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Federal Circuit Affirms Decision Re Bilski

10/31/2008

 In In re Bernard L. Bilski and Rand A. Warsaw, No. 2007-1130 (October 30, 2008), an en banc Federal Circuit affirmed a decision of the Board of Patent Appeals and Interferences (Board) that Applicants’ claims are not directed to patent-eligible subject matter under 35 U.S.C. § 101.

Applicants’ claims, in essence, are directed to a method of hedging risk in the field of commodities trading.  The Board rejected Applicants’ claims since they do not involve any patent-eligible transformation, holding that transformation of “non-physical financial risks and legal liabilities of the commodity provider, the consumer, and the market participants” is not patent-eligible subject matter.  The Board also concluded that Applicants’ claims are directed to abstract ideas ineligible for patent protection.  Finally, the Board held that Applicants’ claimed process did not produce a “useful, concrete and tangible result.”

On appeal, the federal circuit relies on two Supreme Court cases (Diamond v. Diehr, 450 U.S. 175 (1981) and Gottschalk v. Benson, 409 U.S. 63 (1972)) in holding that the machine-or- transformation test, as clarified in the decision, is the applicable test to determine whether a process claim is patent eligible.  Under the machine-or-transformation test, a claimed process is patent-eligible under 35 U.S.C. § 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.  In its analysis, the federal circuit rejects the “useful, concrete, and tangible” language associated with the Federal Circuit’s State Street decision, and the so-called “technological arts test” proposed by some amici.

The federal circuit’s decision may not be the proverbial death-knell to all business method/software patents,  however:

Purported transformations or manipulations simply of public or private legal obligations or relationships, business risks, or other such abstractions cannot meet the [machine-or-transformation] test because they are not physical objects or substances, and they are not representative of physical objects or substances.  In re Bilski decision, page 28.