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State Street ruling by US CAFC on 23 July 1998

State Street Bank & Trust Co. v. Signature Financial Group, Inc. at the US CAFC is often cited as the ruling which opened the floodgates for business method patents, and broadening the scope for software patents (directly or by describing a software idea as if it were a business method).

Two case references are frequently cited for this litigation:

  • 149 F.3d 1368 (Fed. Cir. 1998)
  • 149 F.3d 1368, 1374 n. 6 (Fed. Cir. 1999)

Can you help? Which is the "real" one? What's the other one?

The patent in question was for a "machine", in the meaning of Section 101 of the Patent Act. The State Street ruling introduced the low standard of "useful, concrete and tangible result".

In the Bilski v. Kappos (2010, USA) decision, two concurring opinions forming a five-judge majority agreed that this test should not be kept.[1]

Effects of Bilski on State Street

Can you help? This section is now out of date

The CAFC's ruling on in re Bilski in 2008 is largely seen as overturning the State Street ruling, in whole or in part. However, the two cases do not deal with the same issue, to the relationship isn't clear.

State Street upheld a software patent which claimed to be a "machine". The patent did not claim to be a "process", and Bilski's ruling only dealt with what tests a "process" had to pass in order to be patentable.

In 2009, during the US Supreme Court's hearing of Bilski, the USPTO's lawyer seemed to argue that the CAFC's Bilski ruling (i.e. the particular machine or transformation test) would not change the State Street ruling:

Well, it was machine — that is, in State Street Bank, the claim was not to a process within the meaning of Section 101 [...] It didn’t transform anything, but it would fit — the transformation part would be irrelevant because the machine-or-transformation test is, in our view, the appropriate rubric to apply in construing the statutory term process[2]

At the hearing, Justice Sotomayor also said agreed that Bilski does not directly reinterpret State Street:

Mr. Stewart (USPTO): [...]The Federal circuit was not construing the statutory term “process.” It was construing the statutory term “machine.”[...]
Justice Sotomayor: No ruling in this case is going to change State Street. It wasn’t looking at process or the meaning of “process.” It was looking at something else.[3]

Allowing pure software patents to the USA

Dan Ravicher says that State Street was the ruling that brought "pure" software patents into the USA:

"Pre July 23rd 1998, there were no pure software patents in the United States. Basically the state of affairs that you [in South Africa] have today. The patent office was routinely rejecting applications for pure software because they believed that, under the law and under current jurisprudence, that software patents were not eligible for patent protection. Then in 1998, the Federal Circuit ruled in the State Street case that software per se could be patentable, and in fact anything could be patentable. This is a case that also dealt with business method patents. So, you can see a dramatic increase - although there was a steady slope of increase in the 80s and early 90s - you can see that there was a gigantic jump, relatively speaking, when the decision was made..."[4]

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  1. "Bilski v. Kappos and the Anti-State-Street-Majority". "Although not rejected by the majority opinion, it is clear that the broad “useful, concrete, and tangible result” test is dead. [...] The two concurrences are in agreement on this point and are signed by five Supreme Court Justices — leading to a second majority on that particular point."