In Re Bilski
545 F.3d 943 (Fed. Cir. 2008)

  • 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 coal.
  • The USPTO rejected the patent. Bilski appealed.
    • 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 tangible result."
  • The Appellate Court affirmed. Bilski appealed.
    • 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 no patent.
      • 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 subject matter.
      • 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.