In one of its last acts before its summer 2010 recess, the United States Supreme Court issued its opinion in the long-awaited case of Bilski v. Kappos (S.Ct. 2010 80-964). In the Bilski case, the inventor was seeking to obtain a patent on a method of hedging risk. The Supreme Court found that the method was not patentable because it was merely an abstract idea. In earlier jurisprudence from the Court of Appeals for the Federal Circuit (CAFC), the CAFC had used a “machine-or-transformation test” to determine whether business methods were patentable. In Bilski, the Supreme Court refused to say that the machine or transformation test was the sole test for determining patentability, and the Court did not reject the machine or transformation test. Instead, the Bilski court stated that the machine or transformation test is a useful tool, but not the only tool, for evaluating whether an invention is proper subject matter for patent protection.

The Court stated that while various tests may be helpful, these tests cannot add or take away from the language of 35 U.S.C. §101. That statute states that the proper subject matter for a patent is “any new and useful process, machine, manufacture, or composition of matter.” The Court did provide one other standard that can be used in determining whether a business method is patentable. The Court stated that there will be no patent protection for abstract ideas. Ultimately, the Court found that the method at issue in Bilski was an abstract idea and, on that basis, refused to allow the applicant to obtain a patent.

While the result of the Bilski case was not the clarification that many in the business and patent legal communities had been awaiting, the case is significant in that it did not pronounce a death sentence for so-called business method patents. Going forward, it appears that pure software-based methods will not be patentable. However, an invention may still be patentable subject matter even if it fails the machine or transformation test, so long as it is not an abstract idea. Proving a negative is always difficult. Therefore, patenting a business method will be possible, but will be an uphill climb.

It will become more important for inventors to evaluate their claiming strategy for inventions which involve business methods. If there is enough substance to the invention or the implementation of the method so as to avoid being classified as an abstract idea, then it is possible that the invention will be deemed proper subject matter. It will also be important to see what the CAFC does in applying the Bilski case going forward.