The Federal Circuit's October 2008 decision, In re Bilski, has created much concern whether software and business methods are still patentable. That concern may turn out to be unwarranted, as the U.S. Supreme Court recently heard oral argument in the case.

In Bilski – a case that arose out of the U.S. Patent Office's rejection of a patent application directed to a method of hedging risks in commodities trading – the Federal Circuit examined "what test or set of criteria governs the determination as to whether a claim to a process is patentable under [35 U.S.C.] § 101 or, conversely, is drawn to unpatentable subject matter because it claims only a fundamental principle."

The Federal Circuit analyzed several prior cases and attempted to clarify what constitutes patentable subject matter by establishing a single, specific test. The Federal Circuit explained that an invention may only be patentable if it is tied to a particular machine or apparatus, or it transforms a particular article into a different state or thing. This is sometimes now referred to as the "machine-transformation" test.