## Facts

- Bernard L. Bilski and Rand A. Warsaw filed a patent application claiming a method for hedging risk in commodities trading, focused on energy markets.
- The claimed process described steps instructing buyers and sellers how to protect against price fluctuations; one claim reduced the concept to a mathematical formula.
- A PTO examiner rejected the application under 35 U.S.C. § 101 as nonstatutory subject matter because it was not tied to a specific apparatus and amounted to an abstract idea.
- The Board of Patent Appeals and Interferences affirmed the rejection.
- The Federal Circuit, sitting en banc, affirmed and treated the “machine-or-transformation” test as the exclusive test for process claims.
- The Supreme Court granted certiorari to review whether that test is exclusive and whether the hedging method is patent-eligible.

## Issues

1. Whether the machine-or-transformation test is the exclusive test for determining whether a claimed “process” is patent-eligible under 35 U.S.C. § 101.
2. Whether the claimed method for hedging risk is patent-eligible subject matter or instead an unpatentable abstract idea.
3. Whether “business methods” are categorically excluded from § 101.

## Decision

- The Court affirmed the Federal Circuit’s judgment that the claims were not patent-eligible, but rejected the Federal Circuit’s view that the machine-or-transformation test is exclusive.
- The Court held the machine-or-transformation test is a useful and important clue for evaluating process claims, not a mandatory rule for all § 101 analyses.
- The Court declined to adopt a categorical exclusion of business methods from § 101.
- The Court concluded petitioners’ claims were directed to the abstract idea of hedging risk, a long-used economic practice, and were therefore outside § 101.

## Legal Principles

- Section 101 is broad, but subject to longstanding judicial exceptions for laws of nature, physical phenomena, and abstract ideas.
- The machine-or-transformation test is an investigative tool that can inform the § 101 inquiry, but it does not control all determinations of process eligibility.
- A claim that effectively preempts use of a fundamental concept—such as a basic economic practice—may fall within the abstract-idea exception.
- Limiting an abstract idea to a particular field of use or adding token, conventional steps does not convert it into patent-eligible subject matter.
- “Business methods” are not per se excluded from § 101, but they remain subject to the abstract-idea limitation and other § 101 constraints.

## Conclusion

The Supreme Court held that the machine-or-transformation test is not the exclusive measure of process patent eligibility under § 101, refused to categorically bar business-method patents, and nonetheless affirmed rejection of Bilski’s application because the claimed hedging method was an unpatentable abstract idea.


Bilski v. Kappos, 561 U.S. 593 (2010)