## United States Court of Appeals for the Federal Circuit
*Revised: January 26, 2009 2006-1286 (Serial No. 09/461,742)

IN RE STEPHEN W. COMISKEY

Thomas J. Scott, Jr. , Goodwin Procter LLP, of Washington, DC, argued for appellant. With him on the br ief was Robert L. Kinder, Jr. , Dickstein Shapiro LLP, of Washington, DC. Of counsel was Yisun Song , Hunton & Williams LLP, of Washington, DC. Raymond T. Chen , Associate Solicitor, United St ates Patent and Trademark Office, of Arlington, Virginia, argued for the Director of the United States Patent and Trademark Office. With him on the brief was Thomas W. Krause , Associate Solicitor. Appealed from: United States Patent and Trademark Office Board of Patent Appeals and Interferences

* Thomas J. Scott, Jr., formerly of H unton & Williams LLP, is now affiliated with Goodwin Procter LLP, of Washington, DC, and Robert L. Kinder, Jr., Dickstein Shapiro LLP, of Washington, DC.

## United States Court of Appeals for the Federal Circuit

2006-1286 (Serial No. 09/461,742)

IN RE STEPHEN W. COMISKEY

Appeal from the United States Patent and Trademark Office , Board of Patent Appeals and Interferences.

__________________ _________ DECIDED: January 13, 2009

__________________ _________ Before MICHEL, Chief Judge , DYK and PROST, Circuit Judges

. DYK, Circuit Judge

. Acting en banc , the court today vacated the Se ptember 20, 2007, judgment in this case, and the panel’s original opinion, which is reported at 499 F.3d 1365 (Fed. Cir. 2007), was withdrawn. The en banc court reassigned the opi nion to the panel for revision. The panel’s original opinion is revised as follows: Appellant Stephen W. Comiskey (“Comiske y”) appeals the decision of the Board of Patent Appeals and Interf erences (“Board”) affirming t he examiner’s rejection of claims 1-59 of his patent application as ob vious in view of the prior art and therefore unpatentable under 35 U.S.C. § 103. We do not reach the Board’s obviousness rejection of the independent claims under § 103. We conclude that Comiskey’s independent claims 1 and 32 and most of their dependent cl aims are unpatentablesubject matter under 35 U.S.C. § 101. With respect to independent claims 17 and 46 (and dependent claims 18-29, 31, 47-57, and 59) and dependent claims 15, 30, 44, and 58, we remand to the PTO to consider t he § 101 question in the first instance. We therefore affirm-in-part, va cate-in-part, and remand. BACKGROUND
I Comiskey’s patent application No. 09/461,742 claims a method and system for mandatory arbitration involving legal documents, such as wills or contracts. According to the application, the claimed “program . . . requires resolution by binding arbitration of any challenge or complaint concerning any un ilateral document . . . [or] contractual document.” Independent claim 1 recites a “method fo r mandatory arbitration resolution regarding one or more unilateral documents” invo lving the following st eps. First, the unilateral document and its au thor are enrolled. Sec ond, arbitration language is incorporated in the unilateral document requiri ng that any contested issue related to the document be presented to the pre- chosen arbitration program for binding arbitration. Third, the method “requir[es] a complainant [sic] to subm it a request for arbitration resolution.” Fourth, the method conducts ar bitration resolution. Fifth, the method provides “support to the arbitration.” Fi nally, the method dete rmines “an award or decision . . . [that] is final and binding.” 1 Independent claim 32 is practically identical to

1 Claim 1 states in full: A method for mandatory arbitration resolution regarding one or more unilateral documents comprising the steps of:

2006-1286 2claim 1, except that it refers to cont ractual documents rather than unilateral documents. 2 Although the application’s written de scription references “an automated system and method for requiring resolution through binding arbitration” and “a mandatory arbitration system th rough a computer on a network,” claims 1 and 32 do not

enrolling a person and one or more un ilateral documents associated with the person in a mandatory ar bitration system at a time prior to or as of the time of creation of or execution of the one or more unilateral documents; incorporating arbitration l anguage, that is specific to the enrolled person, in the previously enro lled unilateral document wherein the arbitration language provides that any contest ed issue related to the unilateral document must be presented to the mandatory arbitration system, in which the person and the one or more unilateral document s are enrolled, for binding arbitration w herein the contested issue comprises one or more of a challenge to the documents, interpretation of the documents, interpretation or application of terms of the documents and execution of the documents or terms of the documents; requiring a complainant to submit a request for arbitration resolution to the mandatory arbitration syst em wherein the request is directed to the contested issue related to the unilateral document containing the arbitration language; conducting arbitration resolution for the contested issue related to the unilateral document in response to the request for arbitration resolution; providing support to the arbitration resolution; and determining an award or a decision for the contested issue related to the unilateral document in accordance wi th the incorporated arbitration language, wherein the aw ard or the decision is final and binding with respect to the complainant. 2 In addition, Claim 32 notes that t he inserted arbitration language would cover a challenge to the contractual document “by any party to the Contract or by any alleged third party beneficiary of the Contract.” It also notes that the party submitting a request for arbitration resolution could be “a party to the Contra ctual document [or] a party so designated in t he contractual document.”

