What is Bilski?

“Bilski” is short for Bilski v. Kappos, a case pending before the United States Supreme Court.  It is an appeal by a patent applicant named Bernard Bilski relating to a patent application that has been rejected by the Patent and Trademark Office.  The patent application at issue in Bilski claims a method of hedging risk.  The specific steps recited in the claimed method involve initiating options contracts.  The claims were rejected by the Examiner as not being directed to patentable subject matter under § 101 of the Patent Act.  The rejection was upheld on appeals to the Board of Patent Appeals and Interferences and then to the Court of Appeals for the Federal Circuit.

For many years the United States Patent and Trademark Office refused to allow patent claims that were directed to methods of doing business. That changed in 1998 when the Court of Appeals for the Federal Circuit struck down that rule in a case called State Street Bank v. Signature Financial.  The Patent Office and courts have struggled since State Street to determine what the limits on patentable methods should be.  In 2008, in In re Bilski, the Federal Circuit created a new test for patent eligibility–the “machine or transformation” test.  According to this new test, a method is eligible for patent protection only if it is tied to a particular machine or it causes an article to be transformed to a different state or thing.  This is a more rigid and restrictive test than was generally applied before, and it calls into doubt the validity of many patents issued since 1998.  The Supreme Court agreed to hear the Bilski case in order to determine whether the new machine or transformation test is the appropriate test.

The Supreme Court heard oral arguments in Bilski in November, 2009.  A final decision on the case is expected before the end of the present term–late June or early July.  While it is always dangerous to predict how the Supreme Court will decide a case, the betting  seems to be that the machine or transformation test will be discarded, at least as the sole test for patentable subject matter.   Any new test is likely to have a significant impact on existing business method and software patents, pending applications, and new applications filed after the decision.