WHAT IS PATENT ELIGIBLE

1
WHAT IS PATENT ELIGIBLE?

• In re Bilski and its Impacts on the Patent
  Landscape

2
In re Bilski

• Part 1. Background
• Part 2. The Bilski Decision
• Part 3. Impact on Business Methods and Software
  Patents
• Part 4. Impact on Diagnostic Methods
• Part 5. Strategies

3
In re Bilski

• Part 1, Background

4
A Little History

• Patent Act of 1793
• a patent may be granted to any person or persons
  who shall allege that he or they have invented
  any new and useful art, machine, manufacture or
  composition or matter, or any new and useful
  improvement on any art, machine, manufacture or
  composition of matter. . . . (1 Stat. 318, 319
  1 (1793)).
• Criteria remained essentially unchanged until
  1952, when Congress amended 101 as follows

5
1952 Patent Act Process

• 35 U.S.C. 101
• Whoever invents or discovers any new and useful
  process, machine, manufacture, or composition of
  matter, or any new and useful improvement
  thereof, may obtain a patent therefor, subject to
  the conditions and requirements of this title.
• 35 U.S.C. 100(b)
• The term process means process, art, or method,
  and includes a new use of a known process,
  machine, manufacture, composition of matter, or
  material.

6
Enter the ComputerGottschalk v. Benson, 409
U.S. 63 (1972)

• Patent claims a method for converting
  binary-coded decimal (BCD) numerals into pure
  binary numerals.
• Claims were not limited to any particular art or
  technology, to any particular apparatus or
  machinery, or to any particular end use.
• Claims purported to cover any use of the claimed
  method in a general purpose digital computer of
  any type.

7
Pre-195Benson (cont.)

• It is conceded that one may not patent an idea.
  But, in practical
• effect, that would be the result if the formula
  for converting BCD
• numerals to pure binary numerals were patented in
  this case. The
• 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 preempt the mathematical formula and, in
  practical effect,
• would be a patent of the algorithm itself.
• Gottschalk v. Benson, 409 U.S. 63, 71-72
  (1972)

8
Benson (cont.)

• It is argued that a process patent must either
  be tied to a particular machine or apparatus or
  must operate to change articles or materials to a
  "different state or thing." We do not hold that
  no process patent could ever qualify if it did
  not meet the requirements of our prior
  precedents. . . . It is said we freeze process
  patents to old technologies, leaving no room for
  the revelations of the new, onrushing technology.
  Such is not our purpose. . . .
• Gottschalk v. Benson, 409 U.S. 63, 71 (1972)

9
Pre-195Diamond v. Diehr, 450 U.S. 175,
(1981)

• A method of operating a rubber-molding press for
  precision molded compounds with the aid of a
  digital computer, comprising . . .
  repetitively comparing in the computer, at
  frequent intervals during each cure, the
  Arrhenius equation for reaction time during the
  cure, which is ln v CZ x, repetitively
  comparing in the computer at frequent intervals
  during the cure each said calculation of the
  total required cure time calculated with the
  Arrhenius equation and said elapsed time, and
• opening the press automatically when a said
  comparison indicates completion of curing.

10
Pre-195Diehr (cont.)

• Claim is patentable
• Arrhenius equation is not patentable in
  isolation, but when a process for curing rubber
  is devised which incorporates in it a more
  efficient solution of the equation, that process
  is at the very least not barred at the threshold
  by 101.
• Diamond v. Diehr, 450 U.S. 175, 188 (1981)

11
Pre-195State Street

• State Street Bank v. Signature Financial Group,
  Inc., 149 F.3d 1368 (1998)
• Provides a system (Hub and Spoke) which
  facilitates a structure whereby mutual funds
  (spokes) pool their assets in an investment
  portfolio (Hub) organized as a partnership

