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U.S. Supreme Court Rejects Financial Planning Patent but Opens the Door to Business Method Patents

In Bilski v. Kappos, the U.S. Supreme Court rejected one business method patent for hedging weather risks in commodities trading, but opens the door to other business method patents that could affect consumer cost in a wide variety of industries, including medical testing and retirement planning.

AARP's Brief

AARP had filed an amicus brief arguing that abstract ideas like business methods should not be patented. The brief, filed by AARP Foundation Litigation attorneys in conjunction with 11 law and science professors, detailed the history of patent law and pointed out that abstract ideas like discoveries of phenomena of nature have long been unpatentable under the fundamental underpinnings of patent law. Patenting phenomena of nature and mathematical formulas impedes progress by setting natural discoveries and processes apart for use only by a few. In contrast, patent law only protects those inventions that create or transform natural phenomena in nonobvious ways.

AARP's brief noted that science, nature and ideas (claimed as such or without invention in their application) for centuries consistently have been held to be excluded from the patent system.

The Ruling

Agreeing with AARP, the Supreme Court unanimously ruled that Bilski's business practice was not patentable. However, it did not categorically rule out such patents; by a narrow one-vote margin it ruled that "a business method is simply one kind of 'method' that is, at least in some circumstances, eligible for patenting."

What's at Stake

The implications of this case are very real and tangible. Because a growing number of retirement plan methods, strategies and designs are seeking patent protection under a similar business process approach, there is a concern that classifying business methods such as retirement plan strategies as "patented" or "patent pending" could lead to the misconception that the strategy is both legitimate and government-approved and that patenting strategies could improperly add to their cost. Granting patent protection to "abstract ideas" or tax strategies could also limit their use and the retirement options available to people, argued AARP's brief. Additionally, the cost of patent protection for business ideas could result in significantly higher fees for services for financial planning and medical testing. Unfortunately, the Supreme Court declined to delineate the limits of business method patents, leaving unanswered the exact cost to consumers in the future.

AARP's brief in Bilski is the latest in AARP legal advocacy efforts seeking to ensure an open and free marketplace that is not unduly hindered by overly liberal granting of patent protections.