How the U.S. Supreme Court’s forthcoming decision in the Bilski v. Doll
case is expected to affect existing and future software patents.
The PaTeNTaBiLiTY oF software and business methods has been a contentious topic for more than 50 years. Because the U.S. Supreme Court de- cided to review the patentability of business methods in Bilski v. Doll in the fall of 2009, this controversy will once again—and soon—reach a boil- ing point. Bilski is asking the Supreme Court to reverse decisions denying him a patent on a three-step method of hedging the risk of price fluctuations in commodities. Although the Bilski case, strictly speaking, does not involve software patents, the Court is likely to say some things in Bilski that will have implica- tions for the patentability of software innovations. This is partly due to the fact that Bilski’s method could be car- ried out with the aid of a programmed computer, but also because most of the Court’s prior rulings on patent subject matter involve computer program in- novations and many software patents are for software-implemented busi- ness methods. The Court’s last pronouncement
on patent subject matter was its 1981
Diamond v. Diehr decision in which the
Court ruled by a 5–4 majority that a rubber curing process that included computer program calculations was patentable subject matter. Many software
companies, industry associations, and
programmers will be weighing in with
briefs in Bilski arguing for and against
This column will first briefly review
the State Street Bank & Trust Co. v. Signature Financial Services, Inc. decision
rendered by the U.S. Court of Appeals
for the Federal Circuit (CAFC) in 1998
that opened the door to business method patents.
After the Supreme Court in 2006
began to signal its dissatisfaction with
the State Street test and with business
method patents, the CAFC decided to
reconsider the broad conception of patentable subject matter articulated in
State Street and in October 2008, it rejected Bilski’s business method claim.
Rather than giving the CAFC leeway
to develop its own post-Bilski jurisprudence, the Court has selected Bilski as
its preferred vehicle for making a new
pronouncement about patentable subject matter.
I predict the Court will rule that Bilski’s method is unpatentable, although
for somewhat different reasons than
most CAFC judges gave. The Court’s
pronouncement in Bilski will almost
inevitably have direct implications for
existing and future software patents.
This may affect the behavior of both
start-up and established software companies, venture capitalists, investors,
and many others.
State Street on Patent
Signature is a financial services company that in 1993 obtained a patent on
an automated data processing system
that used a hub-and-spoke structure to
organize financial services. After negotiations over a license to use this patent
broke down, State Street sought a court
declaration that Signature’s patent was
invalid because it claimed a business
method, which many prior decisions
had deemed to be unpatentable subject matter.
In upholding Signature’s patent,