Method Patents - Machine or Transformation Test and Business Method Patents

By: Elias Borges, patent & trademark lawyer.

Methods of doing things can be protected by patents, and like patents for devices, the typical rules of novelty (newness) and inventiveness (obviousness) apply. However, over the years courts have ruled that not all methods of doing things can be protected by patents, regardless of the method's novelty or inventiveness. For example, under Canadian patent law, "business methods" are generally not included in patentable subject matter. As a result, methods of raising funding or methods of advertising are generally not patentable in Canada.

The situation in the United States has traditionally been quite different, with numerous "business method patents" having been allowed by the United States Patent Office over the decades. In recent years, however, courts in the United States have moved much closer to the Canadian approach, declaring that methods which deal purely with "legal relationships" between people (example, a purchase/sale relationship) may not be the subject of patent protection.

To help sort between what types of methods can be patented from the types of methods which cannot be patented, US courts have developed the "Transformation" test. In essence, the transformation test asks the question: "does the method operate to change articles or materials from one state to another". If the method does deal with transforming an article or material from one state to another, then the method may be protectable by patent if the method is new and inventive. Examples of methods which can be protected by patents which pass the material transformation test includes methods for creating a new chemical compound from precursor chemicals, methods of manufacturing steel, and even methods of sharpening knives. In fact, just about any new and inventive method which takes a physical object or thing and transforms it in some way would qualify. While the US Supreme Court has held that the "Transformation" test is not the only test which can be used, it is none the less a handy tool to help decide whether a particular method can be protected by patents.

When applying the test, the first thing to consider is the nature of the article or material being transformed. Certainly, if the article or material is a physical object of some sort, such as a volume of crude oil to be refined, or an old rubber tire to be recycled, then the test is passed. Non-physical things, such as an electronic signal, does not appear to fall under the category of “article or material” because they do not have a hard physical three dimensional nature. But it is clear that methods of transforming non-physical things are very important and need to be protected. For example, there are numerous commercially valuable methods of generating, transforming and transmitting electricity. Those methods have been, and continue to be, protected by method patents. Furthermore, there are highly transitory and ephemeral things which, while they exist for only a short period of time and never appear to take physical form, their importance to society and industry are unquestionably high. Take for example a radio transmission or even an electronic sound recording. Despite the fact that these ephemeral yet significant “things” don't have any physical form per say, they have been the subject of patent protection for over a hundred years.

Examples of patents for methods of producing, modifying, transmitting, storing and otherwise “changing” various ephemeral “things” are legion. There are, for example, several patents for methods of noise reduction while recording and playing back music. Patents have been granted for methods of compressing sound files, and for that matter, patents have been granted for methods of compressing image files and other data files. I have personally received patents for a method of serving up applications on a web server based on the file extension. Hence, methods of changing electronic data, signals or information from one state to another are in fact patentable. I have also received patents for methods of measuring changes in the electrical current flowing through a power network and for methods of identifying where there is a short circuit in a power network. Therefore, we can say with some certainty that electronic information as well as other “ephemeral things” can qualify as an “article or material”.

But the courts in the United States have seemed to drawn the line at purely legal relationships between people. These purely legal relationships are not included in the definition of "article or material" and methods of manupulating those legal relationships have therefore been denied patent protection. I know of several patents that have been denied in recent years for methods of changing the ownership of sums of money in different bank accounts. There are also several recent US supreame court rulings which have effectively denied patent protection to methods of conducting sales. This effectively means that many business methods are no longer patentable.

In addition to the transformation test, there is also the "Machine Test"; i.e. a method can be patentable if the method is carried out by a "particular machine". There is some debate as to what constitutes a "particular machine", with some courts holding that a general purpose computer, for example, is not a "particular machine". A machine which is purpose built and whose sole (or primary) use is to carry out the method would probably qualify.

Finally, as mentioned previously, the "transformation" and "machine" tests are not the only tests which can be used to determine whether or not a particular method can be protected by patent. However, it is clear that passing the machine-or-transformation test does confirm the method as being correct subject matter for patent protection.