I finally got around to reading In Re Bilski (via Groklaw), the latest landmark case in the United States with regards to patentability issues. While abstract ideas are not patentable, ever since the case State Street, the U.S. has allowed mere abstractions as patentable subject matter if they produce a “useful, concrete and tangible result”. This means that one did not need to have anything tangible, technical or even plausible, in order to get a patent, but that the result would be tangible; which confirms my firm belief that patent law is 90% sophistry and 10% mumbo-jumbo. It is no coincidence that software patents and business method patent applications exploded after State Street was decided. The impact of allowing abstract “inventions” can be seen when one compares the patent landscape in Europe and the United States, as mere abstractions or business methods are not patentable subject matter in Europe. The result of such practice is a more reasonable and rational patent policy, with better quality patents and less worry for innovators.

First some background. In 2002 Mr Bernard Bilski filed and application (08/833,892) to protect a “Capped Bill System”. The abstract reads:

“A method of providing one of a good or a service to at least one entity at one of a payment, rate, or price that is capped at a pre-determined amount. The method includes producing an offer for the entity, wherein the offer represents at least one of a capped maximum payment, a capped maximum rate, a capped maximum usage, a capped maximum consumption, or a capped maximum price amount. The method also includes providing the good or service to the entity at one of a payment, rate, or price that may fluctuate, wherein the payment, rate, or price cannot exceed the capped maximum payment, capped maximum rate, capped maximum usage, capped maximum consumption, or capped maximum price amount.”

At first reading, one realises that this does not describe anything specific, it is purely the abstract description of a capped payment method. Where is the novelty? Where is the tangible result? The examiner agreed and rejected the application. The Board of Patent Appeals agreed with the examiner. Mr Bilski then appealed to the United States Court of Appeals for the Federal Circuit (CAFC), which affirmed the rejection of the Bilski application. The question at the heart of the majority decision is whether the method described in the Bilski application is patentable subject matter. One of the ways in which business method patents were allowed in the past was by the application of what is known as the machine-or-transformation test, namely, that if the abstract process described could be carried out by a machine, or allowed some physical transformation, then it would be patentable. The CAFC majority disagreed that the Bilski application met such test. They say:

“Even if it is true that Applicant’s claim “can only be practiced by a series of physical acts” as they argue, see id. at 9, its clear failure to satisfy the machine-or-transformation test is fatal. Thus, while we agree with Applicants that the only limit to patent-eligibility imposed by Congress is that the invention fall within one of the four categories enumerated in § 101, we must apply the Supreme Court’s test to determine whether a claim to a process is drawn to a statutory “process” within the meaning of § 101.”

To me the most interesting part of the ruling is the dissenting opinion by Judge Mayer, which goes even further, and makes the point that the question is one of allowing abstract thoughts to be patented. He says clearly and astutely:

“The patent system is intended to protect and promote advances in science and technology, not ideas about how to structure commercial transactions. Claim 1 of the application of Bernard L. Bilski and Rand A. Warsaw (“Bilski”) is not eligible for patent protection because it is directed to a method of conducting business. Affording patent protection to business methods lacks constitutional and statutory support, serves to hinder rather than promote innovation and usurps that which rightfully belongs in the public domain. State Street and AT&T should be overruled.”

Judge Rader seems more favourable to business and software method patents, but even he agrees that the majority decision is unnecessarily complex. He says that:

“In sum, this court today invents several circuitous and unnecessary tests. It should have merely noted that Bilski attempts to patent an abstract idea. Nothing more was needed.”

It would be easy to miss the importance of Bilski amongst the patent law technicalities, but make no mistake about it, it is a massive shift in U.S. patent policy, something that draws USPTO practice closer to Europe. It seems clear that the United States patent system is finally waking up after a patent binge, and is realising that it has a very bad hangover. Business method patents are an aberration for several reasons, chiefly amongst them is the fact that they disproportionately reward applicants who have incurred in little or no investment to come up with their “innovations”. They reward trolls and punish legitimate businesses, making the mere business competitive environment a more hazardous place to conduct private endeavours. One has to hope that Bilski will be the beginning of the end to the most outlandish patents out there, and may inject some rationality back to patent law.

So far, the only people I have heard complaining are patent attorneys. That says it all really.

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