12
Useful, Concrete, and Tangible

• Today, we hold that the transformation of
  data, representing discrete dollar amounts, by a
  machine through a series of mathematical
  calculations into a final share price,
  constitutes a practical application of a
  mathematical algorithm, formula, or calculation,
  because it produces "a useful, concrete and
  tangible result"--a final share price momentarily
  fixed for recording and reporting purposes and
  even accepted and relied upon by regulatory
  authorities and in subsequent trades.
• State Street, 149 F.3d 1368, 1373 (1998)

13
Pre-195State Street to Bilski

• According to Justice Newmans dissent in Bilski,
  almost 40,000 Business Method patent applications
  filed since State Street decision.
• As noted in Justice Mayers dissent in Bilski,
  issued patents include

14
Pre-195State Street to Bilski

• U.S. Patent 6,119,099 (method of enticing
  customers to order additional food at a fast food
  restaurant)
• U.S. Patent No. 6,329,919 (system for toilet
  reservations)
• U.S. Patent No. 7,261,652 (method of putting a
  golf ball)
• U.S. Patent No. 6,368,227 (method of swinging on
  a swing)
• U.S. Patent No. 5,443,036 (method of inducing
  cats to exercise)
• U.S. Patent No. 6,049,811 (method of obtaining a
  patent)

15
In re Bilski

• Part 2, The CAFC Decision

16
In re Bilski

• Claim 1 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 averages, 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 (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.

17
Examiners Rejections

• The Examiner rejected claims 1-11 under 35
  U.S.C. 101
• The Examiners rational
• regarding claims 1-11, the invention is not
  implemented on a specific apparatus and merely
  manipulates an abstract idea and solves a purely
  mathematical problem without any limitation to a
  practical application, therefore, the invention
  is not directed to technological arts.

18
Boards Decision

• The Board held the Examiner erred to the extent
  that he relied on a technological arts test
  because the case law did not support such a test
• The Board also held that the requirement of a
  specific apparatus was also erroneous as a claim
  that does not recite a specific apparatus may
  still be patent-eligible if it transforms
  physical subject matter from one state to another
  (e.g., mixing two elements or compounds to
  produce a chemical substance or mixture is
  clearly a statutory transformation )

19
Boards Decision (cont.)

• The Board, however, concluded that Applicants
  claims did not involve any patent-eligible
  transformation as they were merely directed to
  non-physical financial risks and legal
  liabilities of the commodity provider, the
  consumer, and the market participants.
• The Board also held that Applicants claims
  preempt any and every possible way of
  performing the steps of the claimed process, by
  human or by any kind of machine or by any
  combination thereof, and hence an abstract idea
  ineligible for patenting

20
Boards Decision (Cont.)

• The Board also held that the claimed process
  did not produce useful, concrete, tangible
  result, and for this reason also was not
  directed to patent-eligible subject matter.

21
CAFC

• The Supreme Court has held that the meaning of
  process as used in Section 101 in narrower that
  its ordinary meaning.
• The Supreme Court has held that a claim is not a
  patent-eligible process if it claims laws of
  nature, natural phenomena, or abstract ideas.
• The true issue before us is then whether
  Applicants are seeking to claim a fundamental
  principle (such as an abstract idea) or mental
  process

22
CAFC (cont.)

• Diehr can be understood to suggest that whether
  a claim is drawn only to a fundamental principle
  is essentially an inquiry into scope of that
  exclusion i.e., whether the effect of allowing
  the claim would be to allow the patentee to
  pre-empt substantially all uses of that
  fundamental principle.

23
CAFC (cont.)

• How does one determine whether a claimed
  process would pre-empt all uses of a fundamental
  process?
• Machine-or-Transformation test
• (1) is the claimed process tied to a particular
  machine or apparatus?
• (2) does it transform a particular article into
  a different state or thing?

24
CAFC (cont.)

• 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.

