## Facts

- Patent applicants Bernard L. Bilski and Rand A. Warsaw sought claims directed to a method of hedging risk in commodities trading, described as arranging transactions between commodity providers, consumers, and counter-risk market participants.
- The claims did not require use of any particular machine or computer and did not recite transformation of a tangible article; they focused on structuring business transactions and relationships.
- A PTO examiner rejected the claims under 35 U.S.C. § 101 as directed to an abstract idea or mental process.
- The Board of Patent Appeals and Interferences affirmed the § 101 rejection.
- The Federal Circuit took the appeal en banc to clarify the proper test for process eligibility under § 101 and affirmed the Board’s rejection.

## Issues

1. What test governs whether a claimed “process” is patent-eligible subject matter under 35 U.S.C. § 101.
2. Whether claims to a method of hedging risk in commodities trading satisfy § 101.

## Decision

- The Federal Circuit (en banc) affirmed the Board’s rejection of all claims under § 101.
- The court held that the machine-or-transformation test is the controlling test for determining whether a claimed process is patent-eligible under § 101.
- Applying that test, the court held the risk-hedging claims were not patent-eligible because they were not tied to a particular machine or apparatus and did not effect a qualifying transformation.
- The court disapproved reliance on the “useful, concrete, and tangible result” formulation as a § 101 test for process claims.

## Legal Principles

- Patent-eligible subject matter under § 101 is a threshold inquiry; claims failing § 101 must be rejected regardless of novelty or nonobviousness.
- A claimed process is patent-eligible under § 101 only if it is tied to a particular machine or apparatus, or it transforms a particular article into a different state or thing (machine-or-transformation test).
- Abstract ideas and fundamental principles are not patentable; § 101 doctrine prevents claims that effectively preempt a basic concept itself.
- Transformations of legal obligations, business relationships, or risk positions, standing alone, are not qualifying “transformations” for § 101 purposes.
- Business method claims are not categorically excluded from § 101, but they must satisfy the machine-or-transformation test to be patent-eligible.

## Conclusion

The en banc Federal Circuit held that Bilski’s risk-hedging method claims were directed to nonstatutory subject matter because they were not tied to a particular machine and did not transform an article, and it adopted the machine-or-transformation test as the controlling framework for evaluating process claims under § 101 while rejecting the “useful, concrete, and tangible result” approach.


In re Bilski, 545 F.3d 943 (Fed. Cir. 2008)