Even if an invention satisfies the novelty, nonobviousness, and utility requirements described above, it may not qualify for patent protection if it does not fall within one of the four statutory categories of patent-eligible subject matter: processes, machines, manufactures, and compositions of matter. The statutory scope of patentable subject matter under § 101 of the Patent Act is quite expansive—the U.S. Supreme Court once observed that the legislative history describing the intent of § 101 was to make patent protection available to "anything under the sun that is made by man." Instead, they seek patent protection for a process of curing synthetic rubber. Since Diehr, the Federal Circuit Court of Appeals has decided several cases concerning patent-eligible subject matter. Bilski v. Kappos

The patent application at issue in Bilski v. Kappos contained claims that relate to a method of hedging risk in the commodities trading field. The Federal Circuit's Opinion

On October 30, 2008, the Federal Circuit issued an opinion in the case, in which it affirmed the Board's decision. In so doing, the Federal Circuit expressly overruled In re Alappat, State Street Bank & Trust Co. v. Signature Financial Group, and its other prior decisions that relied on the "useful, concrete and tangible result" test for process patent eligibility. Furthermore, the Federal Circuit asserted that the Diehr Court had reaffirmed this test, and rejected Bilski's argument that the Supreme Court did not intend the "machine-or-transformation" test to be the sole and exclusive governing test for determining patent eligibility for a process under § 101:
We believe that the Supreme Court spoke of the machine-or-transformation test as the "clue" to patent-eligibility because the test is the tool used to determine whether a claim is drawn to a statutory "process"—the statute does not itself explicitly mention machine implementation or transformation. On June 1, 2009, the Supreme Court granted certiorari in Bilski to consider two questions:
Whether the Federal Circuit erred by holding that a "process" must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing ("machine-or-transformation" test), to be eligible for patenting under 35 U.S.C. He noted that the Court's precedents provide three specific exceptions to subject matter that may be patented under the Patent Act: "laws of nature, physical phenomena, and abstract ideas." Relying on the Court's earlier decisions in Benson, Flook, and Diehr , all members of the Court agreed that Bilski's patent application is not a patentable "process" under § 101 because it attempts to patent abstract ideas:
The concept of hedging, described in claim 1 and reduced to a mathematical formula in claim 4, is an unpatentable abstract idea, just like the algorithms at issue in Benson and Flook. However, the Court recognized that its precedents have found that the "machine-or-transformation" test is "a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under § 101." Thus, the Court did not invalidate the "machine-or-transformation" test, but rather reversed the Federal Circuit's requirement that the test be the only standard by which courts may examine a process for patent eligibility under § 101. In addition to this conclusion based upon the ordinary meaning rule, Justice Kennedy observed that "federal law explicitly contemplates the existence of at least some business method patents," citing the American Inventors Protection Act of 1999 that had added § 273 to the Patent Act and created the "prior user rights" defense to patent infringement, described earlier in this report:
[B]y allowing this defense the statute itself acknowledges that there may be business method patents. He expressed concern that business methods may stifle technological progress (and legitimate business competition and innovation) rather than promote it. 2. Nevertheless, by finding that the Patent Act's definition of "method" does not categorically exclude business methods, the Court did not outright invalidate the patents that have already been issued in the financial services, biotechnology, and Internet fields; furthermore, by rejecting the use of the "machine-or-transformation" test as the exclusive test, Bilski requires courts and PTO examiners to follow a more flexible approach in determining patent eligibility of processes.
The source of federal patent law originates with the Patent Clause of the U.S. Constitution, which authorizes Congress: "To promote the Progress of ... useful Arts, by securing for limited Times to ... Inventors the exclusive Right to their respective ... Discoveries." Section 101 of the Patent Act describes the subject matter that is eligible for patent protection, which may be divided into four categories: processes, machines, manufactures, and compositions of matter. The U.S. Court of Appeals for the Federal Circuit issued two decisions in the 1990s, In re Alappat and State Street Bank & Trust Co. v. Signature Financial Group, that had expanded the scope of patent-eligible subject matter to include any process that produces a "useful, concrete and tangible result." In October 2008, the Federal Circuit issued an en banc opinion, In re Bilski, that expressly overruled those earlier decisions. The Federal Circuit's Bilski opinion articulated a new legal standard governing the eligibility of process claims for patent protection under § 101 of the Patent Act: if the process is tied to a particular machine or apparatus, or if it transforms a particular article into a different state or thing. Some observers and patent practitioners criticized this "machine-or-transformation" standard as being too rigid and not in compliance with Supreme Court precedent concerning patentable subject matter eligibility. They raised concerns that the test potentially restricts patent protection for new innovations in business methods and software, and that it called into question the validity of already-issued patents that claim information-based and computer-managed processes.
On June 28, 2010, the Supreme Court issued its opinion in Bilski v. Kappos, representing the first time that the Court has ruled on the scope of patentable subject matter since its last decision on this topic, the 1981 decision Diamond v. Diehr. At the outset of the opinion, the Court emphasized that its precedents already provide limits to patent eligibility under § 101—laws of nature, physical phenomena, and abstract ideas may not be patented. Indeed, the Supreme Court rejected Bilski's patent application (regarding a commodities trading risk-hedging method) without using any "test" that may have been developed by the Federal Circuit; rather, the Court relied on its precedents in declaring that the processes that were claimed in Bilski's patent application are unpatentable abstract ideas.
The Court ruled that the Federal Circuit was incorrect in holding that the "machine-or-transformation" standard is the sole test for showing patent eligibility of process claims; however, the Court acknowledged that the test is a "useful and important clue, an investigative tool," for determining whether a particular process is patentable. Thus, the Court did not invalidate the test, but rather rejected the Federal Circuit's conclusion that the test is the exclusive one that governs the analysis for process patent eligibility under § 101 of the Patent Act. However, the Court did not articulate a different test or adopt new categorical rules for process patent eligibility, nor did it provide much guidance to the lower courts on this matter. Instead, the Court invited the Federal Circuit to develop additional tests and other limiting criteria regarding what constitutes a patentable process.
The Bilski Court also ruled that some business methods may be patentable, because (1) the Patent Act's definition of "process" does not categorically exclude business methods; and (2) § 273 of the Patent Act contemplates the possibility that some business methods, at least in some circumstances, may be eligible for patenting.