U.S. Supreme Court decision on business method patents: what it means for your business!

Dear Ladies and Gents:

The next installment of “Valuable Intellectual Property (IP) Tips for Business” is postponed so we can address the recent United States Supreme Court decision Bilski et al v. Kappos. This decision is extremely important because it largely eliminates patent eligibility for business method inventions. For those unfamiliar with the term, ‘business methods’ are processes and procedures which organize and/or direct human economic activities.

What does Bilski mean for the innovator and entrepreneur? If your company owns business method patents, be aware that post-Bilski most of the thousands of business method patents in the United States are now no longer valid. Also post-Bilski, exactly how does a company evaluate future investment in business method patent applications? Fortunately, many of the pre-Bilski clues remain viable investment predictors. For example, if a business method is primarily an abstract idea, then one should not invest in a patent application. Similarly, if the process is done entirely with pencil and paper, then this business method most likely is also not patent-eligible.

It is true that the Court did not find that business methods per se comprise a totally non-patent eligible category. However, as a practical matter most issued patents for business methods are no longer enforceable and will be difficult to obtain in the future. It is true that the Court justices diverged on the specific rationale for rejecting Bilski’s application. Nevertheless the unanimous Court implicitly agreed with previous judicial decisions, that the patent laws protect technological innovation and not business improvements.

Although not specifically addressed in Bilski, computer related inventions have similar challenges with patent-eligibility. In fact, many business methods are intertwined with computer related inventions, which contributed to confusion in the inventor community. Nevertheless there are clues for patent–eligibility of computer related processes. For example, if a computer related process is primarily an abstract mathematical formula then patent applications should be discouraged. Similarly, if the computer related process is primarily a mathematical formula for a law of nature (such as gravity) or a natural phenomenon (such as electricity), then investment should be discouraged.

There are pre-Bilski decisions which found business methods patent-eligible, but only for narrowly drafted methods with specific technology. These cases may remain viable guideposts for patent eligibility after the Supreme Court Bilski decision. If you are interested in these decisions, please e-mail my office at adrienne.b.naumann@att.net.

In my next posting I will resume our series on “Valuable IP Tips for Business” with a discussion of employee contracts.


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