Bilski was a landmark patent case relating to what is patentable subject matter under 35 USC §101 and affected how patent attorney’s in Austin and throughout the US drafted claims and patents.
In Bilski the Supreme Court affirmed the patent board of appeals that a method of hedging risks in commodities trading does not meet the “machine or transformation” test required for subject matter to be patentable.
In this series, I will provide 1) a brief overview of Bilski, 2) discuss recent cases and different courts analysis of Bilski, and 3) provide analysis of how Bilski affects patent lawyers/attorneys in Austin, Texas that have mobile applications/software development startups as clients.
The patent in question was a patent application directed towards fixing an energy bill for customers, where customers would pay fixed rates over a period of time for electricity bills that were predetermined. Therefore, a customer who used more energy over the period of time relative to other customers would save money, while customers who used less energy over the period of time would pay more money.
The patent disclosed a method where a broker “hedges” risks for customers of an input of a product or service (i.e. energy). The following was one of the claims in question in Bilski, and includes three parts.
A method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price comprising the steps of:
(a) initiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumers purchase said commodity at a fixed rate based upon historical averages, said fixed rate corresponding to a risk position of said consumers;
(b) identifying market participants for said commodity having a counter-risk position to said consumers; and
(c) initiating a series of transactions between said commodity provider and said market participants at a second fixed rate such that said series of market participant transactions balances the risk position of said series of consumer transactions.
Initially, the examiner at the USPTO rejected the claims as being unpatentable subject matter under §101 stating that the claims were directed towards an abstract idea.
The patent board of appeals affirmed the examiner’s rejection but on the grounds of State Street which required that the subject matter of the test produce a “useful, concrete and tangible result.”
The Supreme Court affirmed the patent board of appeal’s rejections, and created a new two prong test based on a trilogy of patent cases (Benson, Flook and Diehr). The two prongs of the test are as follows:
1) The invention is tied to a particular machine or apparatus, and
2) The invention transforms a particular article into a different state or thing.
The Supreme Court stated that because Bilski’s method was not tied to any specific machine, therefore stated it was unnecessary to decide any issues related to the second prong of the test. More so, the court stated that it was up to future cases to determine if the recitation of a computer or computing elements would sufficient to tie a process to a claim so that a claim includes patentable subject matter.
After Bilski was an interesting time for patent attorneys and start-up companies with software related inventions because it was uncertain whether method claims or claims directed towards software were patentable. However, as discussed in later sections of this trilogy courts have held that method claims tied to an apparatus such as a display, processor or network meet the second prong of the Bilski test. Yet, it is uncertain with what future courts will hold.