Source: https://www.ip-watch.org/2009/10/16/how-the-machine-or-transformation-test-in-bilski-is-failing/
Timestamp: 2019-04-25 02:18:48+00:00

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The US Supreme Court is poised to hear a challenge to the Bilski “machine-or-transformation” test on 9 November. Charles Macedo and Norajean McCaffrey write that the Federal Circuit’s decision in Bilski has departed from Supreme Court precedent, and suggest what the Supreme Court should do to put the law of patent-eligible subject matter back on track.
In 1998, the United States Court of Appeals for the Federal Circuit had the foresight to recognise that the revolution in information technology and availability of the internet would radically change the way that the world does business, and that US patent law would need to adapt to this new technological and commercial reality by confirming the availability of patent protection for so-called “business method” patents.
First, in State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), and then later in AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352, 1355 (Fed. Cir. 1999), the Federal Circuit followed the Supreme Court’s lead in Diamond v. Chakrabarty, 447 U.S. 303 (1980), which recognised that patent-eligible subject matter under 35 U.S.C. § 101 should be broadly construed to “include anything under the sun that is made by man.” 447 U.S. 303, 308-09 (1980) (quoting S. Rep. No. 82-1979, at 5 (1952); H.R. Rep. No. 82-1923, at 6 (1952)).
Those decisions, an inevitable evolution in patent law based on the Supreme Court’s binding precedent, fostered a renaissance in patent law. More and more, so-called business-related and computer-related patents were sought, and the US Patent and Trademark Office (“USPTO”) started to become overwhelmed. A number of “dubious quality” patents began to issue and made their way to the courts. Scrutiny from the press, Congress, and the Supreme Court ensued. At the core, the problems caused by these patents were the result of their failure to comply with the Patent Act’s requirements for novelty (35 U.S.C. § 102), non-obviousness (35 U.S.C. § 103) and definiteness (35 U.S.C. § 112) of a claimed invention, and did not stem from any real dispute over whether those patents were patent-eligible subject matter (35 U.S.C. § 101).
Against this backdrop, just over a decade after its State Street decision, the Federal Circuit was presented with the specific issue raised in In re Bilski, 545 F.3d 943 (Fed. Cir. 2008) (en banc), cert. granted, 129 S.Ct. 2735 (2009) – namely, what types of processes should be eligible for patent protection under 35 U.S.C. § 101.
In a split decision, the majority opinion authored by Chief Judge Michel redefined the “governing” test for patent-eligible processes to be the so-called “machine-or-transformation” test. In re Bilski, 545 F.3d at 952, 956. Under this test, a patent-eligible process must either be tied to a particular machine or apparatus or must transform a particular article into a different state or thing. In addition, in order to impart patent eligibility, “the use of a specific machine or transformation of an article must impose meaningful limits on the claim’s scope” and “the involvement of the machine or transformation must not merely be insignificant extra-solution activity.” For a detailed discussion of the Federal Circuit decision in Bilski, see Charles R. Macedo and Norajean McCaffrey, “How The Supreme Court Should Resolve Bilski” [pdf], IP Law360, July 20, 2009; Charles R. Macedo, Processes must be tied to machine or transform matter to be patent-eligible in the United States [pdf], Journal of Intellectual Property Law & Practice, January 27, 2009 (available at www.arelaw.com); Charles R. Macedo and David Boag, The “Machine-Or-Transformation Test” For Processes [pdf], IP Law360, October 30, 2008. The Supreme Court has now granted certiorari to address this important issue and weigh in on the scope of patent-eligible subject matter.
The briefing to the Supreme Court has brought out more amici who have expressed a wide range of views on the issue of what constitutes patent-eligible subject matter. In this article, we provide a brief summary of our view as to how the Federal Circuit’s decision in Bilski has departed from Supreme Court precedent, and what the Supreme Court should do to put the law of patent-eligible subject matter back on track.
(2) the claimed subject matter must not preempt what the Bilski majority calls “fundamental principles” (545 F.3d at 952 n.5) – laws of nature, natural phenomena, or abstract ideas.
See Diamond v. Diehr, 450 U.S. 175, 185 (1981) (holding that a claim is not a patent-eligible process if it claims “laws of nature, natural phenomena, [or] abstract ideas.”) (citing Parker v. Flook, 437 U.S. 584, 589 (1978) and Gottschalk v. Benson, 409 U.S. 63, 67 (1972)).
• Flook, 437 U.S. at 589 n.9 (“An argument can be made, however, that this Court has only recognized a process as within the statutory definition when it either was tied to a particular apparatus or operated to change materials to a ‘different state or thing,’ [however] . . . we assume that a valid process patent may issue even if it does not meet one of these qualifications of our earlier precedents.”) (citations omitted).
