Original URL: http://www.theregister.co.uk/2008/10/31/us_court_of_appeals_federal_circuit_business_method_patent_decision/

US court blocks Amazon-style patent trolls

Back to reality

By Austin Modine

Posted in Law, 31st October 2008 20:48 GMT

A US court has made the task of getting patent protection for software and business methods a la Amazon's "One-Click" a whole lot more difficult.

The ruling means businesses and individuals with a penchant for patenting trivial or abstract concepts, and suing over infringement, may soon receive a swift kick to the intangibles.

The Court of Appeals for the Federal Circuit on Thursday upheld a earlier decision by the US Patent Office that rejected a patent application for a method of hedging risks in commodities trading.

The 9-3 decision rejects the court's own earlier landmark State Street Bank ruling of what can be patented. Instead, it favors earlier Supreme Court guideline that maintains a stricter, two-pronged standard.

The court decided in order for software or a business method to be eligible for patent protection, it has to either be tied to a particular machine or apparatus, or transform a physical object into something else.

That compares to State Street's much more lenient "useful, concrete and tangible result" inquiry, which first opened up business methods as something patentable.

The risk-hedging strategy in the case therefore can't pass muster because nothing it can arguably "transform" is material. From the majority opinion, penned by Chief Judge Michel Newman:

Purported transformations or manipulations simply of public or private legal obligations or relationships, business risks, or other such abstractions cannot meet the test because they are not physical objects or substances, and they are not representative of physical objects or substances... Given its admitted failure to meet the machine implementation part of the test as well, the claim entirely fails the machine-or-transformation test and is not drawn to patent-eligible subject matter.

For software patents, it's theoretically much easier to get by the standard on virtue of it requiring computer or device - which counts as a machine. But the decision could leave many business method patents open to attack.

Possibly the most notorious of these is Amazon's "One-Click" patent, where the bookseller effectively claimed exclusive rights to storing customer records in order to skip the step of using an online shopping cart. Another example is Netflix suing Blockbuster in 2006 for getting into the subscription movie rental business.

The court's decision still may raise some tricky questions about what's acceptable. For example, could Amazon's website be considered a "machine?" Is simply saying the patent is "for a computer", "particular" enough?

The case is also widely expected to be appealed to the Supreme Court, so we've definitely not heard the last of this. A full copy of the decision is available here (PDF). ®