Bilski applied for a method of
hedging risks in commodities trading. (aka a business method patent).
Basically, Bilski's method was to bill coal plants a fixed amount of
money each month for the coal they needed, instead of billing them a
different amount each month based on fluctuations in the spot price of
The USPTO rejected the patent.
The USPTO found that
"the invention is not implemented on a specific apparatus and merely
manipulates [an] abstract idea and solves a purely mathematical problem
without any limitation to a practical application, therefore, the
invention is not directed to the technological arts."
There was no physical
transformation, so it was not patentable subject matter under 35 U.S.C. §101.
The Board of Patent Appeals
and Interferences affirmed. Bilski appealed.
The BPAI found that Bilski's
method was not patentable
subject matter because it only
involved an abstract idea,
and those are not patentable.
The BPAI looked to State
Street Bank & Trust Co. v. Signature Financial Group, Inc. (149 F.3d 1368 (1998)) and found that in
order to be patentable, an application for a method patent
must include a practical application and a "useful, concrete, and
The Appellate Court affirmed.
The Appellate Court rejected
their previous decision in State Street and came up with a new test for patentability (the machine or
apparatus test). Under this new test, in order to be patentable
subject matter a patent for a method must:
Be tied to a particular
machine or apparatus, or
Transform a particular
article into a different state or thing.
The Court found that
Bilski's method was not tied to a
machine, and it didn't transform an article into a different state. So
The Court found that legal
obligations and contracts are not 'articles' or representative of any
physical object or substance.
Bilski claimed that the method was calculated on a computer, and that's a machine.
However, the Court found that just using a computer to make the
calculations is not enough.
The Court found that an
invention must be considered 'as a whole' when determining if it was patentable
See Diamond v. Diehr (450 U.S. 175 (1981)) and Parker
v. Flook (437 U.S. 584 (1978)).
In a concurrence, it was
argued that it was the intent of the framers that the patent system not be
used to patent "methods for organizing human activity that do not
involve manufactures, machines, or compositions of matter." Since
Bilski's method failed that test, it is not patentable subject matter.
In a dissent, it was argued
that a lot of patents had been issued on the old standard in State
Street, and that the Court should not
discard all that precedent and creating large amounts of uncertainty. In
addition, since the patent system didn't explicitly limit business
method patents, they should be granted.
In a dissent, it was argued
that patents on business methods
were unconstitutional and the Court should have explicitly said so, and
reject all business methods
based on the very old Statute of Monopolies.
In another dissent, it was
argued that Bilski's patent should have been rejected simply because it
involved an abstract idea, and
those are not patentable subject matter.
When I took this class, this
case had been granted cert by the US Supreme Court, who will likely have a
different opinion that the Federal Circuit once they hear the arguments.