(1) “The Machine-or-Transformation” Test Should Not Be a Rigid Rule.
In the Federal Circuit’s quest to find a “test or set of criteria” to “govern” the USPTO and courts in determining patent-eligibility, the Bilski majority erroneously adopted as the “governing test” a mechanical version of the so-called “machine-or-transformation” test. In re Bilski, 545 F.3d at 952, 956. This is exactly the kind of error the Supreme Court found the Federal Circuit to have made with respect to the obviousness analysis in KSR International Co. v. Teleflex, Inc., 550 U.S. 398, 419 (2007) (“We begin by rejecting the rigid approach of the Court of Appeals.”).
Adoption of this rigid rule has wreaked havoc on the stability and reliability of hundreds of thousands of issued patents (as evidenced by litigations that raise the issue of patent-eligible subject matter as a defence, which have begun to sprout since the Bilski decision) and countless pending applications (as evidenced by the wave of claim rejections under § 101 and the increasingly rigid rules coming out of decisions of the Board of Patent Appeals and Interferences (“BPAI”) at the USPTO).
In attempting to apply this rigid rule, the BPAI and lower courts have ended up adopting even more rigid rules, without making an effort to consider the underlying rationale that guided the Supreme Court’s decisions.
For example, the BPAI recently rejected a claim for synthesizing speech signals, which included “computing” steps and steps in which two sets of signals were transformed to produce speech signals. The BPAI’s analysis failed to directly address whether the claim merely preempts a fundamental principle, as Supreme Court precedent directs. Instead, it applied a wooden analysis of specific prior holdings from In re Abele, 684 F.2d 902 (C.C.P.A. 1982), as discussed by the Bilski majority, 545 F.3d at 962-63, to reject the patent-eligibility of this claimed process, even though it was not an abstract idea by any means. See Ex parte Hardwick, Appeal 2009-002399, slip op. at 6-9 (BPAI June 22, 2009). The test set forth in Abele and its prior precedent (the so-called “Freeman-Walter-Abele test”) was one of the tests expressly rejected in Bilski, 545 F.3d at 958-59.
Similarly, the BPAI has sought to apply the “machine-or-transformation” test as a rigid rule to system claims, despite the Federal Circuit’s warning that “[i]n State Street, as is often forgotten, we addressed a claim drawn not to a process but to a machine” Bilski, 545 F.3d at 960 n.18. See Ex parte Atkin, Appeal 2008-4352, slip. op. at 18 (BPAI Jan. 30, 2009) (broadly applying Bilski to reject not only method claims but system claims, finding that the system claims encompassed “any and all structures for performing the recited functions” and therefore the system claims were “at least as broad as method claims … which we have determined recite patent ineligible subject matter under Bilski ”; making this determination even though the system claims were more appropriately considered under §112 and also rejected on that ground.).
Rigid application by courts of the “governing” rule from Bilski has also resulted in other previously approved claimed methods being found to no longer be patent-eligible. For example, in Fort Properties, Inc. v. American Master Lease, LLC, 609 F.Supp.2d 1052 (C.D.Cal. 2009), the district court, based on a wooden analysis of the “governing” test, invalidated various previously issued method claims in a patent relating to real estate transactions in which legal obligations are transformed and evidenced by deed shares. Again, the court did not address whether the claim, which clearly claimed one of the four statutory classes of subject matter – a process – fell into one of the exceptions to patent-eligible subject matter, e.g., was merely preempting an abstract idea.
Regardless of whether these claims have other failings, the adoption of the rigid “machine-or-transformation” test in Bilski has resulted in both the courts and the USPTO missing the point and using §101 as a gatekeeper in a manner in which it was never intended to be used by the Patent Act, either as enacted by Congress or as interpreted by the Supreme Court. Cf. Dann v. Johnston, 425 U.S. 219, 221 (1976) (avoiding the §101 issue in favour of a §103 analysis).
The Supreme Court should quiet title on meritorious inventions and refocus the inquiry where it belongs, on the issue of whether the claimed invention is novel, non-obvious, useful, and sufficiently well-defined, as contemplated by the Patent Act.
(2) The Bilski Majority’s Definition of a Patent-Eligible Process Is Too Narrow.
In interpreting what constitutes a patent-eligible process, the Bilski majority also departed from Supreme Court precedent and the broad statutory construction of the Patent Act that was intended by Congress. In particular, the Bilski majority erroneously discounted, and essentially ignored, the statutory definition of “process” in the Patent Act (35 U.S.C. § 100(b)) and engrafted extra-statutory limitations on patent-eligible processes. Cf. In re Bilski, 545 F.3d at 951 n3.
