Bilski: Almost the Big One

October 31, 2008

Posted by: Glyn Moody

Those with good memories will recall a short post I wrote back in February about a case, generally known as “Bilski”, that was going before the US Court of Appeals for the Federal Circuit (CAFC).

It was important, because it asked the court to rule on the patentability of business methods – something that, like software patents, have blossomed to absurd levels in the US. The judgment came through yesterday, and it's pretty good news for those who would like to see some sanity in this area. Here's what the well-regarded patent law blog PatentlyO wrote:

The Federal Circuit has affirmed the PTO's Board of Patent Appeals (BPAI) finding that Bilski's claimed invention (a method of hedging risks in commodities trading) does not satisfy the patentable subject matter requirements of 35 U.S.C. § 101. In doing so, the nine-member majority opinion (penned by Chief Judge Michel) spelled out the "machine-or-transformation" test as the sole test of subject matter eligibility for a claimed process.

Although this narrows down what is patentable, it is not a complete victory for good sense. In particular, it does not rule out software patents altogether:

Still, the court made clear that business methods and Software will still be patentable – if they meet the machine-or-transformation test.

The latter is one of the mysterious concepts that only lawyers could love. The PatentlyO blog explained:

To be clear, the machine-or-transformation test is not a physicality test – i.e., a claim can still be patentable even if it does not recite sufficient "physical steps." On the flip-side, "a claim that recites 'physical steps' but neither recites a particular machine or apparatus, nor transforms any article into a different state or thing, is not drawn to patent-eligible subject matter."

Here, the court spelled out the specific issue in mind: a claimed process where every step may be performed entirely in the human mind. In that situation, the machine-or-transformation test would lead to unpatentability. "Of course, a claimed process wherein all of the process steps may be performed entirely in the human mind is obviously not tied to any machine and does not transform any article into a different state or thing. As a result, it would not be patent-eligible under § 101."

It really comes down to the same issues that the EPO is currently considering: whether the business method (or software) has an effect on the outside world, and is not just a series of algorithms (like software). Interestingly, the original patent examiner who refused to approve the Bilski application had touched on this issue:

The examiner ultimately rejected claims 1-11 under 35 U.S.C. § 101, stating: "[r]egarding . . . claims 1-11, the invention is not implemented on a specific apparatus and merely manipulates [an] abstract idea and solves a purely mathematical problem without any limitation to a practical application, therefore, the invention is not directed to the technological arts."

The big question is what effect, if any, this decision will have on the current referral of a “point of law” concerning software patents by the President of the European Patent Office (EPO) to the EPO “Enlarged Board of Appeal”, something I wrote about earlier this week. It would be ironic if, at a time when the US courts begin to move away from patenting software “as such”, the EPO started allowing precisely that through a relaxation of its own rules.

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