How the US Supreme Court Case of Bilski v. Kappos Impacts VCs & Investors

August 25th, 2010

Editor: John R. Harris

The dust is still settling after the U.S. Supreme Court’s Bilski v. Kappos decision about the patentability of processes (business method and otherwise) on June 28, 2010.  Scholars and experts in other parts of the world seem to agree that the recent decision about the patentability of processes is, for the most part, “business as usual” here in the U.S.  Europe in particular has long been hostile to the patentability of computer software and business methods.

According to one European legal scholar’s observation, the “machine-or-transformation” test discussed in that case is either: “(i) woefully imprecise and ill-equipped for determining the patent-eligibility of types of invention that the legislators could never have imagined, or (ii) magnificently flexible in their scope for interpretation in that very small number of disputed cases in which the boundaries of patent-eligibility must be identified.”   Jeremy Phillips, Intellectual Property Consultant, Olswang, London; Professorial Fellow at the Queen Mary Intellectual Property Research Institute, quoted in Journal of Intellectual Property Law & Practice, Oxford Journals, Vol. 5, No. 9, p. 615 (2010).

See the Oxford Journal article

So, the debate will likely continue indefinitely – until the U.S. Congress changes the law or higher courts hand down further clarifying decisions – whether it is better to have the flexible standard that was just barely approved in the Bilski v. Kappos decision, or to have clearer rules for determining patentable subject matter.   For now, the “machine-or-transformation” test seems to provide a reasonable rule of thumb for business investors at the point of deciding whether to support the commercial development of a new process or not.