25
CAFC (cont.)

• The claim is not limited to transactions
  involving actual commodities, and the
  application discloses that the recited
  transaction may simply involve options, i.e.,
  rights to purchase or sell the commodity at a
  particular price within a particular timeframe

26
CAFC (cont.)

• it is inappropriate to determine the
  patent-eligibility of claim as a whole based on
  whether selected limitations constitute
  patent-eligible subject matter.
• the use of a specific machine or
  transformation of an article must impose
  meaningful limits on the claims scope to impart
  patent-eligibility
• the involvement of the machine or
  transformation in the claimed process must not
  merely be insignificant extra-solution activity.
• We leave to the future cases the elaboration of
  the precise contours of machine implementation,
  as well as the answers to particular questions,
  such as whether or when recitation of a computer
  suffices to tie a process claim to a particular
  machine.

27
CAFC (cont.)

• In Benson, the claimed process, though tied to a
  machine, was found not to be patent eligible
• In Benson, the limitations tying the process
  to a computer were not actually limiting because
  the fundamental principle at issue, a particular
  algorithm, had no utility other than operating on
  a digital computer.

28
CAFC (cont.)

• It is virtually self-evident that a process for
  a chemical or physical transformation of physical
  objects or substances is patent-eligible subject
  matter.
• The raw materials of many information-age
  processes, however, are electronic signals and
  electronically-manipulated data.

29
CAFC (cont.)

• A broad independent claim reciting a process of
  graphically displaying variances of data from
  average values was held patent ineligible. In re
  Abele, 684 F.2d 902 (CCPA 1982)
• The claim did not specify any particular type
  or nature of data, and nor did it specify
  how or from where the data was obtained or what
  the data represented.

30
CAFC (cont.)

• One of Abeles dependent claim reciting said
  data is X-ray attenuation data produced in a two
  dimensional field by a computed tomography
  scanner was deemed patent eligible
• This data clearly represented physical and
  tangible objects
• transformation of that raw data into a
  particular visual depiction of a physical object
  on a display was sufficient for patent
  eligibilty

31
CAFC (cont.)

• Certain active steps, such as gathering data
  and/or recording output data, may be construed as
  insignificant extra-solution activity and hence
  insufficient to render an otherwise
  patent-eligible claim into a patent-eligible one
• This court and our predecessor court have
  frequently stated that adding a data-gathering
  step to an algorithm is insufficient to convert
  that algorithm into a patent-eligible process.
• 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.

32
CAFC (cont.)

• Method of conducting an auction of multiple items
  in which the winning bids were selected in a
  manner that maximized the total price of all
  items. In re Schrader, 22 F.3d 290 (Fed. Cir.
  1994)
• Claims were patent-ineligible as being merely
  directed to a mathematical optimization
  algorithm.
• No specific machine or apparatus was recited.
• The claimed method did require a step of
  recording bids on each item, though no particular
  manner of recording was specified.
• The step of recording the bids constituted
  extra-solution activity.

33
CAFC (cont.)

• Nevertheless, we agree that future developments
  in technology and the sciences may present
  difficult challenges to the machine-or-transformat
  ion test
• Thus, we recognize that the Supreme Court may
  ultimately decide to alter or perhaps even set
  aside this test to accommodate emerging
  technologies.
• And we certainly do not rule out the
  possibility that this court may in the future
  refine or augment the test or how it is applied.

34
In re Bilski

• Part 3, Impact on Business Methods and Software
  Patents

35
Future of Business Methods

• End of Business Method patents?
• Transformation of Legal Relationships and
  Business Obligations
• Abstract Not Tangible
• Is there a Machine?

36
Cybersource Corporation v. Retail Decisions, 2009
U.S. Dist. LEXIS 26056

• 3. A method for verifying the validity of a
  credit card transaction over the Internet
  comprising the steps of a) obtaining other
  transactions utilizing an Internet address that
  is identified with the credit card transaction
  b) constructing a map of credit card numbers
  based upon the other transactions and c)
  utilizing the map of credit card numbers to
  determine if the credit card transaction is
  valid.

