Vviewpoints

DOI: 10.1145/1364782.1364790

Legally Speaking
Revisiting Patentable
Subject Matter

Is everything under the sun made by humans patentable subject matter?

ARE BUSINESS METHODS and software algorithms patentable? Many of us think they shouldn’t be. However, under a 1998 U.S. Federal Circuit Court of Appeals decision in State Street Bank Bank v. Signature Financial Group, they seem to be. That case opined that business methods could be patented and regarded any process conforming to a dictionary definition as patentable subject matter, as long as it produces a “ useful, concrete, and tangible result.” This would include program algorithms.

Because of State Street Bank’s very broad interpretation of patentable subject matter, the U.S. Patent and Trademark Office (PTO) has been flooded with applications for patents on methods of all kinds, including business methods, methods of meditation, dating methods, sports moves, tax strategies, and even plots for novels. This capacious view of patentable subject matter may, however, be about to change.

This past February, the Federal Circuit decided to hear en banc (with the full court, not just the usual panel of three judges) an appeal by Bernard Bilski of a decision by the PTO Board of Patent Appeals and Interferences (BPAI) denying Bilski’s application for a patent on a method for managing energy consumption risks owing to vagaries of the weather for failure to claim patentable subject matter.

The order announcing the en banc review invited interested parties to file amicus curiae (friend of the court) briefs to address not only whether Bilski’s patent application should be granted, but also what test or standard should be used for judging what processes are eligible for patent protection. The order even asks whether the State Street Bank decision should be overturned.

Bilski’s claim

Claim 1 of Bilski’s application sets forth three steps of his method for energy risk management: initiating a series of transactions between a commodity provider and consumers of the commodity whereby consumers would purchase the commodity at a fixed rate based on historical averages (setting the risk position of the consumers); identifying market participants for the commodity who have a counter-risk position to that of consumers; and initiating a series of transactions between the commodity provider and market participants having a counter-risk position at a second fixed rate such that transactions of the market participants balance out the risks to consumers.

Bilski relies upon the State Street Bank decision in support of his claim. He asserts his claim recites a process and this method produces a useful, concrete, and tangible result. To understand why BPAI rejected Bilski’s claim, a brief historical review is in order.

the Supreme court
on Process Patents

The Supreme Court first considered whether computer program processes could be patented in its unanimous 1972 decision in Gottschalk v. Benson. Benson had applied for a patent on a method for transforming binary coded decimals to pure binary form. One claim called for implementing this algorithm in a programmed computer; a second was for the algorithm as such.

Section 101 of U.S. patent law states that “[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefore.” Benson’s algorithm was a process in the dictionary sense of the word, but that didn’t necessarily mean it was a process within the meaning of section 101.

Under the Court’s past decisions, patentable processes had been those that transformed matter from one physical state to another. Benson’s process didn’t do this. Past decisions had also excluded laws of nature, mathematical and scientific principles, mental processes, and abstract ideas from patent protection. Because Benson’s method could be carried out in a person’s head or with aid of paper and pencil, it seemed like a mental process or abstract idea, and perhaps a mathematical principle. The Court was also disturbed that Benson’s