Software and Business Methods: Patent Eligible?

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Despite the clear importance of software and business method inventions in today's economies, the European and U.S. courts and patent offices have struggled to define appropriate tests for patent eligibility. In the United States, under 35 U.S.C. § 101, inventors can obtain a patent for "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof. . . ." This broad statutory right has enabled the United States Patent Office ("USPTO") to issue countless patents to software and business methods, and many of these inventions are claimed with "process" or "method" claims. Indeed, the statute— and the Supreme Court's longstanding case law excluding "laws of nature", "physical phenomena", and "abstract ideas" from eligibility—does not articulate clear tests for when a claimed process or method should be excluded.

In Bilski v. Kappos, the U.S. Supreme Court clarified that business methods cannot be categorically excluded from patenting. The Court rejected the lower appellate court's (the Federal Circuit's) requirement that a process be tied to a particular machine or apparatus, or transform a particular article into a different state or thing in order to be patentable. Justice Anthony Kennedy, writing for the majority, explained that the machine-or-transformation test is a useful, but nonexclusive, tool for determining patent-eligibility of processes. Although the Court held that Bilski's claims were unpatentable "abstract ideas," it refrained from articulating a test for patent eligibility and specifically refused to adopt any "categorical rules that might have wide ranging and unforeseen impacts." Instead, the Court encouraged the Federal Circuit to continue developing case law that will define an appropriate test, leaving the lower courts, USPTO, and practitioners without clear guidance.

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