37
Cybersource Corporation (cont.)

• No Transformation court finds that
  manipulation of data is not transformation
• Transformation suggests a fundamental change,
  whereas manipulation does not. . . . Simply
  collecting data into a vague sort of map does
  not amount to a transformation.
• Even if manipulation could be considered
  transformation, there is no transformation of an
  article i.e., any physical object or substance,
  or any electronic signal representative of any
  physical object or substance.
• No machine internet is not a particular machine

38
Cybersource Corporation (cont.)

• As for the future of Business Method patents
• In analyzing Bilski, one is led to ponder
  whether the end has arrived for business method
  patents, whose numbers swelled following the
  decision in State Street. . . . Although the
  majority declined say so explicitly, Bilskis
  holding suggests a perilous future for most
  business method patents.
• . . . The closing bell may be ringing for
  business method patents, and their patentees may
  find they have become bagholders.

39
In re Ferguson (Fed. Cir.) March 6, 2009

• A method of marketing a product, comprising
• developing a shared marketing force, said shared
  marketing force including at least marketing
  channels, which enable marketing a number of
  related products
• using said shared marketing force to market a
  plurality of different products that are made by
  a plurality of different autonomous producing
  company, so that different autonomous companies,
  having different ownerships, respectively produce
  said related products
• obtaining a share of total profits from each of
  said plurality of different autonomous producing
  companies in return for said using and
• obtaining an exclusive right to market each of
  said plurality of products in return for said
  using.

40
Software Patents

• Is a Computer a Machine?
• If so, how detailed do you need to be?
• Is there a Transformation of an Tangible
  Article?

41
Every Penny Counts v. BOA (May 2009)

• A system, comprising a network entry means
  coupled to said network for entering into the
  network an amount being paid in a transaction by
  a payor . . . said computing means in said
  network being responsive to said data and said
  identification entering means for determining an
  excess payment to the basis of the determinant
  established by the payor, and said computing
  means in said network being responsive to the
  excess payment for apportioning at least a part
  of the excess payment among said accounts on the
  basis of the excess determined and established by
  the payor and on the basis of commands
  established by the payor and controlled by other
  than the payee.

42
Ex parte Nawathe, February 9, 2009

• Ex parte Nawathe (February 9, 2009)
• Representative claim
• A computerized method comprisinginputting
  multiple extensible Markup Language (XML)
  documentscreating a data representation of said
  multiple XML documents andreducing redundancy
  across said multiple XML documents via a fixed
  set of tables.
• Rejection Affirmed

43
Ex parte Nawathe (cont.)

• No machine just a general purpose computer
• No transformation because documents are not
  articles

44
Ex parte Halligan, April 8, 2009

• A programmed computer method based upon the six
  factors of a trade secret from the First
  Restatement of Torts for providing documentation,
  analysis, auditing, accounting, protection, and
  other management relating to an existence, . . .
  of a plurality of trade secrets of an
  organization, said method implemented by the
  programmed computer to effect the following
  steps

45
Ex parte Halligan, (cont)

• Fails both prongs
• Merely a general purpose computer
• No transformation because numerical value
  assigned by computer is abstract not a
  tangible article

46
In re Shahabi, April 20, 2009

• 1. A method, comprising
• processing at least one query using a wavelet
  transformation to produce a transformed query
  and
• performing a range-sum query on a database
  using the transformed query to produce a result.
• No machine
• No transformation

47
In re Richter, May 29, 2009

• 21. In a host multiprocessor system for
  emulating the operation of a target n-processor
  system (ngt1) by execution of one of more threads
  representing the operation of the target system,
  a method for emulating the target systems memory
  addressing using a virtual-to-real memory mapping
  mechanism of the host multiprocessor systems
  operating system, said method comprising
• (a) reading a target system virtual memory
  address (ATV)
• (b) mapping said ATV to a target real address
  (ATR)
• (c) mapping said ATR to a host virtual memory
  address (AHV) and
• (d) mapping said AHV to a host real memory
  address, wherein the emulation of the target
  systems memory addressing is treated as an
  application running on the host multiprocessor
  system.

48
In re Richter, (cont.)

• Claim 21 recites a method performed in a host
  multiprocessor system that emulates a target
  n-processor system therefore the process claim
  includes use of a specific machine.
• . . . We further find use of the specific
  machine imposes meaningful limits on the scope of
  the claims the host processor emulates a target
  systems memory addressing causing it to behave
  like the target processor.

