Court limits ‘business method’ patents

A federal appeals court on Thursday ruled against a man trying to patent a business idea, a decision with far-ranging implications for the financial services and high-tech industries, which have major players on both sides of the issue.

The U.S. Court of Appeals for the Federal Circuit ruled against Bernard Bilski, who wanted to patent a method for hedging against weather-related effects on businesses. Because his process did not involve a particular machine and did not physically transform anything, the court said, the process was not eligible for a patent.

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 that Bilski's patent application did not meet this definition of "process" under patent law.

The court affirmed the U.S. Patent and Trademark Office's denial of Bilski's patent, saying the agency's interpretation of the "process" was correct.

Consulting firm Accenture and banking company Goldman Sachs Group Inc., among others, believed that processes like Bilski's should be eligible for patents.

Denying the patent "eliminates a whole class of innovations from protection — business methods that rely on humans for execution," Accenture wrote in a fact sheet arguing for reversal of the patent office's decision.

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But Bank of America Corp., Wachovia Corp. and a host of other companies argued in court briefs that allowing abstract ideas to be patented "hinders rather than promotes innovation."

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Companies that rely on computer-related patents could take heart from the court's statement that processing data counts as "transformation," making them patent-eligible. But the court punted on the question of whether mentioning a computer is enough to argue that a process involves a machine.

Two judges filed long dissents, arguing the decision could disrupt industries operating with patents that could be affected by the decision.