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Court rules against inventors in patent case

The U.S. Supreme Court upheld a ruling refusing to give a patent for a business method, but also criticized the prevailing standard for deciding whether to allow such patents.
/ Source: news services

The Supreme Court on Monday refused to weigh in on whether software, online-shopping techniques and medical diagnostic tests can be patented, saying only that inventors' request for protection of a method of hedging weather-related risk in energy prices cannot be granted.

The high court on Monday unanimously agreed with a lower court ruling that threw out Bernard Bilski and Rand Warsaw's patent, a decision many said could endanger Information Age patents. But the high court said they did not need to make a broad sweeping decision about patents to dispose of Bilski and Warsaw's case.

"The patent application here can be rejected under our precedents on the unpatentability of abstract ideas," Justice Anthony Kennedy wrote for the court. "The Court, therefore, need not define further what constitutes a patentable process."

The U.S. Court of Appeals for the Federal Circuit had said a process is eligible for a patent only if it is "tied to a particular machine or apparatus" or if it "transforms a particular article into a different state or thing."

Kennedy said the Supreme Court was not endorsing that idea.

"There are reasons to doubt whether the test should be the sole criterion for determining the patentability of inventions in the Information Age," Kennedy said. "... The machine-or-transformation test would create uncertainty as to the patentability of software, advanced diagnostic medicine techniques and inventions bases on linear programming, data compression and the manipulation of digital signals."

The patent case, involving a system for hedging against energy cost changes, had been closely watched. Some software and biotechnology companies wanted the definition of what can be patented to be as broad as possible because they license those processes. Others, like some financial institutions, wanted restrictions on business method patents to avoid getting sued.

The best known patented business method is Inc.'s one-click purchases.

Bilski and Warsaw a small Pittsburgh company called WeatherWise to sell services based on hedging methods. They had tried to patent the hedging method, which allows users to make fixed energy payments even if usage and energy prices vary.

The U.S. patent office rejected the patent application in 2000, and the patent board upheld the rejection in 2006.

The U.S. Court of Appeals for the Federal Circuit, which specializes in patent cases, also upheld the rejection. It ruled in 2008 that business methods can be patented only if they involve a machine or result in the transformation of a material substance.

The Supreme Court upheld the appeals court decision but criticized the "machine or transformation" standard.

The Obama administration argued before the Supreme Court that the appeals court ruling should be be upheld.

Writing the Supreme Court opinion, Justice Anthony Kennedy agreed.

"Today, the court once again declines to impose limitations on the Patent Act that are inconsistent with the Act's text," he wrote.

"The patent application here can be rejected under our precedents on the unpatentability of abstract ideas," he concluded.

The Supreme Court case is Bilski v. Kappos, No. 08-964.