2006-1286 3evice such as a computer. reference, and the parties agree that these claims do not require, the use of a mechanical d Independent claim 17 recites a “system for mandatory arbitration resolution regarding one or more unilatera l documents.” It includes the following limitations: (1) “a registration module” to register the un ilateral document and its executor; (2) “an arbitration module” for incor porating arbitration language that requires any contested issue related to the unilateral document be presented to the system; (3) “an arbitration resolution module” that requires “a compla inant to submit a request for arbitration resolution”; and (4) “a means for selecting an arbitrator from an arbitrator database” and “providing support to the arbitrator . . . w here the arbitrator det ermines an award or a decision . . . [that] is final and binding.” 3 Independent claim 46 is practically identical to

3 Claim 17 states in full: A system for mandatory arbitration resolution regarding one or more unilateral documents comprising: a registration module for enrolling a person who is executing and one or more unilateral documents associat ed with the person in a mandatory arbitration system at a time prior to or as of the time of creation of or execution of the one or more unilateral documents; an arbitration module for inco rporating arbitration lang uage, that is specific to the enrolled person, in the prev iously enrolled unilateral document wherein the arbitration language provi des that any contested issue related to the unilateral document must be pr esented to the mandatory arbitration system, in which the person and the one or more unilateral documents are enrolled, for binding arbi tration wherein the contes ted issue comprises one or more of a challenge to the docum ents, interpretation of the documents, interpretation or application of terms of the documents and execution of the documents or terms of the doc uments; and for providing this arbitration language to the enrolled person;

2006-1286 4claim 17, except that it refers to c ontractual documents ra ther than unilateral documents. 4 Four dependent claims (claims 15, 30, 44, and 58) also explicitly require use of a computer or other ma chine. Each states, in full: “[t]he method[/system] of claim [1, 17, 32, or 46] wherein access to the mandatory arbitration is established through the Internet, intranet, World Wide Web, software applications, telephone, television, cable, video [or radio], magnetic, electronic communi cation, or other communication means.”
II Comiskey filed his patent application with the United Stat es Patent and Trademark Office (“PTO”) on December 16, 1999. On March 28, 2001, the examiner issued a first office action re jecting claims 1-9, 11-24, 26 -38, 40-52, and 54-59 under 35 U.S.C. § 103(a) as unpatentable over Ginter, U.S. Pa tent No. 6,185,683 (’683 patent), in view of Perry, U.S. Patent No. 5,241, 466 (’466 patent), and Walker, U.S. Patent No. 5,794,207 (’207 patent). Ginter discloses an electronic system for securely delivering documents from the sender to the recipient through the electronic equivalent of a

an arbitration resolution module for r equiring a complainant to submit a request for arbitration resolution to the mandatory ar bitration system wherein the request is directed to the contested issue related to the unilateral document containing the arbitration language; and a means for selecting an arbitrator fr om an arbitrator database to conduct an arbitration resolution for the contes ted issue related to the unilateral document in response to the reques t for arbitration resolution, for providing support to the arbitrator, and where the arbitrator determines an award or a decision for the contested issue related to the unilateral document in accordance with the in corporated arbitration language, wherein the award or the decision is final and binding with respect to the complainant. 4 Claim 46 also notes that the party submitting a request for arbitration may be “a party to the contractual document [or] a party so designat ed in the contractual document.”

2006-1286 5“personal document carrier” that can validate transactions as well as actively participate in the transaction by, among other things, provid ing arbitration. ’683 patent “Abstract.” Walker discloses an electronic system that allows buyers to submit binding purchase offers and sellers to create contracts by acc epting a purchase offer on its terms. It also teaches the inclusion of langua ge in the purchase offers “r equiring that both parties submit to binding arbitration of all disputes” and suggests that a “central controller . . . can support the arbitration pr ocess by providing an arbiter for each dispute.” ’207 patent col.30 ll.47-54. Perry discloses an electronic central depository for secure storage and rapid retrieval of unilateral documents such as wills. The examiner also found claims 10, 25, 39, and 53 (which added the additional limitation of displaying an “arbitration schedule”) unpatentable over Ginter in view of a document entitled “Arbitration Fee Schedule.” The exam iner’s final office action on May 30, 2001, provided the same basis for rejection. Comiskey filed an amendment after final rejection on August 29, 2001, “to more distinctly claim and particularly point out” the aspects of his invention that he believed were novel, namely pre-enrolling the per son in a mandatory arbitration system, including language in the document requiring s ubmission of disputes to this pre-chosen system, and enabling a person to submit a dis pute pertaining to the document to this pre-chosen system for binding arbitration. On December 31, 2001, the examiner mailed a final rejection of the amended claims, which rejected the claims on the same basis. After Comiskey filed a request fo r continued examination, the finality of the prior office action was withdrawn, and the ex aminer mailed another non-final rejection on July 9, 2002, based again on the same grounds. In response, Comiskey submitted a

