Source: https://www.ipwatchdog.com/2014/12/23/a-software-patent-history-scotus-decides-bilski/id=52837/
Timestamp: 2019-04-18 22:23:04+00:00

Document:
This is part 5 of a multi-part series exploring the history of software patents in America. To start reading from the beginning please see The History of Software Patents in the United States. For all of our articles in this series please visit History of Software Patents.
In Bilski v. Kappos the questions presented to the Supreme Court for consideration were: (1) whether the Federal Circuit erred by creating the so-called “machine or transformation” test, which requires a process to be tied to a particular machine or apparatus, or transform an article into a different state or thing, in order to be patentable subject matter; and (2) whether the machine or transformation test contradicts Congressional intent (pursuant to 35 U.S.C. 273) to allow for business methods to be patented.
The Supreme Court held that the machine-or-transformation test is not the sole test for patent eligibility under §101, and that the Federal Circuit erred when it ruled that it was the singular test to determine whether an invention is patentable subject matter.
Delivering the opinion for the Court was Justice Kennedy. There were no dissents, only concurring opinions, which is in and of itself a little surprising, at least at first glance until you realize that the Justices all agreed Bilski’s invention was patent ineligible, but some, such as Justices Stevens and Breyer would have found all business methods unpatentable.
Kennedy explained that the Federal Circuit decision ignored well established rules of statutory interpretation, and further explained that there is no ordinary, contemporary common meaning of the word “process” that would require it to be tied to a machine or the transformation of an article. Nevertheless, the machine or transformation test may be useful as an investigative tool, but it cannot be the sole test.
Similarly, Kennedy explained that Section 101 does not categorically preclude business method patents. The term “method” within §100(b)’s “process” definition, at least as a textual matter, suggests that it may include at least some methods of doing business. Kennedy again pointed out that the Court is unaware of any argument that the “ordinary, contemporary, common meaning,” of the term “method” would exclude business methods. Finally, the categorical exclusion argument is further undermined by the fact that federal law – 35 USC §273(b)(1) – explicitly contemplates the existence of at least some business method patents: Under §273(b)(1), if a patent-holder claims infringement based on a method in a patent, the alleged infringer can assert a defense of prior use. By allowing this defense, the statute itself acknowledges that there may be business method patents.
Unfortunately for Bilski, however, the Court decided that just because processes and business methods can be patentable subject matter does not mean that the Bilski invention is patentable subject matter. The Court explained that under Benson, Flook, and Diehr, the Bilski claims are not direct to a patentable process but rather attempts to patent abstract ideas. The Bilski claims covered unpatentable abstract ideas, just like the algorithms at issue in Benson and Flook. Notably, and unfortunately, perhaps the major impact of the Supreme Court’s decision in Bilski was to resurrect Flook, which seems completely irreconcilable with Diehr.
Initially, during prosecution the patent examiner rejected the claims as not directed to patent-eligible subject matter under 35 U.S.C. § 101. More specifically, the examiner explained that 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. Thus, the patent examiner concluded that the invention was not directed to the technological arts and, therefore, not patentable subject matter. The examiner also noted for the file that the Applicants during prosecution admitted that the claims were not limited to operation on a computer.
The applicants appealed that decision to the Board of Patent Appeals and Interferences, the internal appellate body within the United States Patent and Trademark Office that is the first line of appeal when an applicant seeks to challenge the final rejection(s) of a patent examiner. The Board ultimately upheld the examiner’s rejection. The Board did, however, determine that the examiner erred to the extent he relied on a “technological arts” test because the case law does not support such a test.
The Board held that the requirement of a specific apparatus was erroneous because a claim that does not recite a specific apparatus may still be directed to patent-eligible subject matter “if there is a transformation of physical subject matter from one state to another.” The Board concluded that Applicants’ claims did not involve any patent-eligible transformation, holding that transformation of “non-physical financial risks and legal liabilities of the commodity provider, the consumer, and the market participants” is not patent-eligible subject matter.
