The Closing Bell for Business-Method Patents?

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The economic recession is not the only downturn troubling the financial industry. Another downturn is happening in litigations involving business-method patents—a principal form of intellectual property for many financial-services companies—following last year’s Federal Circuit In re Bilski decision. That case holds that a claimed method, or process, is patent-eligible under 35 U.S.C. § 101 if “(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.” In re Bilski, 545 F.3d 943, 954 (Fed. Cir. 2008) (en banc). Bilski modifies the Federal Circuit’s more liberal, 1998 decision in State Street Bank & Trust Co. v. Signature Financial Group, Inc., which had held that business methods are patentable if they elicit a “useful, concrete and tangible result.” 149 F.3d 1368, 1375 (Fed. Cir. 1998). State Street fueled a business-method boom as financial-services companies and others rushed to file patent applications for their business methods. But Bilski burst the business-method bubble. In just eight months since the Federal Circuit’s decision, Bilski’s machine-or-transformation test has already doomed several patents in litigation. Although the Supreme Court’s decision to review Bilski offers patentees some hope, the district court decisions that apply Bilski signal that the outlook for business-method patents remains gloomy. Four of those cases are discussed below.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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