In a much anticipated decision issued today, the Supreme Court has refused to decide on a categorical basis whether software or so-called “business methods” may be patented under U.S. law. Rather, the Court held that the particular business method under review was merely directed to an “abstract idea” and thus was not eligible for patent protection. The Court further ruled that the lower courts had improperly adopted a particular legal test – the “machine-or-transformation test” – as the sole test for determining whether software or business methods are patent eligible or not. Notwithstanding this narrow ruling, the Court allowed that the machine-or-transformation test is a useful test for determining patent eligibility, albeit not the sole or exclusive test.

In the wake of this narrow decision, the United States Patent Office and the lower courts are expected to adopt a somewhat more flexible, case-by-case approach in determining whether a particular software program or business method is patentable. At the same time, however, the Supreme Court reaffirmed its precedential case law from the 1970s and 1980s stating that “abstract ideas” are not patentable. The Court additionally cautioned that would-be patentees could not obtain a patent for an abstract idea merely by limiting the abstract idea to a “particular technological environment.” Finally, the Court noted that many business method patents contain very vague language and therefore are invalid for that additional reason.

In conclusion, the Supreme Court’s decision in Bilski v. Kappos provides very little concrete guidance as to what particular software programs or business methods are patentable. The Court has instructed the lower courts to develop additional criteria for answering this question. In the meantime, patent applicants and litigants should focus on the Supreme Court’s precedential decisions from the 1970s and 1980s in determining the metes and bounds of patentable subject matter for software and business methods.

For more information, contact your SGR Intellectual Property counsel.