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In Re Bilski - A new hurdle for method patents

In 2008 the Court of Appeals for the Federal Circuit issued an opinion in the case of In re Bilski which upheld the decision made by the Board of Patent Appeals and Interferences. Both rulings affirmed the decision of the examiner not to issue a patent to Bilski for his method of hedging risks in commodities trading, this type of patent is often called a business method claim. Bilski's patent application claimed a three-step method for a broker to hedge risks for purchaser-users of an input of a product or service.

The majority opinion in this case stated many rulings which could be highly influential in current and future business method claims. The majority opinion upheld the transformation-or-machine test which states, "a claimed process is surely patent-eligible under §101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing." The opinion, however, rejected the previously used State Street test which says that a process is eligible for a patent if it produced, "a useful, concrete, and tangible result." The Court stated that,

" while looking for 'a useful, concrete and tangible result' may in many instances provide useful indications of whether a claim is drawn to a fundamental principle or a practical application of such a principle, that inquiry is insufficient to determine whether a claim is patent-eligible under § 101."

The main problem with the State Street test was the definition of what is useful and if something is useful does that necessarily mean that it is patent eligible. The Court did affirm the ruling in State Street which said, "Business method claims (and indeed all process claims) are 'subject to the same legal requirements for patentability as applied to any other process or method.'" In light of the disqualification of the "useful, concrete, and tangible result" test the Court ruled that since the Bilski method could not pass the transformation-or-machine test, in that it did not transform any article into a different state or thing, it should be termed ineligible for a patent.

This case is currently being appealed to the Supreme Court. In the mean time, however, the USPTO is changing the way it reviews patents in light of the Court of Appeals for the Federal Circuit's ruling. Thus, on January seventh of 2009 the USPTO released a memo to their examiners saying,

"In view of the Bilski decision, the guidelines are being redrafted to reflect the most current standards for subject matter eligibility. Until the guidelines are completed, examiners should continue to follow current patent subject matter eligibility guidelines appearing in MPEP 2106, with the following modification.

As explained in a memorandum dated May 15, 2008, entitled "Clarification of 'Processes' under 35 USC §101," a method claim must meet a specialized, limited meaning to qualify as a patent-eligible process claim. As clarified in Bilski, the test for a method claim is whether the claimed method is (1) tied to a particular machine or apparatus, or (2) transforms a particular article to a different state or thing. This is called the "machine-or-transformation test.""

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