Bilski v. Kappos is the Supreme Court decision that opened the modern § 101 era. The Court rejected the Federal Circuit's "machine-or-transformation" test as the sole measure of patent eligibility, declined to categorically bar business-method patents, and held that the specific Bilski claims were unpatentable abstract ideas — setting the stage for Mayo and Alice to make § 101 the workhorse defense it is today.
Decided June 28, 2010, 561 U.S. 593.
Background
Bernard Bilski and Rand Warsaw filed a patent application (No. 08/833,892) on a method for hedging risk in the energy commodities market. The claimed method involved (1) initiating transactions between a commodity provider and consumers at fixed rates, (2) identifying market participants with counter-risk positions, and (3) initiating offsetting transactions to balance overall risk.
The USPTO rejected the application as patent-ineligible. The Board of Patent Appeals affirmed. The Federal Circuit, sitting en banc, also affirmed — and used the case to anoint a single § 101 framework: the machine-or-transformation test. A process is patent-eligible, the Federal Circuit held, only if it (a) is tied to a particular machine, or (b) transforms a particular article into a different state.
Bilski appealed.
The holding
The Supreme Court unanimously affirmed the rejection of the Bilski claims, but split sharply on the reasoning.
On the outcome (9-0). The Bilski hedging method was an unpatentable abstract idea. Hedging is "a fundamental economic practice long prevalent in our system of commerce" — exactly the kind of fundamental concept that § 101 places beyond the reach of patent law.
On the test (5-4). Justice Kennedy's opinion for the Court rejected the Federal Circuit's machine-or-transformation rule as the sole § 101 test:
The machine-or-transformation test is not the sole test for deciding whether an invention is a patent-eligible "process."
Machine-or-transformation remains "a useful and important clue, an investigative tool" — but courts must apply the broader § 101 inquiry, which excludes laws of nature, natural phenomena, and abstract ideas.
On business methods (5-4). Kennedy declined to hold that all business-method patents are categorically ineligible. Justice Stevens, joined by three others, would have categorically barred them.
What Bilski did and didn't do
What Bilski did:
- Rejected machine-or-transformation as the only § 101 test.
- Confirmed that abstract ideas — including economic practices like hedging — are unpatentable.
- Left business-method patents alive in principle, but vulnerable to abstract-idea challenges in practice.
What Bilski didn't do:
- Provide a clear test for what counts as "abstract." That gap is what Mayo (2012) and Alice (2014) would fill.
- Define "fundamental economic practice" with precision. Lower courts borrowed Kennedy's phrasing ad hoc; Alice later adopted it explicitly.
Aftermath
Bilski by itself didn't transform district-court litigation. The opinion was widely read as preserving the status quo for software and business-method patents — perhaps narrowing them slightly but not threatening their core. Patent prosecutors kept filing software claims; defendants couldn't yet point to a clean § 101 framework.
Two years later, Mayo v. Prometheus supplied the framework — the two-step "directed to a judicial exception... inventive concept" inquiry. Two years after that, Alice v. CLS Bank extended Mayo's framework to software and business-method patents, anchoring the doctrine in Bilski's rejection of the hedging claims. The trio sits together now as the modern § 101 sequence:
- Bilski — machine-or-transformation isn't the only test; abstract ideas remain unpatentable.
- Mayo — two-step framework distinguishes ineligible concepts from inventive applications.
- Alice — the Mayo framework applies to software and business-method patents too.
Without Bilski, the Federal Circuit would still be applying machine-or-transformation reflexively. With Bilski alone, defendants would have no workable test. The three together gave defendants the § 101 motion as it exists today.
What it means for defendants
For modern defendants, Bilski is rarely the lead authority — the operative case is Alice (or Mayo for life-sciences patents). But Bilski still matters in two specific ways:
- The "fundamental economic practice" argument. When a software claim is at heart a long-standing business practice (hedging, escrow, intermediated settlement, advertising), citing Bilski alongside Alice strengthens the abstract-idea case at Step 1.
- Machine-or-transformation as a clue. When a patentee argues their software is "tied to a machine" because it runs on a computer, Bilski directly forecloses that move — being tied to a generic computer isn't enough to escape § 101. (See Alice on generic computer implementation.)
For substantive workflow, see Alice Corp. v. CLS Bank. For the natural-law branch of the same framework, see Mayo v. Prometheus.
Bottom line
Bilski opened the door. It rejected a rigid Federal Circuit test, kept abstract ideas firmly outside patent eligibility, and held a textbook business-method patent invalid. The framework defendants now invoke routinely came two and four years later — but without Bilski, neither Mayo nor Alice would have had a precedent to build on.
Read the opinion: Bilski v. Kappos, 561 U.S. 593 (2010).
This article is for general education and is not legal advice.