State Street Bank case overturned limited

From the Wall Street Journal - Court Limits Issuance of Patents on Methods of Doing Business

The U.S. Court of Appeals for the Federal Circuit upheld a ruling made by the Board of Patent Appeals and Interferences, which denied a patent for a method of hedging risks of sudden changes in energy costs. While patent law specifically allows the patenting of processes, the court ruled today that this protection doesn't extend to all abstract strategies of doing business.

The court, in a 9-3 decision, wrote that in order for a process to receive patent protection, it has to either "transform [an] article to a different state or thing" or be "tied to a particular machine." The risk-hedging strategy, the court ruled, did not fall into either category. Wrote the court: "transformations or manipulations of…business risks, or other such abstractions cannot meet the test because they are not physical objects or substances…"

The plaintiffs, Bernard Bilski and Rand Warsaw, had developed a hedging strategy used by several utilities to smooth out revenues in a sector where prices often gyrate. Messrs. Bilski and Warsaw argued that the utilities should have to license the right to use the method, citing 1998 court decision which largely allowed so-called "business method patents." Yet, the patent office denied their request and the plaintiffs appealed.

But in today's ruling, the court largely disavowed the highly controversial 1998 decision, State Street Bank v. Signature Financial Group. That case had granted protection to a system for managing mutual fund accounts. The State Street decision was widely cheered by the financial-services and software industries, among others. But ever since its issuance, the State Street case has been a lightning rod among patent practitioners, with detractors largely arguing that it led to a glut of weak patents.

This changes a lot.

For more background on the case (not the ruling) see Patent Law Blog (Patently-O): Bilski: Full CAFC to Reexamine the Scope of Subject Matter Patentability, Why In re Bilski will see the US move closer to Europe - Intellectual Asset Management and United States, Intellectual Property, Federal Circuit To Re-Assess Standards For Patent-Eligible Subject Matter - Fenwick & West LLP - 07/04/2008, Patent.