On June 28, 2010, the U.S. Supreme Court issued its decision in Bilski v. Kappos,1 addressing the circumstances by which business methods are eligible for patent protection. In a majority opinion by Justice Anthony M. Kennedy, the Court, not surprisingly, affirmed the U.S. Court of Appeals for the Federal Circuit’s decision that a process for hedging against the risk of price changes in commodities markets is unpatentable.
The majority understandably relied on the text of the Patent Act and the Court’s own precedent to reject the Federal Circuit’s holding that a process is only patentable if “(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing” (the “machine-or-transformation test”).2 Instead of creating new exclusions and/or categorical rules, the Court ruled that the patent eligibility focus should be on the three long-recognized judicial exceptions to patentability: laws of nature, natural phenomena, and abstract ideas. Ultimately, the Court found that Mr. Bilski’s claims were directed to an abstract idea, and therefore not patentable.
