualify as “transformations” under their test.

The CAFC clarification that business methods in themselves--i.e., not implemented by a machine--are unpatentable  draws a bright line that clearly delineats patentable subject matter. This removes many potential questions that could be difficult to answer, e.g.: Can it be determined with certainty who was the first person to use a business method? How realistic is it to detect an infringment of a business method? Is there any societal benefit to granting exclusive rights for business methods? Allowing patent protection only on business methods implemented by a machine simplifies both determination of first use and also detection of infringement. 

The scope of the decision was limited. As the law stands now, any business method implemented by a computer is statutory subject matter under 35 U.S.C. § 101 and can be patented provided it passes the other tests for patentability, such as novelty and nonobviousness. The only caveat is that care must be taken to draft the claims so that they will pass the “machine or transformation” test. This is not a difficult task for the skilled practitioner.

When drafting claims for a patent application, a skilled practitioner will write a variety of types of claims. These will include various types of apparatus claims and method claims. This will give maximum protection from the winds of change that occasionally blow in the laws governing the patentability of subject matter such as business methods and software. Bilski’s patent application failed to claim subject matter in a variety of different ways and so got caught in a legal bind. There is no reason this should happen to a patent application with well drafted claims.

Please note: This article is written for general information only. The information does not constitute legal advice, solicitation or advertising. The information provided does not create an attorney-client relationship. Liability for any action taken or omitted based on the information herein is specifically disclaimed. If you need legal assistance, you are advised to contact an attorney.