In the notable case of In re Bilski, the U.S. Court of Appeals for the Federal Circuit (CAFC) addressed the question of whether business methods qualify as patentable subject matter. The case involved Bernard Bilski and Rand Warsaw, who challenged the denial of their patent application for methods related to hedging risks in commodities trading.
In the patent application, Bilski and Warsaw claimed a business method patent for providing fixed-bill energy contracts to consumers. The claimed process involved a series of sales or options transactions between brokers, purchasers, and producer-sellers to balance out risk positions. However, the patent examiner rejected the claims, arguing that the invention lacked a specific apparatus, manipulated an abstract idea, and did not have a practical application in the technological arts.
The applicants appealed the examiner’s decision to the Board of Patent Appeals and Interferences (BPAI), but the appeal was unsuccessful, with the BPAI upholding the examiner’s decision. Subsequently, Bilski and Warsaw appealed to the CAFC, challenging the BPAI’s order.
In its majority opinion, the CAFC focused on whether the claimed method qualified as a patent-eligible “process” under Section 101 of the Patent Act. The court emphasized that the statutory meaning of a process is narrower than its dictionary definition, which allows for a more nuanced interpretation.
The court clarified that natural phenomena, laws of nature, and abstract ideas are excluded from patentable subject matter since they are fundamental to scientific and technological endeavours. However, a claimed process can be considered patent-eligible if it is tied to a particular machine or apparatus, or if it transforms a specific article into a different state or form.
In a dissenting opinion, it was argued that patents on business methods or natural phenomena are acceptable as long as they are claimed to achieve a useful, tangible, and concrete result. The dissenting judge disagreed with the majority’s view that Bilski’s claims were merely abstract ideas and believed that the court’s definition of a process contradicted the statute, precedent, and the constitutional mandate to promote innovation in the useful arts and sciences. The dissent also expressed concerns about the ambiguity in patentable subject matter, which could discourage innovation.