The U.S. Supreme Court ruled Monday that a method of hedging against fluctuations in the price of energy or other commodities was an unpatentable abstract idea. The court, however, rejected the idea that a business method could never be patentable. The case, Bilski v. Kappos (08-964), has been widely followed because of its possible far-reaching implications for business-method patents. Some business-method patents have been approved by the U.S. Patent and Trademark Office, including some concerning taxes. Some tax practitioners and groups, including the AICPA, have opposed patents for tax strategies or planning methods.
The high court upheld the substantive holding of the Federal Circuit Court of Appeals. However, the Supreme Court rejected the reasoning behind the lower court’s holding. The Federal Circuit had concluded that the hedging method was not eligible for patent under 35 USC § 101, the main statutory definition of patentable subject matter, because it failed the machine-or-transformation test. The Supreme Court’s majority opinion, written by Justice Anthony M. Kennedy, held that the application at issue was not patentable principally because it embodied an abstract idea, a mathematical procedure that, broadly applied, could allow the applicants rights over many types of hedging activities.
“Allowing petitioners to patent risk hedging would pre-empt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea,” Kennedy wrote.
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