2006-1286 6“declaration of long felt need” on Oc tober 1, 2002, claimi ng that based on his experience representing clients involved in family disputes concerning unilateral documents, he believed his invention addressed an area of long felt need. On November 6, 2002, the examiner mailed a final rejection based on the same reasons as the prior office actions and rejected Comiskey’s assertion of long felt need on the ground that the cited prior art references had recognized and addressed the problem prior to Comiskey. Comiskey appealed, and on November 30, 2005, the Board affirmed the examiner’s rejection. The Bo ard concluded that because all of the independent claims were argued together they stood or fell together, and it chose claim 32 as representative. It concluded that the combi nation of Ginter and Walker rendered this claim obvious. Despite concluding that a ll of the independent claims stood or fell together, the Board proceeded to consider claims 1 and 17, directed to unilateral documents, separately. It c oncluded that the addition of Pe rry to Ginter and Walker rendered these claims obvious. Finally, the Board considered and affirmed the examiner’s rejection of claims 10, 25, 39, and 53 as obvious in li ght of Ginter, Perry, Walker, and the “Arbitration Fee Schedule.” Comiskey timely appealed to this court. We have jurisdiction under 28 U.S.C. § 1295(a)(4)(A) (2000). After oral argum ent, we requested supplemental briefing directed at the patentability of the subjec t matter of Comiskey’ s application under 35 U.S.C. § 101. In the supplem ental briefing, Comiskey argued fo r the first time that we lacked the power to consider a ground for rejection not relied on below. Alternatively, Comiskey argued that his application was patentable under § 101, and that the subject

2006-1286 7matter of his application did not fall within an exception to patentability, such as an abstract idea, natural phenomena, or law of nature. The PTO urged that this court could prope rly consider the § 101 issue. Indeed, the PTO urged that this court resolve the ca se on this ground to “give the Office needed guidance in this area.” PTO Supp. Br. 15. The PTO argued that Comiskey’s independent claims were directed at an unpatentable abstract idea, and not a patentable process, because they neither were tied to a particular machine nor operated to change materials to a different state or thing. Rather th e claims impermissibly “encompasse[d] a method of controlling how hum ans interact with each other to resolve a dispute, based on a human arbitrator’s percept ion of the dispute.” PTO Supp. Br. 12. DISCUSSION We do not reach the ground relied on by the Board below—that the claims were unpatentable as obvious over Ginter in view of Walker, Perry, and “Arbitration Fee Schedule”—because we conclude that many of the claims are “barred at the threshold by § 101.” Diamond v. Diehr , 450 U.S. 175, 188 (1981). It is well-established that “[t]he first door which must be opened on the difficult path to patentabi lity is § 101.” State St. Bank & Trust Co. v. Si gnature Fin. Group, Inc. , 149 F.3d 1368, 1372 n.2 (Fed. Cir. 1998) (quoting In re Bergy , 596 F.2d 952, 960 (CCPA 1979)). Only if the requirements of § 101 are satisfied is the inventor “allowed to pass through to” the other requirements for patentability, such as novelty under § 102 and, of pertinence to this case, nonobviousness under § 103. See id. As the Supreme Court st ated in Parker v. Flook , “[t]he obligation to determine what type of discovery is sought to be patented [so as to determine whether it is “the kind of ‘discoveries’ that the st atute was enacted to protect”]

2006-1286 8must precede the determination of whether that discovery is, in fact, new or obvious.” 437 U.S. 584, 593 (1978) (emphases added). The PTO acknowledges that the examiner , consistent with hi s obligation under the cases, must have addressed the predica te issue of patentable subject matter and implicitly concluded that the claims met the requirements of § 101. See Oral Arg. Tr. 18:40. For the reasons discussed below, we di sagree that § 101 is satisfied. See also Manual of Patent Examining Procedures (“MPEP ”) § 2106 “Guidelines Flowchart” (Rev. 5, Aug. 2006) (listing the steps an examiner should follow in determining patentability, with “determine whether the claimed invent ion complies with . . . 101” listed before “determine whether the clai med invention complies wit h 35 U.S.C. 102 and 103”).
I We first address Comiskey’s argument that we cannot properly address the issue of patentable subject matter. At oral argument, Comiskey admitted that the court “could affirm on [the § 101] ground if in fact [we] came to the conclusion that . . . the subject matter of this claim does not address the st atutory subject matter.” In his supplemental briefing, Comiskey attempts to “withdraw[] any statement made at or al argument which would infer that this Court could even consi der a new statutory grounds for rejecti[on].” Appellant’s Supp. Br. 19. Comiskey now a sserts that “[t]his Court lacks the power to sua sponte raise and thereafter decide a statut ory ground of patentability never raised during the agency proceeding below” because our review of the Board’s decision is required to be “on the record before the Patent and Trademark Office” under 35 U.S.C. § 144 and the Administrative Procedure Act (“APA”), 5 U.S.C. § 706. Id. at 16-17.

