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Bilski v. Kappos: Supreme Court Leave Open Door for Business Method Patents

On Monday, the Supreme Court issued its long-awaited opinion in Bilski v. Kappos. The Supreme Court affirmed the Federal Circuit’s judgment that Bilski's patent application, which claimed a method of hedging commodities risk, was not patentable. The Court reached this conclusion, however, only after rejecting the Federal Circuit’s reasoning; namely, that Bilski’s process was un-patentable because it failed to pass the “machine-or-transformation” test. Under that test, a claimed process is patentable only 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 Supreme Court found that this "machine-or-transformation" test is not the exclusive test for determining patentability.

The Supreme Court stated in its majority position that the patent statute does not categorically exclude business method patents, as some amici curiae had argued, thus leaving the door open for business method patents. But the Court ultimately concluded that Bilski’s application was not patentable because it claimed the mere “abstract idea” of hedging risk in the commodities and energy markets.

Significantly, the Court did not define further what constitutes a patentable “process” under section 101, beyond pointing to the guideposts in the Court's earlier precedents. Justice Kennedy delivered the opinion for the Court. Justice Stevens filed an opinion concurring in the judgment, in which Justices Ginsburg, Breyer, and Sotomayor joined. Justice Breyer filed an opinion concurring in the judgment, in which Justice Scalia joined in part. A copy of the Supreme Court's opinion is available here.

This report is a publication of Loeb & Loeb and is intended to provide information on recent legal developments. This alert does not create or continue an attorney client relationship nor should it be construed as legal advice or an opinion on specific situations.

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