In a recent decision by the U.S. Supreme Court, the Court held that business method patents may still be acquired and enforced in the United States. The Court reviewed a patent examiner’s decision to deny a patent claim on a method of how buyers and sellers in the energy mark can protect or hedge against the risk of price changes.
Specifically, the Patent Examiner rejected claims 1 and 4, which describe a series of steps on how to hedge against risk and the expression of those steps into a mathematical formula. The Patent Examiner denied the claims, because they were not tied or limited to an apparatus or a machine that carried out the steps. The Patent Examiner rejected the claims stating that they are merely expressions of abstract ideas and solve a purely mathematical problem.
The Board of Patent Appeals and Interferences agreed and the Federal Circuit Affirmed. However, the Federal Circuit’s en banc panel rejected the “useful, concrete and tangible result” test for determining whether an invention or process is patentable. Instead, the Federal Circuit held that the only test for determining whether a claimed process is patentable is the “machine or transformation” test.
The “machine or transformation” test states that in order for a process to be patentable it must do the following: 1) be tied to a particular machine or apparatus; or 2) transform a particular article into a different state or thing. However, the Supreme Court decision rejects this holding. The Supreme Court held that the “machine or transformation” test is a useful test, but it is not the only test.
The Supreme Court stated that the novelty requirement can be met by a business method that is useful, concrete and produces a tangible result. Moreover, the Supreme Court went on to reject the assertion that business method patents should be categorically excluded from the Patent Act’s definition of patentable subject matter. Categorically excluding business method patents is contrary to the following: 1) the broad or wide scope that Congress intended for patent protection; 2) section 100 (b)’s use of the term method and its ordinary definition; and 3) section 273 (b) (1)’s allowance for a prior use defense for method patents.
However, the Supreme Court affirmed the decision to deny patent protection to claims 1 and 4, because they attempted to patent abstract ideas. Thus, although business method patents are still viable and can be patented; they must be more concrete, useful, and tangible or meet the machine or transformation test. It is unclear as to how this will impact patent prosecution, litigation, licensing, and acquisition strategies. This will also have an impact on business research and development strategies.
However, it is clear that business method patents are viable, but the range of subject matter that can be patented is further restricted to more concrete expressions of a process. Moreover, claims of business methods may have to be drafted more narrowly to ensure that they are granted. Business method claims will likely have to be interpreted more narrowly to avoid potential invalidity findings during a lawsuit.