Bilski v. Kappos

Background

Two inventors applied for a patent on a method for hedging price risk in energy and commodity markets. The key claims describe step-by-step instructions for arranging transactions and a simple mathematical formula that embodies the hedging concept. The Patent Office examiner and the Patent Board rejected the application as an abstract idea not tied to a specific machine. The Federal Circuit agreed and, sitting en banc, said a process is patentable only if it is tied to a machine or transforms an article.

Reasoning

The Supreme Court rejected the view that the machine-or-transformation test is the only way to decide if a process is patentable, calling that test an important clue but not exclusive. The Court also said the statutory word “process” need not categorically exclude business methods. Still, applying long-standing precedents, the Justices concluded the particular claims here simply try to patent the basic idea of hedging and its reduction to a formula — an abstract idea like those in earlier cases — and thus are not patent-eligible.

Real world impact

The decision leaves the Federal Circuit’s machine-or-transformation test available as a helpful tool but prevents that test from becoming the sole rule. It affirms that broad concepts and basic economic practices cannot be monopolized by a patent and signals the Patent Office and courts must use other precedents and tools to limit overly broad business-method claims.

Dissents or concurrances

Some Justices agreed only with the judgment. One concurrence argued more plainly that methods of doing business are not patentable at all; another stressed caution but joined the judgment affirming rejection of these specific claims.