Business Method Patents

Monday, August 2, 2010 - 01:00

With the United States Supreme Court's decision in Bilski v. Kappos , the future of business method patents remains a bit complicated.The court's rejection of the machine-or-transformation test - as the sole test for a new method or process of doing business - was watched closely by counsel and inventors involved in a variety of industries.

The decision didn't change the fact that the patent application process remains a long road for some business methods to gain patent status. And, it also leaves some open questions for the software and technology crowd, who deal in more abstract matters of business process.

We talked about the impact of the case with Robert A Matthews, Jr. of Matthews Patent-Law Consulting and author of the Annotated Patent Digest and the Patent Jury Instruction Handbook , published by Thomson Reuters, Legal.

Editor: Does the Bilski decision complicate the business method patent outlook?

Matthews: Most likely. Whenever you have flexibility in the law you're going to have complications. The Bilski opinion basically opens the door and gives people something to argue on both sides of the subject matter patent eligibility question. But that's how we make advances in the law by permitting parties to argue opposing sides of a legal point. When a legal test is rigid, it may be easy to apply, but at a risk of unfairly treating some litigants in some situations. Bilski , like many other recent patent-related Supreme Court decisions, rejects an attempt to impose a rigid standard on an aspect of patent law, and thereby gives a little bit to both sides (the patentee and those challenging the validity of a patent). By rejecting a rigid test of patent eligible subject matter for process inventions, Bilski leaves the door open for inventors to argue that some process inventions (including some business methods) that would fail the Federal Circuit's "machine-or-transformation" test should still be patent eligible. This will give hope to those seeking to patent and enforce business method patents. But the Court also expressed some disdain for business method patents, and by no means sought to thwart the Federal Circuit's creation of legal standards that rein in business method patents so long as these standards comport with the principles of the patent law.

As for current prosecution of patent applications, the United States Patent and Trademark Office has effectively stated that it is going to be "business as usual." They're still going to apply the machine-or-transformation test. If the patent claim seems to be invalid under that test, the applicant will have to show why its invention is not an abstract idea. If the claim passes the test, it's likely it will be held patent eligible unless the Examiner comes up with a reason to say the claim is still only claiming an abstract idea. So it's really not going to change much of what the PTO is doing except maybe adding an extra layer onto their analysis. I don't necessarily think it's going to open the door for more business method patent applications to be filed or to be allowed.

Editor: What's the effect on software and technology companies?

Matthews: Bilski will probably have little impact on what software inventors will seek to patent but it is going to cause patent attorneys to put more thought into claim drafting. There also will be more thought going into how patentees and accused infringers litigate software related method patent claims. The Supreme Court provided little guidance in Bilski as to how to determine whether a claimed process is nothing more than an abstract idea, and therefore unpatentable. Right now, we're kind of left in the dark as to what is going to be considered an abstract idea. While there are some other Supreme Court opinions out there that lawyers can try to glean standards from, there will be room for litigators and prosecutors to maneuver in contending why the process claim at issue is or is not claiming an abstract idea.

Editor: What's the lasting impact of the decision?

Matthews: Bilski will lead to further refinements by the Federal Circuit and the district courts in addressing when process claims, including business methods, are or are not patent eligible. Its lasting impact most likely will be as a general proposition that any legal test for determining what subject matter can be patented must remain a flexible inquiry to account for new and unanticipated technologies.

Robert A. Matthews, Jr.'s publications - the "Annotated Patent Digest" and the "Patent Jury Instruction Handbook" - are available at

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