Eric Waltmire Speaks at ISBA Seminar on Patent Issues on the InternetBy Erickson Law Group • Jun 22nd, 2009 • Category: News
On June 9, 2009, Eric Waltmire, Patent Attorney with the Erickson Law Group, presented a session at the Illinois State Bar Assication’s “Intellectual Property Essentials and IP on the Internet” all day seminar. Eric’s session covered Patent Issues on the Internet. An excerpt of his material is provided below.
Patenting Software, Internet Technologies, and Business Methods in view of the Federal Circuit’s Decision in Bilski v. Doll
Presented at ISBA’s Intellectual Property Essentials and IP on the Internet
June 9, 2009
By Eric R. Waltmire
In October 30, 2008, the U.S. Court of Appeals for the Federal Circuit issued a decision that restricted but did not prohibit the patentability of software and business method related patents. Bilski v. Doll, 545 F.3d 943 (Fed. Cir. 2008). The case sets the standard for determining what is patentable in the fields of software and business methods. However, the U.S. Supreme Court recently granted writ of certiorari on the following questions:
- Whether the Federal Circuit erred by holding that a “process” must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing (“machine-or-transformation” test), to be eligible for patenting under 35 U.S.C. § 101, despite this Court’s precedent declining to limit the broad statutory grant of patent eligibility for “any” new and useful process beyond excluding patents for “laws of nature, physical phenomena, and abstract ideas.”
- Whether the Federal Circuit’s “machine-or-transformation” test for patent eligibility, which effectively forecloses meaningful patent protection to many business methods, contradicts the clear Congressional intent that patents protect “method[s] of doing or conducting business.” 35 U.S.C. § 273.
[Bilski v. Doll, No. 08-1191. 556 U.S. _____ (2009)]
Until the Supreme Court rules in Bilski, this paper provides guidance on the patentability of software and business methods under the Federal Circuit decision and the decision from the Board of Patent Appeals and Interferences (BPAI). This paper will (1) review the facts of Bilski, (2) explain the holding of Bilski, (3) review prior and subsequent cases to illustrate what claims are allowable under Bilski, and (4) provide suggestions for claiming software based inventions in light of Bilski.
In Bilski, the invention at issue was a method of managing risk in a commodities market. The representative claim provided:
A method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price comprising the steps of:
(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 aver-ages, said fixed rate corresponding to a risk position of said consumer;
(b) identifying market participants for said commodity having a counter-risk position to said consumers; 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 participant transactions balances the risk position of said series of consumer transactions
[Bilski v. Doll, 545 F.3d at 949]
The 35 U.S.C. § 101 provides five categories of patentable subject matter: process, machine, manufacture, or composition of matter, or any new and useful improvement thereof. The Bilski claims were not directed to a machine, manufacture, or composition of matter. So the question turned on what constitutes a patentable process. Specifically, the court addressed, in relevant part, (1) whether the claimed subject matter is not patent-eligible because it constitutes an abstract idea or mental process, (2) when does a claim that contains both mental and physical steps create patent-eligible subject matter, and (3) 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.
The court noted that the term “process” within the meaning of section 101 is narrower than the ordinary meaning of the word. A process is not patentable it if claims abstract ideas, laws of nature and purely mental processes. Id. at 952. So the issue presented was whether Bilski was seeking to claim a fundamental principle or a mental process. Id. The court noted that “an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection.” Id. In order to distinguish between unpatentable law of nature or mathematical formula and patentable applications thereof, the court looked to the question of “whether the effect of allowing the claim would be to allow the patentee to pre-empt substantially all uses of that fundamental principle.” Id.
The court found that the only test for determining 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 was the machine-or-transformation test. Id. at 954.
Machine-or-Transformation Test. The court’s machine-or-transformation test provides that a process is not patentable under section 35 USC 101 unless (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing. Id. at 954. This test requires an explanation of what is a (1) “particular machine”, (2) a “transformation,” and (3) a “particular article.”
Particular Article. The claims in Bilski did not involve a machine so the court’s analysis focused on the second part of the machine-or-transformation test. Regarding what constitutes a “particular article” the court stated, “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.” Thus, a patentable process must transform physical object or substances.
Physical Objects Represented. When software manipulates data alone, the data must represent physical objects. The court reviewed a prior case where a broad claim covered a process of displaying data variances from averages. However, the claim did not “specify any particular type or nature of data; nor did it specify how or from where the data was obtained or what the data represented.” Id. Another claim was found to contain patentable subject matter provided, “said data is X-ray attenuation data produced in a two dimensional field by a computed tomography scanner.” This claim was patentable because the data represented structure of bones, and other body tissues, which are physical objects. Therefore a process that transforms data representing physical objects is patentable. The court explained that the process claimed need not transform the underlying physical object that the data represented. Id. at 962. Where the claim does not involve a particular machine and the claim involves the transformation or manipulation of an electronic signal, the electronic signal must represent a physical object or substance. Id. at 964.
