Anticipate This!™ | Patent and Trademark Law Blog

In Re Bilski – En Banc Hearing Relating to Business Method Patents.

Posted in Opinion Commentary by Jake Ward on February 18, 2008

CAFC Orders Hearing En Banc of a BPAI Decision That Non-Machine-Implemented Business Methods Are Non-Patentable Subject Matter.

(Fed. Cir. 2008, 07-1130 order)

The following are the issues as stated in the CAFC’s sua sponte order relating to the Board of Patent Appeals and Interferences decision in Ex Parte Bilski (BPAI 2006):

The court by its own action grants a hearing en banc. The parties are requested to file supplemental briefs that should address the following questions:

(1)  Whether claim 1 of the 08/833,892 patent application claims patent-eligible subject matter under 35 U.S.C. § 101?
(2)  What standard should govern in determining whether a process is patent-eligible subject matter under section 101?
(3)  Whether the claimed subject matter is not patent-eligible because it constitutes an abstract idea or mental process; when does a claim that contains both mental and physical steps create patent-eligible subject matter?
(4) Whether a method or process must result in a physical transformation of an article or be tied to a machine to be patent-eligible subject matter under section 101?
(5) Whether it is appropriate to reconsider State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), and AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352 (Fed. Cir. 1999), in this case and, if so, whether those cases should be overruled in any respect?

Background on the case via InsideCounsel.com:

Bilski’s fight began more than 10 years ago when he submitted a patent application seeking exclusive rights to a method of using hedge contracts to reduce the risk that a commodity’s wholesale price might change. His process is pretty simple: When a commodity seller makes a sale to a consumer at one fixed price, he or she then makes a second set of hedging transactions at a second price.

There are no calculations for determining appropriate hedge prices, no use of computers to help implement the hedging.

The U.S. Patent and Trademark Office ruled in September 2006 that this “method” is merely an abstract idea, not patentable subject matter. A patentable “process,” the agency declared, must either transform matter or energy or use a machine to carry out specified steps. Bilski’s invention does neither.

Bilski appealed this ruling to the Federal Circuit in early 2007, and the legal battle began. According to many experts, the PTO is using this as a test case to narrow the type of business methods eligible for patents.

Claim 1 at issue from the Bilksi 08/833,892 patent application is reproduced below:

1. A method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price comprising the steps of:
         (a) initiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumers purchase said commodity at a fixed rate based upon historical averages, said fixed rate corresponding to a risk position of said consumer;
        (b) identifying market participants for said commodity having a counter-risk position to said consumers; and
        (c) initiating a series of transactions between said commodity provider and said market participants at a second fixed rate such that said series of market participant transactions balances the risk position of said series of consumer transactions.

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