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WHAT IS PATENT ELIGIBLE? In re Bilski and its Impacts on the ... In re Abele, 684 F.2d ... One of Abele's dependent claim reciting 'said data is X-ray ... – PowerPoint PPT presentation

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  • In re Bilski and its Impacts on the Patent

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

In re Bilski
  • Part 1, Background

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

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

Enter the Computer Gottschalk 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.

Pre-195 Benson (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

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)

Pre-195 Diamond v. Diehr, 450 U.S. 175,
  • 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.

Pre-195 Diehr (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)

Pre-195 State 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

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)

Pre-195 State 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

Pre-195 State Street to Bilski
  • U.S. Patent 6,119,099 (method of enticing
    customers to order additional food at a fast food
  • U.S. Patent No. 6,329,919 (system for toilet
  • 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

In re Bilski
  • Part 2, The CAFC Decision

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.

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.

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 …)

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

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.

  • 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

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.

CAFC (cont.)
  • How does one determine whether a claimed
    process would pre-empt all uses of a fundamental
  • 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?

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

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

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
  • … 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

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.

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
  • The raw materials of many information-age
    processes, however, are electronic signals and
    electronically-manipulated data.

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.

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

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.

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.
  • Claims were patent-ineligible as being merely
    directed to a mathematical optimization
  • 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.

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
  • 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.

In re Bilski
  • Part 3, Impact on Business Methods and Software

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

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

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

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.

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

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

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.

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

Ex parte Nawathe (cont.)
  • No machine just a general purpose computer
  • No transformation because documents are not

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

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

In re Shahabi, April 20, 2009
  • 1. A method, comprising
  • processing at least one query using a wavelet
    transformation to produce a transformed query
  • performing a range-sum query on a database
    using the transformed query to produce a result.
  • No machine
  • No transformation

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
  • (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

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.

In re Bilski
  • Part 4, Implications for Diagnostic Methods

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

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)

Classen Immunotherapies, Inc. v. Biogen Idec,
Supp. 2d 452, 2005 U.S. Dist. LEXIS 17075 (D. Md
  • 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 …
  • Clearly, the correlation between vaccination
    schedules and the incidence of immune mediated
    disorders that Dr. Classen claims to have
    discovered is a natural phenomenon.

  • As such, the process is indistiguishable from
    the idea itself. Accordingly, the 283 patent
    seeks to patent an unpatentable natural
  • 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

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

Prometheus Laboratories Inc. v. Mayo
Collaborative Services Fed. 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.

In re Bilski
  • Part 5, Strategies

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

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