Insignificant extra-solution activity. Moreover, the court stated that the particular machine or the transformation of a particular article must be more than an “insignificant extra-solution activity.” For example, in a previous case the court rejected a claim where it was merely an algorithm combined with a data-gathering step. The court noted “that, at least in most cases, gathering data would not constitute a transformation of any article.” The court continued, “A requirement simply that data inputs be gathered–without specifying how–is a meaningless limit on a claim to an algorithm because every algorithm inherently requires the gathering of data inputs.” Id. at 963.
Software and Business Methods Not Categorically Excluded. The court did not exclude software or business methods from patentable subject matter. The court stated, “we decline to adopt a broad [patentability] exclusion over software or any other such category.” Id. at 960. The court also stated “that business method claims (and indeed all process claims) are subject to the same legal requirements for patentability as applied to any other process or method.” Id. However, the machine-or-transformation test adopted by the court has a restricting effect over the type of software or business methods that are patentable, or at least restricts the way in which software and business methods may be claimed.
Pre-Bilski Decisions – Particular Machine.
A pre-Bilski Board of Patent Appeals and Interferences (BPAI) decision is relevant to the question of what is a “particular machine.” Ex parte Langemyr (2008-1495, May 28, 2008). The question is whether a general purpose computer is a “particular machine.” In each instance the board relied on the Supreme Court in Gottschalk v. Benson, 409 U.S. 63 (1972). Where the claims provided method for converting binary-coded-decimal (BCD) numerals into pure binary numerals for use with a general-purpose digital computer of any type. In Benson the court held that the claimed method was directed to non-statutory subject matter, because “[tlhe mathematical formula involved here has no substantial practical application except in connection with a digital computer, which means that if the judgment below is affirmed, the patent would wholly pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself.” The claim in Ex parte Langemyr provided, “1. A method executed in a computer apparatus for creating a model of a combined physical system having physical quantities . . .” The Board found the claimed method is not tied to "a particular machine," but rather is tied only to a general purpose computer. At least when any and all computing systems will suffice, then a claim is not tied to a particular computer.
The Board of Patent Appeals and Interferences found in each that a general purpose computer is not a particular machine. New software processes may not be patentable if they are tied only to a general purpose computer. Simply reciting a general-purpose computer does likely not qualify as a particular machine, at least according to the Board.
In Ex Parte Bo LI (BPAI 2008-1213) the board court found a Beauregard claim patentable under Bilski. A Beauregard claim is a claim to an article of manufacture embodied as a computer-readable medium. The claim in Ex Parte Bo LI included a “number of software components, such as the claimed logic processing module, configuration file processing module, data organization module, and data display organization module, that are embodied upon a computer readable medium.”
In Ex parte Halligan (BPAI 2008-1588), the patent application provided in claim 119 a "programmed computer method" for identifying trade secret information. The computer program applies trade secret common law rules to determine if a given piece of information is a trade secret under those rules. The BPAI rejected the Halligan claims applying the machine-transformation test because the application lacked patentable subject matter under 35 USC § 101.
Halligan claims failed to transform a physical object because the claims involved legal rights and did not represent physical objects. Next, the BPAI found that claim 119 was not tied to a particular machine. The preamble of the claim provided a “programmed computer method.” However, the BPAI found “This recitation fails to impose any meaningful limits on the claim's scope as it adds nothing more than a general purpose computer that has been programmed in an unspecified manner to implement the functional steps recited in the claims.” Moreover, the BPAI stated, “Were the recitation of a ‘programmed computer’ in combination with purely functional recitations of method steps, where the functions are implemented using an unspecified algorithm, sufficient to transform otherwise unpatentable method steps into a patent eligible process, this would exalt form over substance and would allow pre-emption of the fundamental principle present in the non-machine implemented method by the addition of the mere recitation of a ‘programmed computer.’”
Bilski does not stand for the proposition that software or business methods are unpatentable. When drafting a software or business method patent application, (1) draft claims tied to physical objects and show how physical objects transform from one state to the next, and/or (2) draft claims to show how the computer implements the invention through computer or machine activities, simply providing that the process is “executed [in/on/by] a computer” is alone not sufficient. Also, note that simply adding extra-solution activities such as “data gathering” is alone not sufficient, instead show how machine grounded activities carry out the process. The Supreme Court may change or throw out the machine-transformation test, but until then following these suggestions will enable claims within within the present section 101 jurisprudence.