In Europe, all inventions that are new and not obvious are patentable [Article 52(1) EPC], but this is subject to various exceptions and exclusions. The exceptions [Article 53 EPC] are:
- inventions the commercial exploitation of which would be contrary to "ordre public" or morality;
- plant or animal varieties or essentially biological processes for the production of plants or animals; and
- methods for treatment of the human or animal body by surgery or therapy and diagnostic methods practised on the human or animal body.
The exclusions, being things that are not considered to be inventions [Article 52(2) EPC] are:
2. scientific theories;
3. mathematical methods;
4. aesthetic creations;
5. programs for computers;
6. presentations of information; and
7. schemes, rules and methods for performing mental acts, playing games or doing business.
These are, however, only excluded from patentability to the extent that a patent application (i.e. the claimed invention) relates to one or more of these things as such.
As an aside, Lord Hoffmann (who was, until recently, the most senior IP judge in the UK) has come up with two reasons that could be used to at least explain these exclusions. Exclusions 1-6 above fall within what he considers to be the 'practical application principle', that these things cannot be the subject of a patent in themselves, but this would not necessarily stop practical applications being patentable (for example, the practical application of the discovery of the electrical nature of lightning to the invention of a lightning rod). The last exclusion falls within the 'human behaviour principle', since mental acts, playing games and doing business are all aspects of human behaviour that should not (presumably for practical as well as ethical reasons) be patented, even though they may be new, useful and inventive. See here for more details.
With the Bilski case coming before the Supreme Court, the scope of patentable subject matter in the U.S. may also soon become smaller.
Personally, I am puzzled why so many people reject software and business methods as patentable, when the world of innovation and discovery is increasingly moving away from compounds and gadgets per se and increasingly being found in how information is handled. Software and business methods are the future and represent some of the most exciting opportunities for valuable innovation, but the world's patent systems tend to emphasize more tangible innovation. The technical aspects of innovation in these realms are just as meaningful, clever, and impact tangible reality just as much or more than any clever new potato peeler.