2006-1286 9Over sixty years ago in Securities & Exchange Commission v. Chenery Corp. , 318 U.S. 80 (1943), t he Supreme Court made clear that a reviewing court can (and should) affirm an agency decision on a legal ground not relied on by the agency if there is no issue of fact, policy, or agency expertise. The Court said: In confining our review to a judgm ent upon the validity of the grounds upon which the Commission itself based it s action, we do not disturb the settled rule that, in reviewing the dec ision of a lower court, it must be affirmed if the result is correct although the lower court relied upon a wrong ground or gave a wrong reason . . . . It would be wasteful to send a case back to a lower court to reinst ate a decision which it had already made but which the appellate court c oncluded should properly be based on another ground within the power of the appellate court to formulate. But it is also familiar appellate proc edure that where the correctness of the lower court's decision depends upon a det ermination of fact which only a jury could make but which has not been made, the appellate court cannot take the place of the jury. Like considerations govern review of administrative orders. If an order is valid only as a determination of policy or judgment which the agency alone is author ized to make and which it has not made, a judicial judgment cannot be made to do service for an administrative judgment. Id. at 88 (emphases added; internal citation s and quotation marks omitted). We have repeatedly applied Chenery and have said that “[w]e may, however, where appropriate, affirm the [agency] on grounds other than those relied upon in rendering its decision , when upholding the [agen cy’s] decision does not dep end upon making a determination of fact not previously made by the [agency].” Killip v. Office of Pers. Mgmt. , 991 F.2d 1564, 1568-69 (Fed. Cir. 1993) (emphases added); see also Newhouse v. Nicholson , 497 F.3d 1298, 1301 (Fed. Cir . 2007) (“[T]he Chenery doctrine is not implicated when the new ground for affirmance is not one that calls for a determination or judgment which an administrative agency alone is author ized to make.” (internal quotation marks omitted)); Spears v. Merit Sys. Prot. Bd. , 766 F.2d 520, 523 (Fed. Cir. 1985). We note

2006-1286 10that the APA specifically st ates that “the reviewing cour t shall decide all relevant questions of law.” 5 U.S.C. § 706. The Supreme Court has emphasized that in general the PTO should be treated like ot her administrative agencies, and that patent cases are subject to the same general administrative law legal princi ples. Dickinson v. Zurko , 527 U.S. 150, 154-55 (1999). Thus, the same rules governing affirmance of agency action on a ground not relied on below necessarily apply in the PTO context as in the administrative context generally. As Comiskey points out, some of our cases have concluded that “it is inappropriate for this court to consider reje ctions that had not been considered by or relied upon by the Boar d.” In re Margolis , 785 F.2d 1029, 1032 (Fed. Cir. 1986). But these statements referred to situations that required factual determinations not made by the agency. For example, in Margolis and other cases the new grounds for decision would require this court to make factual determinations involvi ng “the scope and content of the prior art [and] differ ences between the prior art and t he claims at issue,” Dippin’ Dots, Inc. v. Mosey , 476 F.3d 1337, 1343 (Fed. Cir. 2007), which had not been

2006-1286 11considered by the PTO. 5 We decline to read these cases as rejecting the breadth of the Chenery decision on which they explicitly relied. It is well-established that “w hether the asserted claims . . . are invalid for failure to claim statutory subject ma tter under 35 U.S.C. § 101, is a question of law which we review without deference.” AT&T Corp. v. Excel Commc’ns, Inc. , 172 F.3d 1352, 1355 (Fed. Cir. 1999). As a question of law, lack of statutory subject matter is a “ground [for affirmance] within the power of the appellate court to formulate.” Chenery , 318 U.S. at 88. While there may be cases in which t he legal question as to patentable subject matter may turn on subsidiary factual issues, Comiskey has not identified any relevant fact issues that must be resolved in order to address the patentability of the subject matter of Comiskey’s applicatio n. Moreover, since we would review a Board decision on the issue of patentability without deference, see AT&T , 172 F.3d at 1355, the legal

5 See In re Thrift , 298 F.3d 1357, 1367 (Fed. Cir. 2002) (refusing to sustain an obviousness rejection based on a new prior art reference not relied on by the Board because it would requir e a determination of the scope of that reference and whether it provided a motivation to combine); Margolis , 785 F.2d at 1031-32 (refusing to consider anticipation and obviousness gr ounds based on prior art re ferences submitted to the examiner but not considered by the exam iner or the Board); In re Hounsfield , 699 F.2d 1320, 1324 (Fed. Cir. 1983) (refusing to cons ider new ground for affirmance that would require determination of scope of a prior pat ent and a comparison between the claims of the prior patent and the claims of t he application); Application of Fisher , 448 F.2d 1406, 1407 (CCPA 1971) (refusing to consider te chnical authorities ur ged by the PTO on appeal but not in the record). In other cases the issue, while perhaps now viewed as legal, was not at t he time seen as legal in nature. See Application of Fleissner , 264 F.2d 897, 900 (CCPA 1959) (noting that a finding of indefiniteness with respect to a means plus function claim requires an ex amination of the “record” to ascertain corresponding structure); see also Hazeltine Research, Inc. v. Dage Elec. Co. , 271 F.2d 218, 220-21 (7th Cir. 1959) (finding “no evidence in this record” to support the district court’s “finding[] of fact” that the “language of the clai ms of the patent in suit is invalid in that it is vague and indefinite”).

