(Adds further expert comment in paragraph 4)
By Diane Bartz
WASHINGTON Oct 30 A U.S. appeals court has
rejected patenting a way to smooth energy costs in a closely
watched decision that could narrow the scope of "business
The case turned on whether an inventor can patent an
abstract process, something that involves nothing more than
thoughts, and was closely watched by software makers, Internet
companies, investment houses and other businesses.
The U.S. Court of Appeals for the Federal Circuit ruled on
Thursday that the patent application at issue was not tied to a
machine and did not result in a transformation, both standards
set by the U.S. Supreme Court for patentability.
"I think there's some narrowing of what you need to get a
business method patent," said Michael Bregenzer, an attorney
with Reed Smith LLP.
The case is widely expected to be appealed to the Supreme
Court, something the appeals court acknowledged in its
Business methods were widely considered unpatentable until
a 1998 ruling by the same appeals court. The U.S. Patent and
Trademark Office issued 1,330 such patents last year, up from
120 in 1997, according to figures on its website.
One of the best known examples of a business method patent
is Amazon's (AMZN.O) one-click process to buy goods on the
Bernard Bilski and Rand Warsaw had challenged the U.S.
Patent and Trademark Office's rejection of their request to
patent their method for managing the risk of sudden movements
in energy costs.
Bilski and Warsaw founded the company WeatherWise to sell
services based on the method used by some utilities. The U.S.
patent office rejected their patent application in 2000 and the
patent board upheld the rejection in 2006.
Erika Arner, a patent attorney with law firm Finnegan LLP,
said that many business method patents would now be vulnerable
to legal assault.
"Some folks will look at the Bilski decision as a new
weapon to attack business method patents," Arner said.
The high-profile case was heard by a 12-judge panel of the
appeals court that specializes in patent matters.
"We hold that the applicants' process as claimed does not
transform any article to a different state or thing," the
majority opinion said.
"Purported transformations or manipulations simply of
public or private legal obligations or relationships, business
risks, or other such abstractions cannot meet the test because
they are not physical objects or substances," added the
opinion written by Chief Judge Paul Michel. Three judges
Future developments in technology may present challenges to
the machine-or-transformation test, the majority opinion said,
just as the widespread use of computers and the advent of the
Internet had begun to challenge it in the past decade.
"Thus, we recognize that the Supreme Court may ultimately
decide to alter or perhaps even set aside this test to
accommodate emerging technologies."
(Reporting by Diane Bartz; Editing by Andre Grenon and Tim