In the case of Bilski versus Kappos, the US Supreme Court upheld earlier judgements that a system of hedging risk should not be granted a patent.
The Federal Court was judged to have erred in concluding that the “machine-or-transformation test” is the exclusive test for a patentable process.
The Supreme Court decided that the claim for patent of the risk hedging system did not constitute more than an abstract idea:
…Claims 1 and 4 explain the basic concept of hedging and reduce that concept to a mathematical formula. This is an unpatentable abstract idea, just like the algorithms at issue in Benson and Flook. Petitioners’ remaining claims, broad examples of how hedging can be used in commodities and energy markets, attempt to patent the use of the abstract hedging idea, then instruct the use of wellknown random analysis techniques to help establish some of the inputs into the equation. They add even less to the underlying abstract principle than the invention held patent ineligible in Flook.
The Licensing Executives Society welcomed the judgement. Brian O’Shaughnessy, LES (USA and Canada) Public Policy Chair, said:
“Overall, we believe the Supreme Court’s decision represents an important step towards maintaining a balanced, effective patent system that promotes innovation and opportunity for both inventors and consumers. By excluding abstract ideas from patent protection, while maintaining the patentability of real-world inventions in all technical fields, this decision will enhance companies’ ability to work together through licensing to offer new products and services.”