2006-1286 12issue concerning patentability is not “a det ermination of policy or judgment which the agency alone is authorized to make.” Chenery , 318 U.S. at 88. In these circumstances, Chenery not only permits us to supply a new legal ground for affirmance, but encourages such a re solution where, as here, “[i]t would be wasteful to send” the case back to the agency for a determination as to patentable subject matter. 318 U.S. at 88. 6 We therefore may consi der the patentability of Comiskey’s claims under § 101, and we tu rn to the merits of that question. 7
II Comiskey’s application may be viewed as falling within the general category of “business method” patents. At one time, “[t]hough seemingly withi n the category of process or method, a method of doing busine ss [was] rejected as not being within the statutory classes. ” State St. Bank , 149 F.3d at 1377 (quoting MPEP § 706.03(a) (1994)). In St ate Street Bank , we addressed the “business method” exception to statutory subject matter, and st ated that “[w]e take this opportunity to lay this illconceived exception to rest.” Id. at 1375. State Street Bank involved “a data processing system for managing a financial services configuration of a portfolio established as a partnership,” and “[g]iven the complexity of the calculations, a

6 The situation is quite different where a party seek s for the first time on appeal to raise a new ground on appeal for setting aside agency action. See Boston Scientific Scimed, Inc. v. Medtronic Vascular, Inc. , 497 F.3d 1293, 1298 (Fed. Cir. 2007).
7 As we recently noted in our en banc decision in In re Seagate Technology, LLC , “a court may consider an issue ‘antecedent to . . . and ultimately dispositive of’ the dispute before it, even an issue the parties fail to identify and brie f.” 497 F.3d 1360, 1372 (Fed. Cir. 2007) (quoting U.S. Nat’l Bank of Or. v. I ndep. Ins. Agents of Am., Inc. , 508 U.S. 439, 447 (19 93) (quoting Arcadia v. Ohio Power Co. , 498 U.S. 73, 77 (1990))). The § 101 issue is an antecedent question to the § 103 issue, as discussed above.

2006-1286 13computer or equivalent device [wa]s a virt ual necessity to perform the task.” Id. at 1371. We held that this system was patentable, concluding that patentability does “not turn on whether the claimed subject matter does ‘bus iness’ instead of something else.” Id. at 1377. Although it has been suggest ed that State Street Bank supports the patentability of business methods generally, 8 State Street Bank explicitly held that business methods are “subject to the same legal requirements for patentability as applied to any other process or method.” Id. at 1375; see also MPEP § 2106(I) (Rev. 4, Oct. 2005) (“Claims should not be categorized as methods of doing business. Instead, such claims should be treated like any other process claims.”). We must then consider the requirements of § 101 in determining whether Comiskey’s claims 1 and 32 for a method of mandatory arbitration for unilateral and contractual documents claim statut ory subject matter.
A The very constitutional provision that authorized Congress to create a patent system, Article I, § 8, also limited the subject matter eligible for patent protection to the “useful Arts.” 9 According to the Supreme Cour t, this constitutional limitation on patentability “was written against the backdrop of the [English] practices—eventually

8 See, e.g., Leo J. Raskind, The State Str eet Bank Decision: The Bad Business of Unlimited Patent Protec tion for Methods of Doing Business , 10 Fordham Intell. Prop. Media & En t. L.J. 61, 61 (1999). 9 Article I, § 8 states in full: “The C ongress shall have Powe r . . . To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their re spective Writings and Discoveries.” The Supreme Court has concluded that the references to “Science” (i.e., knowledge generally) and “Writings” creates the right to copyright protection and the references to “useful Arts” and “Discoveries” creat es the right to patent protection. See Graham v. John Deere Co. of Kansas City , 383 U.S. 1, 5 (1966).

2006-1286 14curtailed by the Statute of Monopolies—of the Crown in grantin g monopolies to court favorites in goods or businesses which had l ong before been enjoyed by the public.” Graham , 383 U.S. at 5. In the 16 th and 17 th centuries, the E nglish Crown granted monopolies over entire types of business to specific indivi duals, for example the grant by James I to Darcy in 1600 of the exclusive right to manufacture or sell playing cards or the exclusive right to the printing bus iness held by the London guild of booksellers and printers. See Peter Meinhardt, Inventions, Patents, and Monopoly 31 (2d ed. 1950); Eldred v. Ashcroft , 537 U.S. 186, 200 n.5 (2003). The purpose of such monopolies “was to enrich the King . . . as we ll as the grantee, at the expense of the community.” Meinhardt, supra , at 31. With this background in mind, the framers consciously acted to bar Congress from grant ing letters patent in particular types of business. The Constitution explicitly limi ted patentability to “the national purpose of advancing the useful art s—the process today called technologic al innovation.” Paulik v. Rizkalla , 760 F.2d 1270, 1276 (Fed. Cir. 1985) (en banc ). Beginning with the first patent act, t he Patent Act of 1790, “Congress [] responded to the bidding of the Constitution,” Graham , 383 U.S. at 6, by including provisions limiting patentabl e subject matter. See An Act to Promote the Progress of Useful Arts, Ch. 7, 1 Stat. 109, 110 (1790). The standard us ed by the Patent Act of 1793, which limited patentability to “any new and useful art, machine, manufacture, or composition of matter, or any new or useful improvement [thereof],” is essentially the same as that used today. An Act to Promot e the Progress of Useful Arts; and to Repeal the Act Heretofore Made for that Purpose, Ch. 11, 1 Stat. 318, 319 (1793). The Patent