The Applicants then appealed to the United States Court of Appeals for the Federal Circuit. The appeal was originally argued before a panel of the court on October 1, 2007, but prior to reaching a disposition on the merits the three judge panel assigned to hear the case decided that it would appropriate for the full Court to hear the case and of their own accord ordered an en banc review by the entire Federal Circuit.
On October 30, 2008, the United States Court of Appeals for the Federal Circuit issued its much anticipated decision. The question that was presented by this case was really whether a purely mental process is patentable subject matter. Unfortunately, the Federal Circuit, and later the Supreme Court, decided to address a much broader question. The Federal Circuit choose to decide under what circumstances a method in general was patent eligible. Although at the time I criticized this approach the Federal Circuit decision in Bilski was a far better, more certain test.
In its decision in Bilski the Federal Circuit functionally overruled the State Street Bank decision, which had recognized that there was no reason to prevent the patentability of business method patents. If you read the decision of the Federal Circuit you will notice multiple places where the Court says that State Street has not been overruled, but that is incorrect. The only intellectually honest reading of the Federal Circuit Bilski decision was that it did, in fact, overrule State Street because it discarded the State Street test for patentable subject matter. This distinction was not lost on the Supreme Court during oral argument when several of the Justices asked the government whether the State Street invention would be patentable under the new machine or transformation test created by the Federal Circuit. Something that appeared at the time made them uncomfortable given the great disparity in the nature of the inventions at play in Bilski and State Street.
In essence, the Bilski invention can be summarized thusly: observe, think and then act. While it would cover more than that, simply observing, thinking and acting could have been infringing activity, which made the claim hopelessly too braod. The State Street invention, on the other hand, related generally to a system that allowed an administrator to monitor and record the financial information flow and make all calculations necessary for maintaining a partner fund financial services configuration.
Footnote 19: “[T]hose portions of our opinions in State Street and AT&T relying solely on a “useful, concrete and tangible result” analysis should no longer be relied on.
[T]he proper inquiry under § 101 is not whether the process claim recites sufficient “physical steps,” but rather whether the claim meets the machine-or-transformation test. As a result, even a claim that recites “physical steps” but neither recites a particular machine or apparatus, nor transforms any article into a different state or thing, is not drawn to patent-eligible subject matter. Conversely, a claim that purportedly lacks any “physical steps” but is still tied to a machine or achieves an eligible transformation passes muster under § 101.
In doing away with the machine or transformation test as the sole test for determining whether an invention is patentable subject matter the Supreme Court seemed to kick open the door for patents on new technologies and innovations that we could not today imagine. Unfortunately, the door remained open for only a very short time unfortunately, but we will get to that in more detail when we discuss Alice v. CLS Bank.
As a result of the Supreme Court’s decision in Bilski we learned that 5 Justices, namely Justices Kennedy, Roberts, Thomas, Alito and Scalia all agreed that business methods are patentable subject matter. All 9 Justices agreed that the Federal Circuit misread previous Supreme Court decisions when they mandated that the machine-or-transformation test was the only test for determining whether a process is patentable subject matter. All 9 Justices agreed that the Bilski application was properly rejected, with the majority agreeing that it was properly rejected because it was an abstract idea, and the concurring minority simply wanting to say that business methods are not patent eligible unless tied to an otherwise patentable invention (see Stevens footnote 40).
Judge Rich authored the State Street opinion that some have understood to make business methods patentable. But State Street dealt with whether a piece of software could be patented and addressed only claims directed at machines, not processes. His opinion may therefore be better understood merely as holding that an otherwise patentable process is not unpatentable simply because it is directed toward the conduct of doing business—an issue the Court has no occasion to address today.
Thus, the State Street patent claims, which unequivocally and directly related to a computer implemented process (i.e., software), were patentable in the views of Justices Stevens, Breyer, Ginsberg and Sotomayor despite being directed to a method of doing business. Thus, these four Supreme Court Justices likewise agree that at least some software is patentable.
As we leave Bilski we knew, or thought we knew, that 8 out of 9 Justices of the United States Supreme Court had agreed that at least some software is patentable. That is why it was so difficult to understand why in Alice the word “software” wasn’t even used once. But that jumps a bit ahead in our story.
