The following guest blog is provided courtesy of Bruno Soucy. He is a partner in the Corporate/Commercial, E-Commerce, Entertainment Law, Information Technology Law and Intellectual Property Law practice groups at Blaney McMurtry LLP. Bruno has represented a wide variety of Internet and other technology companies in various commercial matters. More particularly, he has negotiated and drafted agreements relating to the exploitation of technology and the conduct of business via the Internet.

Certainty is conducive to efficient markets.

The state of law in the United States with respect to business method patents (patents on methods of doing business) has been anything but clear over the past 15 years. The United States Patent and Trademark Office (“USPTO”) has been criticized, especially in the late 1990s for being lax in issuing business method patents. After some introspection, the USPTO later adopted a more restrained approach but questions persisted surrounding the validity of previously issued business method patents as well as the validity of the criteria currently (and sometimes inconsistently) used by the USPTO when reviewing patent applications for business methods. That is why there were high hopes amongst the various stakeholders that the U.S. Supreme Court would render a decision that would provide greater clarity with respect to this issue. Regrettably, the decision falls short of this.

In terms of background, Bilski and Warsaw v. Kappos involved a patent application for claims relating to a process of managing risk in commodities trading. The USPTO found that the underlying invention was not patentable subject matter and therefore denied the issuance of a patent. Bilski and Warsaw appealed the decision which was in turn affirmed by the Board of Patent Appeals and Interferences.

Bilski and Warsaw again appealed and, again, the U.S. Court of Appeals for the Federal Circuit affirmed the decision on the grounds that an invention is only patentable if: “1) it is tied to a particular machine or apparatus, or 2) it transforms a particular article into a different state or thing” and that the subject invention did not satisfy these requirements. Bilski and Warsaw then appealed the refusal to the U.S. Supreme Court.

Regrettably, the U.S. Supreme Court did not deliver the landmark decision that stakeholders on both sides of the debate were hoping for. Even though the U.S. Supreme Court affirmed the lower decisions it rejected the stricter test proposed by the U.S. Court of Appeals (machine-or-transformation test) yet failed to clearly set out the circumstances in which methods of doing business can be patented. The U.S. Supreme Court simply confirmed that business method may be patentable subject matter if they are more than abstract ideas and offered little guidance in terms of how this determination is to be made.

A few things are clear, however. The existing ambiguity surrounding business method patents remains and so does the existing business and legal challenges surrounding valuation of intellectual property assets and assessment of operational exposure. This decision indeed leaves the floor open for the continued debate between stakeholders on both sides of the issue and with it, levels of litigation should not be expected to be quelled nor related legal costs.

Perhaps the case at hand was not the proper case for such determination or perhaps this is simply confirmation that legislative intervention will be required to address this lingering issue.