Court weighs whether to restrict 'business method' patents

Chen said that since most software requires computers to operate, they involve machines and therefore could be patented.

But opponents of the government's test have noted that software wasn't considered patentable until a court ruling 30 years ago. The opponents, which include some financial services companies, argue that rigid rules about what can be patented could stifle innovation in sectors that rely on information and electronic data more than physical processes.

"Technology evolves and things change," said John Duffy, a patent law expert who participated in the hearing as a friend of the court.

Duffy represents Regulatory Data Corp., which is seeking patents on methods that can detect suspicious financial activity. Goldman Sachs Group Inc. founded the company and retains a minority investment in the firm.

The judges struggled to define abstract concepts, such as when a process transforms an object. Judge Randall Rader asked whether the process of throwing a curve ball transforms a baseball by altering its flight path.

The case has split the financial services industry, with Bank of America Corp., Wachovia Corp. and a host of other companies arguing in court briefs that patenting business methods has allowed abstract ideas to be patented, which "hinders rather than promotes innovation."

Other companies, including American Express Co. and Accenture Ltd., sided with Duffy and Goldman Sachs.

The high-tech industry was also divided, with IBM Corp. supporting the government's position and Yahoo Inc. uring a more flexible approach.

"A narrow focus on physicality requirements is not well suited to the electronic age," Yahoo said in a court brief.