Business Methods and Patentable Subject Matter Following in Re Bilski: Is "Anything under the Sun Made by Man" Really Patentable?
McFarlane, Robert A., Litts, Robert G., Santa Clara Computer & High Technology Law Journal
Despite Supreme Court precedent holding that "anything under the sun that is made by man" is patentable, (1) courts have struggled for decades to place reasonable limitations on the kinds of inventions that can be protected under United States patent statutes. It is well settled, for example, that laws of nature, natural phenomena, abstract ideas, and mathematical algorithms cannot be patented. (2) Defining the outer boundaries of patentable subject matter has become even more complicated due to the emergence of patents directed to computer-related inventions and methods for executing transactions over the Internet. Recently, "business method patents," i.e., those that purportedly cover novel methods for conducting certain business processes related to such activities as tax accounting (3) and investment strategies, (4) have generated enormous controversy.
The Federal Circuit's en banc decision in In re Bilski sought to answer once and for all whether, and to what extent, business methods may be patented and to articulate the standard that governs the patentability of all processes. (5) The Federal Circuit's decision has, however, raised at least as many questions as it answered and has been the subject of well-reasoned criticism from within the court itself (6) and from many quarters of the legal and business communities. (7) The Federal Circuit's majority opinion addresses the patentability of a claimed method for hedging risk in commodities trading. (8) Contrary to the hopes of many, the court held there is no "exclusion" that prevents the patenting of business methods and that the patentability of such methods is governed by the same principles as all other processes. Additionally, Bilski announced a new "machine-or-transformation" test that it declared is now the exclusive test for determining the patentability of processes in all fields, including business methods. (9) In view of the strong criticism of the majority opinion, as well as difficulties in applying this test that were openly acknowledged in the majority opinion, (10) it was no surprise when the Supreme Court granted certiorari on June 1, 2009. (11)
This article places Bilski into its historical context, addresses its ramifications in defining what may be patented, and analyzes the decision to be made by the Supreme Court. Following this introduction, Part Two briefly reviews the treatment of patentable subject matter leading up to the Federal Circuit's 1998 decision in State Street Bank & Trust Co. v. Signature Financial Group, Inc., (12) which gave rise to much of the recent controversy surrounding business method patents. Part Three discusses the State Street decision, its impact on the scope of patent-eligible subject matter, and the state of the law immediately prior to Bilski. Part Four discusses the Federal Circuit's decision in Bilski, and the significant changes it represents on issues of patentability. Part Five analyzes representative early decisions of the Federal Circuit, the district courts, and the Board of Patent Appeals and Interferences applying In re Bilski, and discusses early patterns emerging from these decisions. Finally, part Six analyzes some of the criticisms of the majority decision and proposes a solution to the question of patent-eligibility that would conform with Supreme Court precedent and Constitutional requirements.
II. HISTORICAL TREATMENT OF PATENTABLE SUBJECT MATTER
A. Patentable Subject Matter, Abstract Ideas, and the Mathematical Algorithm Exception
The Patent Act of 1952 broadly defines the statutory subject matter for which a patent can be obtained as "any new and useful, process, machine, manufacture, or composition of matter, or any new and useful improvement thereof. ...," (13) and the Supreme Court has construed this language broadly to reflect congressional intent that patentable subject matter "include anything under the sun that is made by man. …