Bilski’s Secret Impact on Trade Secrets

If you’re not a patent lawyer, you probably haven’t given much thought to the United States Supreme Court’s ruling in Bilski v. Kappos, the decision that clarifies what the test is for determining whether something can qualify for a patent as a business method. Specifically, the Court clarified the test by saying what it is not. (It said it was not limited to a test adopted by the Federal Circuit known as the “machine or transformation test.”)

In reading myriad articles about the case (as well as the case, of course), I was struck by the absence of any discussion of the impact of the decision outside the wonderful world of patents. Specifically, why did no one discuss its significance for trade secrets? The answer: I have no idea! Seems like a no-brainer. Well, given that no one else seems to care, I decided I had better write something in case anyone was curious.

In refusing to provide a bright-line test, the Bilski decision complicates the already-difficult choice between using patents versus trade secrets to protect business methods. Had the Court said that business methods could never be patented, it would have heralded a clear shift to the use of trade secrets. Conversely, had the Court completely done away with the consideration of the machine or transformation test, it would have encouraged the use of patents. The Court did neither. Rather, although rejecting the test as the exclusive test, it expressly stated that the test “is a useful and important clue, an investigative tool, for determining whether some claimed inventions” can qualify for patent protection. Further, it also expressly stated that the Federal Circuit was free to develop “other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text.” The result: muddied waters.

So, what should you take from this? Given the Supreme Court’s intentionally-limited decision and resultant lack of a bright-line test, companies would be well-advised to give greater consideration to protecting their business methods as trade secrets, rather than potentially forfeiting them through a failed patent application.