The US Supreme Court decided in Bilski and Warsaw v. Kappos that a business method for managing price risks in the energy market was too abstract to be patented. In simple terms, the business method was a mathematical formula.
A lower federal court determined that the mathematical formula wasn’t something that could be patented because it wasn’t tied to a specific machine or some sort of physical transformation. The Supreme Court said that this “machine or transformation” test was a useful tool to determine if a process could be patented, but it should not be the only way to determine patentability.
The Court suggested that certain business methods could be patented. However, the Court decided in this case that because the business method was just an abstract idea, it couldn’t be patented. The Court explained that a patent can’t be put on an abstract idea, law of nature, or mathematical formula.
Now and then, hard-and-fast rules are challenged, and a new way of thinking emerges. Two entrepreneurs hope to break the rules to patent a method for hedging risk in the energy commodity markets.
The Supreme Court heard oral argument on the case in November 2009, and court-watchers agreed in their read of the highest Court's unwillingness to broaden patents to processes called "business methods" which have no physical or "transformative" factors.
Patenting "Business Methods" Case
Last November, the Supreme Court heard rare oral argument on a controversial topic in patent law. The Court grants "Petitions for Leave to Appeal" on a very rare basis. Even though tens of thousands are brought, the nation's highest court selects only a few cases to hear on appeal.
Bilski and Warsaw v. Kappos involves two inventors who developed a mathematical formula for energy commodity companies to manage the costs of energy bought and sold at fixed prices as "hedges" against future price fluctuations. The case appears at the Supreme Court after the Court of Appeals. The Federal Circuit Court heard the original case and ruled against Bilski and Warsaw. However, the parties dispute the meaning and impact of the Court's ruling.
The US Patent and Trademark Office feels the ruling would have limited impact on how inventions, including in the areas of software and biotechnology, are patented. This keeps with the Office's trend toward greater scrutiny of patent applications.
In contrast, Bilski and Warsaw argued that the Federal Court of Appeals decision confines the patent criteria to an outdated test that’s no longer realistic in the "information age."
The Case Outcome Could Affect Many Areas
The surprising ruling in the Bilski case reversed the Court's own 1998 decision that said so long as business methods had a "useful, concrete and tangible result,” they could be patented. The ruling led to many patent applications for methods, including computerized methods used in financial and investment management.
It’s unknown if the Supreme Court's decision in this case will have a slowing effect on patent applications for these methods. Some argue the Court of Appeals’ ruling is so specific the Supreme Court's finding should be limited only to the Bilski case.
Others reason that the ruling will be significant, as it will either throw open or slam shut the doorway to patent applications for a vast array of technology-based methods.
Have Invention, Need Patent
Having a patent on your invention allows you to have a lock on creation to potentially make money from it. The process of applying for a patent is a daunting one, and involves a lot of paperwork and careful attention to detail. An attorney specializing in this highly technical area can provide valuable assistance and advice.
A main "hurdle" is careful consideration of the chances of success. The Office receives thousands of patent applications per year, and it’s impossible to know how long any one application takes to go through the system.
It would be helpful if you have a "prototype" of your invention or process. However, use caution in selecting a firm to make the prototype. You may find yourself out several thousand dollars with only a makeshift sample that doesn’t do justice to your creation.
Have a patent attorney carefully review any contract you’re given before you sign it, and before you pay any money to anyone. Meet with the prototype developer at the office to be sure it’s a legitimate business.
Patent Law is a Specialized Field
If you want to have something patented, it’s important to seek the advice and assistance of a licensed patent attorney. These attorneys have a background in engineering, science, or computer science, along with a law degree, and must pass rigorous examinations before being admitted to the Patent Bar.
Question For Your Attorney
- How can I make sure that my product idea isn't stolen before I apply for a patent?
- Should I have a product patented if I'm not sure if it will do well in the market?
- I have an invention that I want to patent. How can I find a company to promote my idea?