The claims in Flook and Diehr seem very different to me.
Here is the first independent claim from Diehr.
opening the press automatically when a said comparison indicates completion of curing.
It seems perfectly reasonable to allow the claims of Diehr and to reject the claims of Flook.
I re-read claim 1 of Bilski. That’s not science. (although it could be construed as useful arts).
I would disagree heartily with you as all that you have done here is assume the conclusion you want to reach and turned around and asked – see how easily it is to do so?
Economics is sometimes called the dismal science, and I suppose that investing and trading can be considered a field within microeconomics.
BTW, I have the impression that some of the technologies of HFT involve patent-eligible/patentable business methods, but not of the practitioners would trade disclosure for a temporary limited monopoly.
Anon, I did normal claim interpretation. I hypothesized a situation and asked myself whether the claim staked it out. Flook is too broad. Diehr is not.
Did you recognize this piece of the preamble as breathing life into the claim (much like the constraint in Diehr to be only to a system of curing rubber), or did you give it no weight, perhaps influenced by the end decision (historical or otherwise) that you wanted to arrive at?
I wonder if one recognizes the evolution of business methods that your allusion to “dismal science” brings about.
An appreciation of history might make one realize that ALL of chemistry at one point in time could easily fit into an analogous view of “dismal science,” with the notion of alchemy and turning lead into gold one of the very real drivers of early practitioners of the chemical arts.
Contrast that with the very real gains that have come from the application of scientific principles to business methods as exemplified with the works of Deming et al, the various Quality Initiatives (including Taguchi Experiment protocols and 6 Sigma efforts). And yet, we have a very real and very broad based contingency that actively seek to deny patent protection to business methods based on seemingly nothing more than a philosophic mindset that such are note “the proper items” for patent protection.
To me it is utterly inexplicable to seek to deny patent protection for the human endeavors that employ the scientific method in a utilitarian aim, as THAT is what the patent system is meant to protect.
Anon #7, having done some consulting for the petroleum industry during the time period of Flook, I qualify as a PHOSITA. I know how the console of a chemical reactor/catalytic cracker of that time period looked and how one used it. A computer could be helpful to the operator, but I would not have needed it to do the calculations and to enter in new alarms.
Diehr claims a method of a system that actually does something a human could not do once the computer, sensors, and mechanicals are removed from the system.
Anon #8, I don’t have a problem with business method patents, I think I know of systems that use patent-eligible patentable business methods, but the firms using them would not trade disclosure for a limited term technological monopoly.
Your response to #7 is unavailing, as there is not a requirement for a “need.” (I too would serve as a “PHOSITA” – or at least I could envision what that legal person would understand).
Your response to #8 is likewise unavailing, as any such personal preference to use a patent system is quite immaterial to the legal positions being advanced to deny ANY such use to anyone. I do understand you to be saying that you personally are not taking an anti-business method position, so my reply is less to you directly, and more to those whom would seek to deny patent protection of this kind.
4) enter some new values for catalytic cracking variables by means of the console for catalytic cracker.
Really where is there more than a claim to a mathematical formula?
How is there really any similarity to the claims of Diehr which stake out a claim to a method of a genuinely new invention that provides material improvement over prior vulcanization systems?
Without answering my post of 7 directly, your re-reading and re-writing at 11 tells me that you remove the preamble phrase from Flook entirely.
Does not that phrase “breather life” into the claim in a Diehr– like manner?
Anon #12, I made a slight narrowing of the preamble by changing “involved in a process…” to “read the displays on the catalytic cracker”.
Even the narrowing does not make the Flook claim any less outrageous.
In contrast Diehr built a system whose computer is constantly reading temperature and whose computer opens a mold automatically. Diehr describes a real technological creation, which uses a general purpose computer as a component and which represents a genuine improvement over prior vulcanization systems.
Sorry Joachim, but I have lost interest in trying to hold a conversation with you as you continue to assume your conclusion without realistically looking at the logic used to arrive at that conclusion and ignore the point I have made.

References: v. 
 §101
 §100
 §273
 §273
 § 101
 § 101
 § 101
 v.