In a decision that could reshape the way banks and high-tech firms protect their intellectual property, a federal appeals court ruled Thursday that a man's business concept was too vague for patent protection.
WASHINGTON — In a decision that could reshape the way banks and high-tech firms protect their intellectual property, a federal appeals court ruled Thursday that a man’s business concept was too vague for patent protection.
The U.S. Court of Appeals for the Federal Circuit ruled against Bernard Bilski, who had attempted to patent a method for managing weather-related risk through commodities trading. The U.S. Patent and Trademark Office had rejected his application, saying it did not involve a particular machine and did not physically transform anything.
Relying heavily on 1970s-era U.S. Supreme Court decisions that established the “machine-or-transformation test,” Chief Judge Paul Michel wrote for a nine-judge majority Thursday that Bilski’s patent application did not meet an older definition of “process” under patent law.
The decision was watched closely by many industries because it could determine whether thousands of existing patents will hold up in court. People accused of patent infringement might argue that under the new case, those older patents are invalid.
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More industries have applied for “business-process patents” in the past decade, experts said, since a previous decision created a looser test for what constitutes an invention eligible for a patent. Manufacturers have patented-operations methods, online retailers have protected new work-flow techniques, and online dating sites have sought rights to their matching algorithms.
The industries most affected are financial-services and software companies, which gain competitive advantages by developing complex ideas that might not always lead to tangible results.
Financial and high-tech firms are split on the case. Some have argued that such patents granted to obvious, trivial processes hamper innovation. Others say people who invest time and energy in creating new processes should have the opportunity to protect them under patent law.
Joseph Potenza, an attorney with the intellectual-property firm Banner & Witcoff Ltd., said the decision appears to split the difference between the two arguments. While Bilski will not receive his patent, the court’s clearer test will make it easier for some companies to protect their ideas, he said.
“I don’t think it’s black and white,” Potenza said. “It’s a long decision, and there’s good language for either side to pick up on.”