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Federal Circuit rules against business methods patentability

[JURIST] In a landmark intellectual property decision Thursday, the US Court of Appeals for the Federal Circuit [official website] ruled [opinion, PDF] 9-3 that a business concept for hedging risk in the field of commodities trading was too vague for patent protection. The case on an application by Bernard Bilski, the CEO of a company called Weatherwise, could affect the validity of thousands of patents, particularly in the financial services and software industries. Relying on the "machine-or-transformation test" established in the 1972 Supreme Court case Gottschalk v. Benson [text] and reaffirmed in the 1981 case Diamond v. Diehr [text], the court ruled that business methods do not meet the standard for patentability under US law. The majority concluded that Bilski's patent application did not meet the definition of "process" under 35 U.S.C. 101 [text] because it did not involve a machine and did not physically transform anything. The New York Times has more.

Bilski and Rand Warsaw filed their patent application on April 10, 1997. After its rejection on the grounds that an abstract idea is not patentable, they appealed to the Board of Patent Appeals and Interferences [official website] which sustained all eleven objections on their patent application. The appeal was originally argued [argument, audio] before a panel of the court in October 2007. The court ordered en banc review [order, PDF], and oral argument [part 1, recorded audio; part 2] was held last May. The Circuit Court's decision could have wide-ranging consequences across a number of industries, as many currently accused of patent infringement are likely to argue that in light of Thursday's ruling many older patents are invalid. It is not yet clear if Bilski will appeal.

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