Bilski v. Kappos

Background

A group seeking a patent described a set of steps and a formula for how buyers, sellers, and market participants could hedge against price swings in the energy commodity market. The patent office rejected the application because it was not tied to a machine and seemed to cover a mathematical or abstract idea. The Board of Patent Appeals and Interferences and then the Federal Circuit (sitting en banc) also rejected the claims; the Federal Circuit said a process is patentable only if it is tied to a machine or transforms something physical. The case reached the Court, which heard argument and issued this decision.

Reasoning

The Court (opinion by Justice Kennedy) said the Federal Circuit was wrong to make the machine-or-transformation test the only way to decide whether a process can be patented. The Court also rejected a blanket rule saying business methods are always unpatentable. Instead, the Justices relied on older decisions (about abstract ideas and mathematical formulas) to conclude that the particular claims here simply recite the basic idea of hedging risk and therefore are an unpatentable abstract idea. All Members agreed that this patent application fails the threshold test for what patents may cover.

Real world impact

The decision lets examiners and courts reject patent claims that merely try to monopolize broad, long-standing economic practices like hedging. It leaves the machine-or-transformation test as an important clue but not the only test. The ruling is narrow: it affirms this rejection and does not say that all software or business-related inventions are unpatentable.

Dissents or concurrances

Justice Stevens, joined by three others, and Justice Breyer wrote separate opinions concurring in the judgment; Stevens would have gone further and treated business methods as not patentable. Justice Scalia did not join two parts of the opinion.