In reality, though, the categories of "things you can do with a PC and software" and "things you can do with a peripheral" are not mutually exclusive.

Take VoIP, for example. We have VoIP software for use with a computer, webcam, and mic. Yet we also have standalone VoIP devices that perform substantially the same functions. These devices are basically stripped down computers.

So what of that? VoIP on the computer does not deserve patent protection, but the same technology on a stripped down device does?

I certainly appreciate your interpretation, but I would counter with this point:

Without getting into too much detail, the physical transformation inquiry only arises (at least in this context) when an invention is an "abstract idea." Method claims often fit this bill.

However, computer hardware is physical, tangible, and concrete--it is not merely an abstract idea. Thus the physical transformation inquiry is not apposite.

People seldom consider the implications of abolishing software patents.

Sure, there are a lot of good arguments against granting artificial monopolies on computer software--and many of them ARE good arguments. However, categorically denying patent protection to software creates some logical difficulties.

Most computer aficionados are familiar with the idea that software and hardware are logically equivalent. We CAN build specialized hardware to do what we would have our software do.

It would seem a bit anomalous, therefore, to allow a patent on specialized hardware that embodies precisely the same inventive character as its patent ineligible software counterpart.

So, in my opinion, the real issue we are seeking to resolve here is more subtle and obscure than we are admitting. Certainly, affording computer software a unique status as patent ineligible subject matter is not the most complete solution.

I think that's what the court was getting at in Bilski. They were searching for some kind of logical test rather than an unexplainable, static, and inflexible prohibition on a certain class of invention.

I'm not saying the court was right--I'm trying to shed a little more light on the playing field.