Supreme Court Agrees to Hear Bilski Case: Decision to Have Broad Implications for Silicon Valley Companies

The Supreme Court agreed this week to hear the Bilski Case. Given the issues at the heart of Bilski, this case will be closely watched by the Silicon Valley business community, since any decision could have a far-reaching impact on the patentability of intellectual property developed by Silicon Valley businesses.

What are the issues to be looked at in Bilski?

First, the Court will look at whether the Federal Circuit erred in its holding that a process must be tied to a particular machine or apparatus, or that it must transform a particular article into a different state or thing to be eligible for patent protection (also known as the "Machine or Transformation Test"). Second, the Court will look at whether or not the Machine or Transformation Test, which effectively denies patent protection to many business methods, contradicts clear Congressional intent.

The outcome of this case will likely determine whether or not many business methods are patentable, including many software patents.

In case you have not been following the Bilski case, the facts behind the ruling are as follows:

The patent application was filed in April, 1997 to protect a method of hedging risk in the field of commodities trading. The patent examiner rejected the claims on the basis that the invention was not directed to the technological arts. The rejection was appealed, and the Board found that the examiner was wrong to use the "technological arts" test but that the invention was still not eligible for patent protection due to the fact that the claims did not involve any patent eligible transformation and only claimed an abstract idea ineligible for patent protection. Also, the Board found that the process did not produce a useful, concrete or tangible result.

The Federal Circuit's decision looked at two earlier Supreme Court decisions: Benson and Diehr. Both Diehr and Benson involved software programs, and looked at whether claims involving a particular mathematical equation were patentable. Benson basically established that a mathematical formula in itself was not patentable. In contrast, Diehr established that a distinction existed between patenting mathematical formulas and patenting specific applications of mathematical formulas. The Federal Circuit used these precedents and later decisions upholding those precedents as the basis for determining that its "Machine or Transformation Test" applied to determine whether a particular process is in fact patentable. It is expected that the Supreme Court may revisit these decisions as part of its consideration of this case.

So, the importance of the Supreme Court taking Bilski is that the Supreme Court is expected to clarify what the test should be for the patentability of method claims. This clarification will inevitably have widespread implications for the technology industry, since it may affect the validity of existing method patents as well as the future patentability of method inventions.
From a licensing perspective: this decision could potentially limit what can be commercialized through patent licensing. More importantly, the decision could call into question the validity of a number of existing patent licenses.

Needless to say, this case is one that the Silicon Valley will be closely watching. The Silicon Valley IP Licensing Law Blog will continue to keep you posted on any developments as they arise.