The Court of Appeals for the Federal Circuit handed down the long awaited en banc decision on In re Bilski (07-1130) in which the court looked at the question of when does a claim that contains both mental and physical steps create patent-eligible subject matter and whether a method or process must result in a physical transformation of an article or be tied to a machine to be patent-eligible subject matter under section 101.

Here, the court looked at an abstract idea or mental process.  But, what about where a claim contains both mental and physical steps to create patentably eligible subject matter?  Must a method claim need to result in physical transformation of an article or be tied to machine under 101?

The court ruled that the patent application did not meet the standards for patentability stating “We hold that the applicants’ process as claimed does not transform any article to a different state or thing.”

Astonishingly, the court seems to be making its own new law of patentability setting out that a software or business method patent is valid only if it (a) is tied to a particular machine or apparatus, or (b) transforms a particular article into a different state or thing. (Diamond v. Chakrabarty)

Despite the fact that Congress had earlier noted that “anything” created by humans deserves patent protection, the Federal Circuit decided that software and business methods have a new, higher standard.  Now, software or business method patents that are neither tied to a specific machine nor change something into a different state are not patentable. It is possible that a certain number of software and business method patents could now be at risk.  More likely, most such patents will have some claims that do, in fact, include some type of apparatus or transformation.

To be fair, the Committee Reports accompanying the 1952 Act show that Congress intended statutory subject matter to “include anything under the sun that is made by man” but refer to such only in the context of the four specific categories of Section § 101:  process, machine, manufacture, or composition of matter.  Section § 101 has no limits. Laws of nature, physical phenomena, and abstract ideas have been held not patentable.

But software is not a law of nature.  Business methods do not spring forth without human intervention.  So why do they warrant special requirements?

To be fair, the present case was really decided on the basis of the algorithm in question having no uses other than those that would be covered by the claims (i.e., any conversion of BCD to pure binary on a digital computer).  Therefore, the claims pre-empted all uses of the algorithm and thus they were effectively drawn to the algorithm itself.

The court noted:

The question before us then is whether Applicants’ claim recites a fundamental principle and, if so, whether it would pre-empt substantially all uses of that fundamental principle if allowed.  Unfortunately, this inquiry is hardly straightforward.  How does one determine whether a given claim would pre-empt all uses of a fundamental principle?  Analogizing to the facts of Diehr or Benson is of limited usefulness because the more challenging process claims of the twenty-first century are seldom so clearly limited in scope as the highly specific, plainly corporeal industrial manufacturing process of Diehr; nor are they typically as broadly claimed or purely abstract and mathematical as the algorithm of Benson.

The Supreme Court, however, has enunciated a definitive test to determine whether a process claim is tailored narrowly enough to encompass only a particular application of a fundamental principle rather than to pre-empt the principle itself.  A claimed process is surely patent-eligible under § 101 if:  (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.

A claimed process involving a fundamental principle that uses a particular machine or apparatus would not pre-empt uses of the principle that do not also use the specified machine or apparatus in the manner claimed.  And a claimed process that transforms a particular article to a specified different state or thing by applying a fundamental principle would not pre-empt the use of the principle to transform any other article, to transform the same article but in a manner not covered by the claim, or to do anything other than transform the specified article.

The question before the court then became whether Applicants’ claim 1 satisfied the transformation branch of the machine-or-transformation test:

We hold that the Applicants’ process as claimed does not transform any article to a different state or thing.  Purported transformations or manipulations simply of public or private legal obligations or relationships, business risks, or other such abstractions cannot meet the test because they are not physical objects or substances, and they are not representative of physical objects or substances.  Applicants’ process at most incorporates only such ineligible transformations.  …  Thus, claim 1 does not involve the transformation of any physical object or substance, or an electronic signal representative of any physical object or substance.  Given its admitted failure to meet the machine implementation part of the test as well, the claim entirely fails the machine-or-transformation test and is not drawn to patent-eligible subject matter.

Not everyone agreed.  In the dissent by Judges Newman, Rader and Mayer, they argue that the court has imposed a new restriction on the kinds of inventions that are eligible to participate in the patent system:

The court achieves this result by redefining the word “process” in the patent statute, to exclude all processes that do not transform physical matter or that are not performed by machines.  The court thus excludes many of the kinds of inventions that apply today’s electronic and photonic technologies, as well as other processes that handle data and information in novel ways.  Such processes have long been patent eligible, and contribute to the vigor and variety of today’s Information Age.

This exclusion of process inventions is contrary to statute, contrary to precedent, and a negation of the constitutional mandate.  Its impact on the future, as well as on the thousands of patents already granted, is unknown.
This exclusion is imposed at the threshold, before it is determined whether the excluded process is new, non-obvious, enabled, described, particularly claimed, etc.; that is, before the new process is examined for patentability.  For example, we do not know whether the Bilski process would be found patentable under the statutory criteria, for they were never applied.

See the entire 132 page opinion here.

See also:  How Did We Get to Bilski and What Can We Do About It?

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5 Comments

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    […] More on Bilski and Business Method Patents Since yesterday’s post on the future of business method patents, bloggers of all shapes and sizes have been waxing philosophic on the impact of the recent ruling in In re Bilski. Some of the more cogent commentaries from intellectual property lawyers can be found at IP Law & Business, PatentlyO, and The Patent Baristas. […]

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