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Supreme Court Rules In Patent Case

July 2, 2010

A Supreme Court Patent Hedge                                                                        

by James Stewart, Ater-Wynne, Oregon Law Firm

The U.S. Supreme Court issued its long-anticipated ruling in re Bilski, a case raising a fundamental question: what is patentable?  The Court agreed with the lower court’s refusal to grant a patent, but refused to state a new test for patentability.

Patent practitioners and inventors have awaited the decision with bated breath since oral arguments last November.  Particularly at stake were business method patent applications under the Federal Circuits’ narrowed interpretation of patentable subject matter.  The Federal Circuit had held that patentable subject matter involving processes must involve a machine or transformation of matter, concluding that the Bilski price-fluctuation-risk-hedging process and its more specific application to commodities and energy markets accomplished neither.

The Federal Circuit’s Bilski holding has caused concern for its potential negative impact on the patentability not only of business methods, but also of software programs themselves or even processes involving software-implemented or software-assisted components.  And, as Judge Rader argued in his Federal Circuit concurring opinion, innovation in the Information Age is no less deserving of patent protection than innovation in the Industrial Age.

In the words of today’s Supreme Court’s majority opinion, “It is true that patents for inventions that did not satisfy the machine-or-transformation test were rarely granted in earlier eras, especially in the Industrial Age . . ..  But times change.”

While affirming the Federal Circuit’s holding regarding the patentability of an energy price-hedging process–thus depriving petitioners Messers. Bilski and Warsaw of a patent–the Supreme Court roundly criticized the Federal Circuit’s incorrect interpretation of 35 USC Sec. 101 and its too-narrow two-prong test.

Thus the Supreme Court unanimously agreed on the result while splitting on the reasons for affirming the Federal Circuit’s holding of unpatentable subject matter.

All Supreme Court Justices agreed that the subject matter of the Bilski, et al. patent application was too abstract to merit patent protection.  But a divided Supreme Court refused to dictate a particular patentability standard, relying instead on the patent statute and the Supreme Court’s own precedents, and leaving to the Federal Circuit the development of future tests for patentability consistent therewith.

  
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