Software Patents and Business Methods Patents, Are They Patentable?

Are software and business methods patentable? If you have been Googling the topic recently, you may have heard that the US Supreme Court and the Federal Circuit have heard a series of different cases during the past few years regarding it. Before I get into the history below, the short answer is still generally yes for software patents, with exceptions, but probably not for pure business methods, with exceptions of course!

Some of the earliest cases in the 70’s held that abstract ideas are not patentable, thus computer software which is composed of algorithms/mathematical concepts were held not to be patentable. This was an initial strike against software patents! Later in the 80’s the Supreme Court ruled on Diamond v. Diehr. The patent in question related to an invention for a method to determine how rubber is heated so it can be best “cured.” The invention was tied to a computer that calculated heating times of the rubber. The claims included a computer program claim and method claims. The Supreme Court held that the invention was not simply a mathematical algorithm, but was a valid process and
therefore patentable.

Throughout the years however, other cases came out that conflicted with Diehr. It wasn’t until the 90’s, in the seminal Supreme Court case of State Street Bank v. Signature Financial Group, which seemed to clarify the patentability of software patents. This patent related to a method of running mutual funds. Again, the issue revolved around the patentability of a mere mathematical algorithm or business method. The Supreme Court held the patent as valid and thus allowing a business method to be patentable subject matter. A key point was that the software must yield a “useful, concrete and tangible result”. So for many the feeling was that the patent claims needed to be drafted such that the software or processes were tied to a computer or processor to achieve a useful, concrete and tangible result to be patentable.

Fast forward to 2008, the Federal Circuit ruled on the In re Bilski matter which garnered a lot of media attention as to the patentability of business methods and computer software. The main claim at issue in the Bilski patent was for a method of hedging risk in the field of commodities trading. The claim was considered to be a pure business method because it dealt with simply a mental process (information that is analyzed and acted upon). The Court walked away with a new test requiring that a process is patentable if "(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing." This new machine-or-transformation test really called into question pure method claims, and software method claims as well.

Then in late 2009 the Bilski matter was pushed to the Supreme Court to decide if the machine-or-transformation test is a proper test to determine patentability of business methods. The Supreme Court will rule on the case sometime in mid 2010. Upholding of Bilski will likely require all business method patent claims to be tied to a machine and require processes to either transform an article or be timed to a machine. More will follow after the Bilski decision later this year!