Is That Business Method Patent Still Valid - Bilski Revisited – Twice

The avid blog reader may remember the recent post regarding the seminal (lawyerspeak for “really, really important”) C.A.F.C. decision in Bilski. For those who are not (but should be) avid blog readers, and for those who simply don’t remember (the memory is the second function to go), we provide a brief recap: to constitute patentable subject matter, an invention must (a) “transform an article into a different state or thing,” or (b) be “tied to a particular machine or apparatus.” Unfortunately, several key terms, such as “transform,” “article” and “particular machine or apparatus” were left undefined. Thankfully, the district courts have now acted to correct this omission.

Cybersource Corp. v. Retail Decisions, Inc. dealt with a re-examined (pre-Bilski) patent directed to a system and method for detecting fraud in a credit card transaction conducted on the Internet. The Court, in the Northern District of California, affirmed that an “electronic signal representative of a physical object or substance" could – under proper circumstances – comprise an “article,” but that “manipulation” of such a signal would not comprise the requisite “transformation.” The Court then went on to hold that “the internet” is not a “particular machine or apparatus.” Bye, bye patent.

Versata Software Inc. et al. v. Sun Microsystems Inc. dealt with two software patents which allowed consumers to select from a variety of configuration options, when ordering a product online. The software allowed the consumer to select only those combinations of options which would yield a workable product. The defendant argued that the claimed inventions did not satisfy the “transformation” prong of the Bilski test and that the limitation that the process be performed on a computer was insufficient to tie it to a “particular machine.” The Court, in the Eastern District of Texas, held Bilski specifically stated that it should not be taken as broadly applying to software. The patents-in-suit live to be litigated another day.

THE LESSON TO BE LEARNED: Although the question as to the patentability of software remains open, the future of most business method patents seems dim. There is some belief that the Supreme Court will take up the Bilski matter and provide some clarification. Stay tuned.