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BHGR Newsletter: New Patentability Standards Post-Bilski Decision

June 2009

The United States Court of Appeals for the Federal Circuit recently rendered a decision that may have an immeasurable effect on patentability of claims related to business methods and software in particular. By its decision in In Re Bilski, 545 F.3d 943 (Fed Cir. 2008), the Federal Court upheld, by a 9-3 margin, the Patent & Trademark Office's rejection of a patent application that described a method of hedging risks in commodities trading. Patents of this type are often described as "business method patents."

The Federal Circuit adopted the "machine-or-transformation" test for determining whether a claim is drawn to a patent-eligible process. Under this test, a patent claim may be allowed only: (1) if it is tied to a particular machine or apparatus; or (2) it transforms a particular article into a different state or thing. The Court went on to reject other tests for patentability, including a significantly broader test previously applied by the Federal Circuit and other courts, stating that a process is patent-eligible if it produces a "useful, concrete and tangible result." The Court ultimately held that the business method application in question was not tied to a particular machine and did not transform a particular article and, therefore, is non-patentable.
The patent applicants subsequently filed a writ of certiorari with the Supreme Court, which was granted on June 1, 2009. A writ of certiorari is a request for the Supreme Court to consider and review a lower court's opinion. The Supreme Court's grant of certiorari underscores the importance of this decision, as it rarely grants certiorari on patent cases decided by the Federal Court. Accordingly, the Supreme Court may uphold the Federal Circuit's decision, or may choose to rule in a separate direction.

While the Bilski decision did not go so far as to declare unpatentable all business-method and software patent claims, its practical effect is likely to render it extremely difficult to obtain patents on such claims, and virtually impossible in the case of business-method claims. Additionally, thousands of business-method and software patents that were previously issued may now be invalid and unenforceable. In short, if it stands, the Bilski decision will likely have a significant effect on how banks, businesses, and high-tech firms protect, enforce, and obtain intellectual infringement litigation regarding previously issued patents. Companies and individuals in these industries must be aware of Bilski and determine their intellectual property strategy in the post-Bilski era.

Should you have any questions regarding your patent(s), contact our Business Transactions Group.

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