2006-1286 15Act of 1952 did replace the word “art” with t he word “process” so that current § 101
states: 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 requirem ents of this title. 10 However, the Supreme Court has made cl ear that the 1952 l anguage change had no substantive effect, stating that “[a]nalysis of the eligibility of a claim of patent protection for a ‘process’ did not change with the addi tion of that term to § 101.” Diehr , 450 U.S. at
184. Patentable subject matter under the 1952 Ac t is extremely broad. Given the breadth of the categories listed in § 101, it is not surprising t hat the legislative history of the 1952 Act noted that “Congress intended stat utory subject matter to include anything under the sun that is m ade by man.” Chakrabarty , 447 U.S. at 309 ( quoting S. Rep. No. 1979, 82d Cong., 2d Sess., 5 (1952); H.R. Rep. No. 1923, 82d Cong., 2d Sess., 6 (1952) (internal quotation marks omitted)). On the other hand, t he Supreme Court has made clear that this statement does “not . . . suggest that § 101 has no limits or that it embraces every discovery.” Id. Specifically, Supreme Court decisions afte r the 1952 Patent Act have rejected a “purely literal reading” of the process prov ision and emphasized that not every “process”

10 The Supreme Court has defined “manufactu re” to mean “the production of articles for use from raw or prepared materials by giving to these materials new forms, qualities, properties, or combinations, w hether by hand-labor or machinery” and “composition of matter” to mean “all composit ions of two or more substances and all composite articles, whether they be results of chemical union, or of mechanical mixture, or whether they be gases, fluids, powder s or solids.” Diamond v. Chakrabarty , 447 U.S. 303, 308 (1980) (quotation mar ks and alteration omitted).

2006-1286 16is patentable. Flook , 437 U.S. at 589. Instead “[t] he question is whether the method described and claimed is a ‘pro cess’ within the meaning of the Patent Act.” Gottschalk v. Benson , 409 U.S. 63, 64 (1972); see also Flook , 437 U.S. at 593 (“[R]espondent incorrectly assumes that if a process application implements a principle in some specific fashion, it automatically falls within the patentable subject matter of § 101.”). “Abstract ideas” are one type of subject ma tter that the Supreme Court has consistently held fall beyond the broad reaches of patentable subjec t matter under § 101. As early as Le Roy v. Tatham , 55 U.S. 156, 175 (1852), the Supreme Court ex plained that “[a] principle, in the abstract, is a fundamental truth; an original cause; a motive; these cannot be patented, as no one can claim in either of them an exclusive right.” Since then, the unpatentable nat ure of abstract ideas has r epeatedly been confirmed. See,
e.g., Diehr , 450 U.S. at 185; Chakrabarty , 447 U.S. at 309; Flook , 437 U.S. at 589; Benson , 409 U.S. at 67; Rubber-Tip Pencil Co. v. Howard , 87 U.S. 498, 507 (1874). The very cases of this court that recognized the patentability of some business methods have reaffirmed that abstract i deas are not patentable. See AT&T , 172 F.3d at 1355; State St. Bank , 149 F.3d at 1373; see also In re Alappat , 33 F.3d 1526, 1542-43 (Fed. Cir. 1994) (en banc ). The prohibition agains t the patenting of abstract i deas has two distinct (though related) aspects. First, when an abstract concept has no claimed practical application, it is not patentable. The Supreme Cour t has held that “[ a]n idea of itself is not patentable.” Rubber-Tip Pencil , 87 U.S. at 507 (emphasis added). In Benson , the claim was for a method of converting binary-coded decimal numerals into pure binary numerals that was “not limit ed to any particular art or technology, to any particular

2006-1286 17apparatus or machinery, or to any particular end use.” 409 U.S. at 64. Since the claim would therefore “wholly pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself,” the claim was unpatent able because its “practical effect” was to “patent an id ea” in the abstract. Id. at 71-72. 11 See also AT&T , 172 F.3d at 1358 (holding that a mathematical algorithm must produc e “a useful, concrete, and tangible result” to be pat entable); State St. Bank , 149 F.3d at 1373 (same); MPEP § 2106 (Rev. 5, Aug. 2006) (“[C]la ims define nonstatutory processes if they . . . simply manipulate abstract ideas . . . without some claimed practical application.”). Second, the abstract concept may have a practical application. The Supreme Court has reviewed process patents reciting algorithms or abstract concepts in claims directed to industrial processes. In that context, the Supreme Court has held that a claim reciting an algorithm or abstract idea c an state statutory subj ect matter only if, as employed in the process, it is embodied in, operates on, transforms, or otherwise involves another class of st atutory subject matter, i.e., a machine, manufacture, or composition of matter. 35 U. S.C. § 101. As the PTO not es, “[t]he Supreme Court has recognized only two instances in which such a method may qualify as a section 101 process: when the process ‘either [1] was tied to a particular appar atus or [2] operated to change materials to a ‘differ ent state or thing.’’” See PTO Supp. Br. 4 (quoting Flook , 437 U.S. at 588 n.9). In Diehr , the Supreme Court confirmed that a process claim reciting an algorithm could state statutory subject matter if it: (1) is tied to a machine or

11 In Benson , the Supreme Court reversed a decision by our predecessor court that had, in turn, relied on earlier dec isions, such as Application of Musgrave , 431 F.2d 882, 893 (CCPA 1970), suggesting that a process of hum an thinking in and of itself could be patentable.

