Recent Changes in Patent Eligibility Will Impact the Securities and Banking Industries

Two important recent events are likely to impact the patenting of inventions related to the securities and banking industries. First, on June 28, 2010, the U.S. Supreme Court issued its long-awaited opinion in Bilski v. Kappos (http://tinyurl.com/24qhdmo). The Bilski decision is the Supreme Court's most recent statement on what types of inventions are eligible to receive patents. For a detailed discussion of the Bilski opinion, please see our Legal News Alert at http://tinyurl.com/37d75bs. Second, on July 27, in response to the Bilski decision, the U.S. Patent and Trademark Office (USPTO) updated its guidelines for evaluating patent applications on subject matter eligibility. The guidelines, which provide concrete insight on how the USPTO will treat specific types of patent applications, are available online at http://tinyurl.com/3ah98xr.

The securities and banking industries, of course, are no strangers to business method patents. The watershed case, State Street Bank & Trust v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), involved a hub and spoke configuration for pooling assets from mutual funds. Since then, companies have sought to patent all manner of business methods and related innovations, including trading systems, securities products, hedging techniques, modeling techniques, customer and B2B Web site features, and so on.

Bilski

Many speculated that the Bilski decision would categorically abolish business method patents. That did not happen. While the Supreme Court ruled that the invention at issue was not patentable, it refused to adopt a broad exclusion against business method patents. In Bilski, the invention related to a process for hedging risk. The Supreme Court indicated that this fact alone did not preclude the invention from being eligible for a patent. Rather, the problem was that the invention was defined too abstractly. According to the Court, "Claims 1 and 4 in petitioners' application explain the basic concept of hedging, or protecting against risk: 'Hedging is a fundamental economic practice long prevalent in our system of commerce and taught in any introductory finance class.'" Slip op. at 15. The Court's reasoning suggests that if Mr. Bilski had defined his invention in more practical terms and less abstractly, it may have been eligible for a patent.

USPTO Guidelines

The USPTO guidelines shed further light on how the USPTO will treat specific types of patent applications. As instructed by the...