By DANIEL WAGNER
Associated Press

WASHINGTON - In a decision that could reshape the way banks and high-tech firms protect their intellectual property, a federal appeals court ruled last week that a man's business concept was too vague for patent protection.

The U.S. Court of Appeals for the Federal Circuit ruled Oct. 30 against Bernard Bilski, who had attempted to patent a method for managing weather-related risk through commodities trading. The U.S. Patent and Trademark Office had rejected his application, saying it did not involve a particular machine or physically transform anything.

Relying heavily on 1970s-era U.S. Supreme Court decisions that established the "machine-or-transformation test," Chief Judge Hon. Paul Michel wrote for a nine-judge majority that Bilski's patent application did not meet an older definition of "process" under patent law.

The decision was watched closely by many industries because it could determine whether thousands of existing patents will hold up in court. People accused of patent infringement might argue that under the new case, those older patents are invalid.

More and more industries have applied for "business process patents" in the last decade, experts said, since a previous court decision created a looser test for what constitutes an invention eligible for a patent. Manufacturers have patented operations methods, online retailers have protected new work-flow techniques, and online dating sites have sought exclusive rights to their matching algorithms.

The industries most affected are financial-services and software companies, which gain competitive advantages by developing complex ideas that might not always lead to tangible results.

Financial and high-tech firms have split in their opinions on the case. Some have argued that such patents granted to obvious, trivial processes hamper innovation. Others say people who invest time and energy in creating new processes should have the opportunity to protect them under patent law.

Joseph Potenza, an attorney with the intellectual-property firm Banner & Witcoff Ltd., said the decision appears to split the difference between the two arguments. While Bilski will not receive his patent, the court's clearer test will make it easier for some companies to protect their ideas, he said.

"I don't think it's black and white," Potenza said. "It's a long decision, and there's good language for either side to pick up on."

Bilski could not be reached for comment. His attorney, David Hanson, said, "obviously we're disappointed," but that he had not yet conferred with Bilski about a possible appeal.

Representatives for the American Intellectual Property Law Association, which filed a brief supporting broader patent rights, also were "disappointed" that their approach was not adopted, but were encouraged that the court hadn't broadly undermined the possibility of patenting business processes.

"The goal of the patent system is to incentivize and reward the investment people make in innovation," said the group's executive director, Todd Dickinson, who also is a former director of the U.S. Patent and Trademark Office. "What this will probably do, and this is a good thing, is weeding out the weaker" patent applications.

Jason Schultz, acting director of Berkeley Law School's Law and Technology Clinic, took the opposite approach in his group's brief, arguing strenuously for what processes should be eligible for patent protection.

"People are trying to get patents on sort of everyday activities that consumers like you or me might violate by using computers in normal ways," he said. Although the judges' decision did not fully adopt his view, Schultz said, he was satisfied that the court took a "pragmatic approach" to the problem that could help ease the backlog of patent applications.