Ruling May Curtail Software Patents

The Federal Circuit Appeals court has placed new limits on business methods that may have ramifications for the broad (and litigious) world of software patents.

The United States Court of Appeals for the Federal Circuit—effectively the second-highest court in the U.S.—has issued a ruling rejecting a patent application that sought to patent a business method independent of any device or transformation of matter. For years, the Federal Circuit has been broadening patent rights, extending patent protection to software applications and business methods during the 1990s. The new ruling should signal an end to many types of business method patents…and, in turn, change the world of software patents, which are closely related to business process patents from a legal standpoint.

The specific case the Federal Circuit ruled on is In Re Bilski. Bernie Bilski, CEO of a company called WeatherWise, applied for a parent on a “method for managing the consumption risk of a commodity.” The application was rejected by the U.S. Patent and Trademark Office on the grounds that it was attempting to patent a mental process, manipulating “an abstract idea” to solve a “purely mathematical problem.” While many business method patents cross the lines between a purely mental process and a software application, Bilski made no effort to disguise his patent application as anything other than a mental process—and that may have been the application’s downfall. In a strong 9 to 3 ruling, the Federal Circuit upheld the rejection of BIlski’s patent application, putting new limits on future business patent applications. While the court did not overturn its previous decisions expanding business and software patent rights, it did describe one of the existing precedents as “inadequate” and indicated it would not rely on the case as precedent in the future.

Although the Bilski case could still be appealed to the U.S. Supreme Court, the Federal Circuit court’s new stance towards business method patents likely means that software patent applications will be held up to a higher standard of scrutiny, although few expect a complete rollback to the 1980s when business method and software patents were almost impossible to obtain.