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US supreme court confirms the patentability of business methods

8th Jul 2010

On 28th June 2010, the US Supreme Court issued its highly anticipated decision in Bilski v Kappos relating to the patentability of business methods. The decision does not significantly change the law, and patentable inventions that relate to computer software or business methods are unlikely to be treated differently following the Supreme Court’s decision, than they were previously under the test proposed in the corresponding Court of Appeal case, Re: Bilski. The Supreme Court’s ruling therefore leaves open the possibility of patentable business methods though does not say in what circumstances this would occur.


In Bilski’s application, the patent claims defined a process of hedging risk in the field of commodities trading. The claims had been found unpatentable by both the US Patent Office (US PTO) and the Court of Appeal for the Federal Circuit (CAFC) as defining nothing more than an unpatentable business method. In particular, the claims made no reference to hardware and so could have been interpreted as seeking protection for the intellectual activity of traders themselves, as they carried out the claimed method. Inventions defined in this way can be thought of as ‘pure’ business methods, as details of the methods’ implementation in hardware or in technology are absent. In the CAFC decision, Re Bilski, the claims were found to be excluded as they failed the “machine or transformation test”.

As expected, the Supreme Court unanimously agreed that the invention defined in Bilski’s application was not patentable subject matter. However, the Court drew on earlier decisions such as Benson, Flook, and Diehr to rule that the invention was inadmissible because it was nothing more than an unpatentable abstract idea, rather than rejecting the application on the ground that the invention was an unpatentable business method.

The Supreme Court also dismissed the notion that the “machine or transformation test”.


Patent Offices generally take the view that patents should be granted only for inventions that are tangible, either in their physical implementation, or in the effect they have on an end article, and abstract concepts, not going beyond algorithms, rules for playing games or doing business, and more controversially, software, are in many jurisdictions specifically excluded from patentability.

Inventions that relate solely to a way of conducting business, such as in Bilski’s application, are therefore nearly always rejected by Patent Offices when they are expressed in purely intellectual or abstract terms. Differences between Patent Offices in different jurisdictions become more apparent however when an invention that relates to a business method is expressed in hardware. The question of patentability then becomes one of assessing the inventive merit in the hardware, as well as the business method it embodies.

In Bilski v Kappos, the Supreme Court rejected the notion that the CAFC-defined patentability test, formulated on considerations of hardware or a transformation of an end article, was the sole test determining whether a process was patentable, but they did not go further to rule on the underlying concepts of what is patentable and what is not. In this regard, Bilski v Kappos is unlikely to significantly affect patent applicants, but will perhaps cause more consternation for Patent Office examiners and lower court judges who must now still struggle to decide what test is appropriate. The US PTO Director has in the meantime advised Patent Office Examiners to continue to use the “Machine or Transformation” test, discussed in more detail in our earlier Briefing note”, as a guideline, but interpret the test on the basis of determining whether the invention is directed to an abstract idea.


Patent applicants in Europe are used to dealing with the requirement that inventions be expressed in terms of hardware and technology, due to the European Patent Office’s approach to inventive step, which requires a patentable invention to provide a technical solution to an identifiable technical problem. This test, and its development in decisions of the European Technical Board of Appeal such as Hitachi, Ricoh, Comvik and Microsoft was recently endorsed by the Enlarged Board of Appeal in its decision G3/08 discussed. A technical solution must itself be comprised of hardware, and a solution that is purely administrative, organisational, or financial (such as a pure business method) will therefore be rejected. As a result, European applicants who define their invention in terms of a combination of method steps, and interaction with hardware, should not be significantly affected by the ruling.

It is interesting to note that the Canadian Patent Office has also recently echoed the European position by adding to its guidelines for Examiners a direction to assess patent applications in Canada on the basis of a “technical solution – technical problem”.

This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice. Please contact Reddie & Grose LLP for advice before taking before any action in reliance on it.

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