2006-1286 18(2) creates or involves a composition of matter or manufacture. 12 450 U.S. at 184. There, in the context of a process claim for curing rubber that reci ted an algorithm, the Court concluded that “[t]ransfo rmation and reduction of an arti cle ‘to a different state or thing’ is the clue to the patentability of a process claim that does not include particular machines.” Id. (quoting Benson , 409 U.S. at 70); 13 see also In re Schrader , 22 F.3d 290, 295 (Fed. Cir. 1994) (hol ding when a claim does not in voke a machine, “§ 101 requires some kind of transformation or reduction of subject matter”). Thus, a claim that involves both a mental process and one of t he other categories of statutory subject matter (i.e., a machine, manufacture, or composition) may be pat entable under § 101. See Diehr , 450 U.S. at 184 (holding a process that involved calculations using the “Arrhenius equation” patentable because the cl aim “involve[d] the transformation of an article, in this case raw, unc ured synthetic rubber, into a diffe rent state or thing”). For example, we have found processes involving mathematical algorithm s used in computer

12 Of course, process claims not limit ed to claiming an abstract concept or algorithm (i.e., a mental process) may not be subject to the same requirements. 13 See also Diehr , 450 U.S. at 184 (“Industrial processes . . . are the types which have historically been eligible to receive the protection of our patent laws.” (emphasis added)); Tilghman v. Proctor , 102 U.S. 707, 722 (1880) (“A manufacturing process is clearly an art, within the meaning of the law.” (emphasis added)); Cochrane v. Deener , 94 U.S. 780, 788 (1876) (“A process is a mode of treatment of certain materials to produce a given re sult. It is an act, or a series of acts, performed upon the subject-matter to be transformed and reduced to a different state or thing.”).

2006-1286 19technology patentable because they claimed practical applications and were tied to specific machines. 14 However, mental processes—or proce sses of human thinking—standing alone are not patentable even if they have practical application. The Supreme Court has stated that “[p]henomena of nature, though just discovered, mental processes , and abstract intellectual concepts are not patentable, as they are the basic tools of scientific and technological work.” Benson , 409 U.S. at 67 (em phasis added). In Flook the patentee argued that his claims did not seek to patent an abstract idea (an algorithm) because they were limited to a practical application of t hat idea—updating “alarm limits” for catalytic chemical conversion of hydroc arbons. 437 U.S. at 586, 589-90. The Court rejected the notion that mere recitation of a practical application of an abstract idea makes it patentable, concluding that “[a] competent drafts man could attach some form of post-solution activity to almost any mathematical formula.” Id. at 590. Since all other features of the process were well-known, including “the use of computers for ‘automatic monitoring-alarming,’” the Court construed t he application as “simply provid[ing] a new and presumably better method for calcul ating alarm limit values.” Id. at 594-95. The

14 See AT&T , 172 F.3d at 1355, 1358 (holding patentable “a process that uses the Boolean princi ple in order to determine the val ue of the PIC indicator” and that “require[d] the use of switches and computers”); State St. Bank , 149 F.3d at 1373 (“[W]e hold that the transformation of data . . . by a machine through a series of mathematical calculations into a final share pric e, constitutes a practical application of a mathematical algorithm.” (emphases added)); Alappat , 33 F.3d at 1544 (“This is not a disembodied mathematical concept which may be characteri zed as an ‘abstract idea,’ but rather a specific machine to produce a useful , concrete, and tangible result .” (emphases added)); Arrhythmia Research Te ch., Inc. v. Corazonix Corp. , 958 F.2d 1053, 1058-59 (Fed. Cir. 1992) (holding patentable a method for analyzing electrocardiograph signals for the detection of a specific heart c ondition that used “electronic equipment programmed to perform mat hematical computation”).

2006-1286 20Court held the application unpatentable because “if a claim [as a whole] is directed essentially to a method of calculating, usi ng a mathematical formula, even if the solution is for a specific purpose, the clai med method is nonstatutory.” Id. at 595 (quoting In re Richman , 563 F.2d 1026, 1030 ( CCPA 1977)). Following the lead of the Supreme Court, this c ourt and our predecessor court have refused to find processes patentable when they merely claim ed a mental process standing alone and untied to another category of statutory subject matter even when a practical application wa s claimed. In Schrader we held unpatentable a “method constitut[ing] a novel way of conducting au ctions” by allowing competitive bidding on a plurality of related items. 22 F.3d at 291. In doing so, we rejected the patentee’s argument that the process us ed a machine. Two of the alleged machines—a “display” in the front of the auction room and “a clos ed-circuit television system” for bidders in different cities—were not claimed by the pa tent, and the third—a “record” in which bids could be entered—could be “a piece of paper or a chalkboard.” Id. at 293-94. We therefore concluded that t he patent impermissibly claimed unpatentable subject matter. Similarly, in In re Warmerdam , 33 F.3d 1354, 1359-60 (Fed. Cir. 1994), we held unpatentable a process for controlling objects so as to avoid collisions because the key steps of “‘locating’ a medial axis” and “‘creating’ a bubble hierarchy” described “nothing more than the manipulation of basic mathemat ical constructs, the paradigmatic ‘abstract idea.’” A machine was not required, id. at 1358, nor was there any indication that the process operated on a manufacture or composition of matter. Decisions of our predecessor cour t are in accord. In re Meyer , 688 F.2d 789, 795-96 (CCPA 1982), held that “a mental process that a neur ologist should follow” was