As Judge Newman’s dissent explains, the majority, in characterising the statutory definition of process as “unhelpful,” In re Bilski, 545 F.3d at 951 n.3, misses the point of this definition and fails to consider the long history associated with its adoption. See In re Bilski, 545 F.3d at 978 (Newman, J. dissenting). The definition was intended to be broad and to make clear that the substitution of the term “process” in the 1952 Patent Act for the term “art,” which was used in prior statutes, was not intended to be limiting and, indeed, was intended to include “any” process. See 35 U.S.C. § 101.
The majority also errs in failing to address Congressional action (and inaction) since the Federal Circuit’s decision in State Street in 1998. For example, the Federal Circuit majority failed to consider the effect of Congress’ adoption of 35 U.S.C. § 273, which provided a “prior user right” for patents that are “methods of doing business”. Besides expressly recognising that “methods of doing business” are by definition patent-eligible subject matter, the legislative history of this act illustrates that Congress was fully aware of the Federal Circuit’s decision to broadly construe patent-eligible subject matter as including anything which provides a useful, concrete, and tangible result, including “methods of doing business”, and elected to add a new defence for infringing such patents (i.e., the prior user right in Section 273) rather than to modify the scope of patent-eligible subject matter (e.g., eliminate such patent claims from being patent-eligible subject matter). See, e.g., 145 Cong. Rec. S14717 (daily ed. Nov. 17, 1999); 145 Cong. Rec. H6942 (daily ed. Aug. 3, 1999). Congress’ failure to change Section 101 when it adopted Section 273, or in any of its opportunities since (see, e.g., S. 2369, 110th Cong.; H.R. 1908, 110th Cong. §10; S. 861, 110th Cong. §303; H.R. 2365, 110th Cong.), is probative evidence of Congress’ legislative acquiescence to the standards set forth in State Street and its progeny.
(3) The Bilski Majority’s Interpretation of the Transformation Prong Is Too Narrow.
The Bilski majority’s blanket exclusion of “electronic signals and electronically-manipulated data” and “business methods” involving, for example, manipulation of “legal obligations, organizational relationships, and business risks” – today’s “raw materials” of innovation – from the scope of patent-eligible subject matter unless they are tied to a computer or some other machine (see In re Bilski 545 F.3d at 962) is the result of an overly rigid analysis that is contrary to the rationale that the Supreme Court used in developing the “transformation” prong of the “machine-or-transformation” test that the Bilski majority sought to apply. See Expanded Metal Co. v. Bradford, 214 U.S. 366 (1909) (rejecting arguments seeking to limit the transformation prong to chemical transformations in favour of also including mechanical transformations).
While we agree that definiteness requirements may preclude claims directed to purely mental steps from being patent-eligible subject matter, the patent-eligibility determination under 35 U.S. C. § 101 should turn only on whether the claim preempts an abstract idea or fundamental principle, not on what type of transformation occurs.
(4) Wooden Distinctions Between General-Purpose Computers and Specific-Purpose Computers Should Be Rejected.
The majority decision, which in some respects helped clarify the Supreme Court’s Benson precedent, nonetheless failed to adequately clarify whether a distinction should be drawn between a computer-implemented invention that is implemented on a general-purpose computer rather than on a specific-purpose computer. Unfortunately, as a result, much confusion has ensued, at least at the BPAI and in the district courts, whereby mechanical distinctions have been drawn that are contrary to the underlying principles set forth in Benson and other governing Supreme Court precedent. See Benson, 409 U.S. at 71-72. The Supreme Court should clarify that any such distinctions are misplaced.
• Ex parte Cornea-Hasegan, No. 2008-4742, slip op. at 9-10 (BPAI Jan. 13, 2009) (rejecting under §101 a claimed method for predicting results of mathematical operations, finding that “[t]he recitation of a ‘processor’ performing various functions is nothing more than a general purpose computer that has been programmed in an unspecified manner to implement the functional steps recited in the claims”).
• Cybersource Corp. v. Retail Decisions, Inc., No. C 04-03268, 2009 U.S. Dist. LEXIS 26056, at *20-21 (N.D.Cal. Mar. 26, 2009).
Such confusion, and the resulting uncertainty engendered thereby, would be eliminated if the inquiry for patent-eligibility was appropriately focused on whether the claimed subject matter falls within one of the four statutory classes and whether it preempts a fundamental principle.
The role of patents – such as those related to financial services, e-commerce, and computers – play a vitally important role in the modern US economy. Such patents, when appropriately awarded, encourage innovation and the disclosure of information, and thus advance the Constitutional goal of “promot[ing] the Progress of Science and useful Arts.” U.S. Const., art. I, § 8, cl. 8. The Supreme Court should resist the temptation to bow to the outspoken minority who would undermine a system that our Founding Fathers thought was so important that they included it in Article I of the US Constitution and enacted it into one of the earliest public laws of this country at its infancy, and which has been maintained ever since. Rather, the Supreme Court should reaffirm its prior precedent, which recognises the broad scope of patent-eligible subject matter under Section 101, and should reject efforts to create any rigid rules or short-cut analyses that seek to narrow the scope of Section 101.
