Document ID: ./input/supremecourt_opinions/opinions/09pdf/08-964.pdf
Page Number: 6.0

2 

BILSKI v. KAPPOS 

Opinion of the Court 

I 

Petitioners’  application  seeks  patent  protection  for  a 
claimed invention that explains how buyers and sellers of 
commodities  in  the  energy  market  can  protect,  or  hedge, 
against  the  risk  of  price  changes.  The  key  claims  are 
claims  1  and  4.  Claim  1  describes  a  series  of  steps  in-
structing  how  to  hedge  risk.    Claim  4  puts  the  concept
articulated in claim 1 into a simple mathematical formula.
Claim 1 consists of the following steps: 

“(a)  initiating a series of transactions between said 
commodity provider and consumers of said commodity
wherein said consumers purchase said commodity at a
fixed  rate  based  upon  historical  averages,  said  fixed
rate  corresponding  to  a  risk  position  of  said  consum-
ers; 

“(b)  identifying  market  participants  for  said  com-
modity having a counter-risk position to said consum-
ers; and 

“(c)  initiating a series of transactions between said 
commodity provider and said market participants at a
second fixed rate such that said series of market par-
ticipant transactions balances the risk position of said 
series of consumer transactions.”  App. 19–20. 

The  remaining  claims  explain  how  claims  1  and  4  can  be
applied  to  allow  energy  suppliers  and  consumers  to  mini-
mize  the  risks  resulting  from  fluctuations  in  market  de-
mand  for  energy.  For  example,  claim  2  claims  “[t]he 
method  of  claim  1  wherein  said  commodity  is  energy  and 
said  market  participants  are  transmission  distributors.” 
Id.,  at  20.  Some  of  these  claims  also  suggest  familiar 
statistical  approaches  to  determine  the  inputs  to  use  in 
claim  4’s  equation.    For  example,  claim  7  advises  using 
well-known random analysis techniques to determine how 
much a seller will gain “from each transaction under each