2006-1286 21not patentable because it was “n ot limited to any otherwise st atutory process, machine, manufacture, or composition of matte r.” Similarly, In re Maucorps held that an invention “[u]ltimately . . . directed to ward optimizing the organization of sales representatives in a business” was unpatentable. 609 F.2d 481, 482, 486 (CCPA 1979); see also Alappat , 33 F.3d at 1541 (“Maucorps dealt with a business methodology for deciding how salesmen should best handle res pective customers and Meyer involved a ‘system’ for aiding a neurologist in diagnosing patients. Cl early, neither of the alleged ‘inventions’ in those cases falls within any § 101 category.”). 15 It is thus clear that the present statut e does not allow patents to be issued on particular business systems—such as a parti cular type of arbitration—that depend entirely on the use of mental processes. In other words, the patent statute does not allow patents on particular systems t hat depend for their operation on human intelligence alone, a field of endeavor that both the framers and Congress intended to be beyond the reach of patentable subject matte r. Thus, it is established that the application of human intelligence to the soluti on of practical problems is not in and of itself patentable.
B Having considered the governing legal pr inciples, we now turn to Comiskey’s application and begin with independent claims 1 and 32 which recite “[a] method for mandatory arbitration resolution” regarding unilateral and contractual documents.

15 In Musgrave , our predecessor court concluded that the claims at issue in that case included non-mental steps and claimed patentable subject matter. 431 F.2d at 893. To the extent that language in the opinion might su ggest that mental processes standing alone are patentable, the broad language in the opinion was significantly cabined by Benson . See 1 Chisum on Patents § 1.03[6][c].

2006-1286 22Comiskey has conceded that these claims do not require a machine, and these claims evidently do not describe a process of manufacture or a process for the alteration of a composition of matter. Comiskey’s i ndependent claims 1 and 32 claim the mental process of resolving a lega l dispute between two parties by the decision of a human arbitrator. They describe in essence “conduct ing arbitration resolution for [a] contested issue” and “determining an award or a decisi on for the contested issue” through a predetermined “mandatory” arbitrat ion system, and thus claim the use of mental processes to resolve a legal dispute. Thus, like the claims that t he Supreme Court found unpatentable in Benson and Flook and the claims found unpatent able in our own cases, Comiskey’s independent claims 1 and 32 seek to patent the use of human intelligence in and of itself. Like the efforts to pat ent “a novel way of conducting auctions” which Schrader , 22 F.3d at 291, found to be directed to an abstr act idea itself rather than a statutory category, Comiskey’ s independent claims 1 and 32 describe an allegedly novel way of requiring and conduct ing arbitration and are unpatentable. C We consider independent claims 17 and 46 separately. They recite the use of “module[s],” including “a registration module for enrolling” a person, “an arbitration module for incorporating arbitr ation language,” and “an arbitr ation resolution module for requiring a complainant [or party ] to submit a request for arbitration resolution to the mandatory arbitration system.” Claim 17 also recites “a means for selecting an arbitrator from an arbitrat or database.” These claims , under the broadest reasonable interpretation, could require the use of a machine as part of Co miskey’s arbitration system. See Alan Freedman, The Computer Glossary 268 (8th ed. 1998) (defining

2006-1286 23module as “[a] self-contained hardware or software component that interacts with a larger system); id. at 90 (defining database as “any electronically-stored collection of data”). Similarly, even though Comiskey di d not separately argue his dependent claims, our decision is based on a different ground than the Board’s, and we think it is appropriate to separately consid er dependent claims 15, 30, 44, and 58. Each of these claims adds the following limit ation to its corresponding independent claim: “wherein access to the mandatory arbitration is esta blished through the Internet, intranet, World Wide Web, software applications, telephone, television, cable, video [or radio], magnetic, electronic communication, or other communications means.” As to all of these claims, which under the broadest reasonable interpretation recite the use of a machine, we think that the § 101 question should be addressed in the first instance by the PTO. We therefore remand to the PTO to consider whether independent claims 17 and 46 (with dependent claims 18-29, 31, 47-57, and 59) and dependent claims 15, 30, 44, and 58 recite patentable subject matter under § 101. CONCLUSION We conclude that Comiskey’s indep endent claims 1 and 32 and dependent claims 2-14, 16, 33-43, and 45 do not claim pat entable subject matter. With respect to independent claims 17 and 46 (with dependent claims 18-29, 31, 47-57, and 59) and dependent claims 15, 30, 44, and 58, we rem and to the PTO to determine in the first instance whether § 101 is satisfied. If the Board had relied on the new § 101 ground for rejection in the first instance, Comiskey wo uld have had the opportunity to amend his application under 37 C.F.R. § 41.50(b). We think that it is appropriate to afford

2006-1286 242006-1286 25 Comiskey the same protections in this respect as he would have had before the Board with respect to the claims t hat we have held unpatentable. AFFIRMED-IN-PART, VACATED -IN-PART, AND REMANDED COSTS No costs.