49
In re Bilski

• Part 4, Implications for Diagnostic Methods

50
Diagnostic Methods

• The application of machine-or-transformation
  test to diagnostic methods can curtail the scope
  of available patent protection
• Diagnostic methods typically involve diagnosing
  disease conditions and/or optimizing therapeutic
  treatments based on comparative inferences and/or
  correlations between various biochemical
  compounds and/or markers
• Under a narrow interpretation of the test the
  identification of such inferences and
  correlations can be deemed as discovery of
  natural phenomena without transforming an article
  from one state to another

51
Classen Immunotherapies, Inc. v. Biogen Idec.

• Classen patents were directed to a process of
  identifying lower risk vaccines (U.S. Patent Nos.
  5,723,283 5,728,385 6,638,739 6,420,139)
• A method of determining whether an immunization
  schedule affects the incidence or severity of a
  chronic immune-mediated disorder in a treatment
  group of mammals, relative to a control group of
  mammals, which comprises immunizing mammals in
  the treatment group of mammals with one or more
  doses of one or more immunogens, according to
  said immunization schedule, and comparing the
  incidence, prevalence, frequency or severity of
  said chronic immune-mediated disorder or the
  level of a marker of such a disorder, in the
  treatment group, with that in the control group.
  (claim 1 of 283 patent)

52
Classen Immunotherapies, Inc. v. Biogen Idec,
Supp. 2d 452, 2005 U.S. Dist. LEXIS 17075 (D. Md
2005)

• Although articulated as a process, the 283
  patent does not claim a specific technique or
  technical process of testing vaccine safety.
  Instead, the 283 patent describes only a general
  inquiry of whether the proposed correlation
  exists.
• Clearly, the correlation between vaccination
  schedules and the incidence of immune mediated
  disorders that Dr. Classen claims to have
  discovered is a natural phenomenon.

53
Classen

• As such, the process is indistiguishable from
  the idea itself. Accordingly, the 283 patent
  seeks to patent an unpatentable natural
  phenomenon.
• The 139 and 739 patents were also deemed as
  patent-ineligible even though they included the
  active step of immunizing patients in accordance
  with a schedule determined to be low risk

54
Classen Immunotherapies, Inc. v. Biogen Idec,
304 Fed. Appx. 866, 2008 U.S. App. LEXIS 25661
(Fed. Cir. 2008)

• In light of our decision in In re Bilski , we
  affirm the district courts grant of summary
  judgment that these claims are invalid under 35
  U.S.C. 101.
• Classens claims are neither tied to a
  particular machine or apparatus, nor do they
  transform a particular article into a different
  state or thing

55
Prometheus Laboratories Inc. v. Mayo
Collaborative ServicesFed. Supp. 2d, 2008 WL
878910 (S.D.Cal 2008)

• Patents were directed to methods of measuring
  the level of certain metabolites (6-thioguinine
  and 6-methylmercaptopurine) in blood of patients
  taking certain drugs for autoimmune diseases and
  indicating that the adjustment of the drug dosage
  may be required based on the measurements to
  avoid toxic side effects. U.S. Patent Nos.
  6,355,623 and 6,680,302
• The claims embody only the correlations between
  the level of metabolites and therapeutic efficacy
  and toxicity in patients taking the drug.
• The court deems the correlations deemed as
  natural phenomena.
• Patents are invalid as directed to
  patent-ineligible subject matter.

56
In re Bilski

• Part 5, Strategies

57
Tips for Success

• Keep Filing Patent Applications
• Include Sufficient Disclosure
• How is data gathered?
• What does data represent?
• How is data transformed?
• Draft Claims In View of Recent PTO Guidelines
• Include Claims of Varying Scope
• Review Existing Portfolio
• Watch For the Supreme Court Decision

58
The End

• Thank you
• Thomas Engellenner
• Reza Mollaaghababa
• Michael Doyle
• Nutter, McClennen Fish, LLP
• Boston