Software and business method patents are on the rocks

On Thursday,the U.S. Court of Appeals for the Federal Circuit ruled against Bernard Bilski, a man whose patent for a method of reducing risk in commodities trading was ruled invalid by the Board of Patent Appeals. For Bilski, this means that he only has one more place to bring his appeal (the Supreme Court). For the rest of us, this establishes a much more narrow interpretation of patentability for software and business method patents.

Software and business method, popular with internet companies, came into vogue after the 1998 State Street Bank case in which the court ruled that any method that had "useful, concrete and tangible results" could qualify for a patent. With the Bilski ruling, there's a new patentability test in town -- "machine-or-transformation." For a software or business method patent to be legit, it must now be either attached to some machine or device or it must transform something into a different state.

There's a pretty good summary at the Patent Law Blog here. Here's a shorter summary from Reuters.