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 software patents.
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.
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,
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