Bilski v. Kappos, 561 U.S. 593 (2010)

"Defining the Future of Innovation — The Limits of Patentable Ideas"

Short Description:

This U.S. Supreme Court case addressed whether a business method patent is eligible for protection under U.S. patent law, specifically under 35 U.S.C. § 101. The case clarified the boundaries of what constitutes patentable subject matter, especially regarding abstract ideas.

Facts:

1.     Bernard Bilski and Rand Warsaw applied for a patent on a method for hedging risks in commodities trading.

2.     Their application described a process where energy consumers could hedge against the risk of price fluctuations by having contracts with both fixed and variable rates.

3.     The U.S. Patent and Trademark Office (USPTO) rejected the application, stating it was an abstract idea and not a patentable process.

4.     The Board of Patent Appeals and Interferences upheld the rejection.

5.     The Federal Circuit also affirmed the rejection, applying the “machine-or-transformation test”: a process is patentable only if it is either tied to a particular machine or transforms an article into a different state or thing.

6.     Bilski appealed to the U.S. Supreme Court.

Issues / Questions:

1.     Whether the “machine-or-transformation” test is the exclusive test for determining the patent eligibility of a process under §101.

2.     Whether a business method like Bilski’s risk-hedging strategy is a patentable process.

Suggestions / Arguments:

• Bilski's Argument: His method for hedging risks was a practical process that should qualify as a patentable method, even if it did not involve a specific machine or physical transformation.

• USPTO's Argument: Abstract ideas, such as risk-hedging, are fundamental economic practices and are not patentable. Allowing such patents would improperly grant monopolies over basic ideas.

Findings / Judgment:

• The Supreme Court affirmed the rejection of Bilski’s patent application on June 28, 2010.

• Key Findings:

1.     The Court held that the machine-or-transformation test is a useful tool but not the sole test for determining patent eligibility.

2.     Abstract ideas are not patentable because they are basic tools of innovation that should remain free for public use.

3.     Bilski’s hedging method was deemed an unpatentable abstract idea, similar to fundamental economic practices.

4.     The Court left open the possibility of some business method patents being eligible, but Bilski’s claim did not qualify.

Judgment Date: June 28, 2010