By Charles R. Macedo, Norajean McCaffrey. Charles R. Macedo is a Partner, and Norajean McCaffrey is an Associate at Amster, Rothstein & Ebenstein LLP. They may be reached at cmacedo@arelaw.com and nmccaffrey@arelaw.com. Mr. Macedo is the author of the forthcoming book The Corporate Insider’s Guide to U.S. Patent Practice published by Oxford University Press.
Mr. Macedo was principal attorney, along with Anthony Lo Cicero and Jung Hahm from his firm, on an amici curiae submission [pdf] to the Federal Circuit in In re Bilski.
Messrs. Lo Cicero and Macedo and Ms. McCaffrey submitted an amici curiae brief [pdf] on behalf of various mid-sized and smaller entities in the financial services, e-commerce, and internet industries to the Supreme Court in Bilski v. Kappos. The authors would also like to thank Marion Metelski, Michael Kasdan, David Goldberg and Tasha Macedo for their helpful comments.
"How The “Machine-Or-Transformation” Test In Bilski Is Failing" by Intellectual Property Watch is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
The purpose of the patent system is *not* the pervasive commodification of any knowledge that can be applied by a business. Patent “protection” should be the exception to the rule of fundamental freedom of competition in American society. True innovation occasionally requires “creative destruction” (Schumpeter), and there are many examples in history that patents blocked innovation.
Should there be a rigid rule? Yes of course, because the grant of patents basically is an administrative process that should not depend on an elaborate judgement of USPTO examiners.
Is the “machine-or-transformation” test OK? No, it actually combines several basic *mistakes* of American patent law of the past decades. It turns the sufficient condition of Cochrane v. Deener into a necessary condition (which is a dead sin to logic), and it may require a point of novelty approach that was officially abolished a long time ago in the US.
The proper test – as some amici have noted – is based on the age-old exclusion of abstract ideas, being ideas that are not ready for routine application by an average person skilled in the art. The PHOSITA is a craftsman, not an expert. § 112 feeds back into § 101, so to say.
Businessmen are not craftsman. They are a kind of inventors. Like pure science, the raw material for scientists, is not patent-eligible, business methods, the raw material for businessmen should not be patentable. And don’t need to be patentable, from an economic perspective!
The reader may wonder how on earth businesses should protect themselves against competition, if there are no more business method patents. The answer is: they shouldn’t! Patents are inherently associated with the word “protection”, but protection is a *crime* in competition law.
Businesses who do not like competition should move to North-Korea, or to Cuba, before it is too late. Economists will confirm: if competing firms effectively do the same, it is ineffecient. That is why the state owned monopolies in Eastern Germany were so efficient!
The Berlin wall was the ultimate business method patent! Will the patent system covertly introduce *communism* into US society, half a century after McCarthy? Business method patents are communism. Their only purpose is to prevent competition. Yes, competion is tough for firms: they have to provide the best product for the lowest price. But it should be. Patents move competition from the marketplace to the courtroom. Don’t let unscrupulous patent propagandists (like the above commentators) destroy basic values of American society!
A general purpose computer running BASIC is “READY” to do whatever you tell it to. A patent cannot turn a general purpose computer into a non-general purpose computer, or else it will become a useless expensive thing. It is not an invention to tell a person or a general purpose computer to do anything. Nothing can be invented simply by putting an idea on a general purpose computer, since the general purpose computer is perpetually “READY” for “ALL PURPOSE” instruction codes, which is an itemized list of logics and maths to do and then output an answer or signal.
It is a reality that Amazon one-click is made of math, even if it looks like something else. What you see on TV is not there but somewhere else. What you see on a computer, additionally is also calculated output, and not really there.
No software is an uncalculable number, ergo all software is a calculable number, and Champernowne Constant is an example of the sum of all such numbers, immediately available to choose from.
The process must be patentable without the computer, because anyone can tell a true GPC to do anything obvious, and a true GPC has no limitations on what it can be told to do.
Windows is not a true GPC, since it features only Solitaire and the ability to simulate illness for the unjust enrichment of ransom-demanding-corporate Pirates, and usually a contract for fools to agree to be attacked in that way, without any control or ownership of a GPC.
BASIC is a true GPC and therefore let the freemen do whatever they want with it, and let Windows be reduced to legally enforced unproductive card games and mouse master baiting by those corporate pirates who demand payment for all usefulness.
Those who are not fools will prefer to operate a GPC in BASIC, Free Open Source Software, Linux, GNU, Assembly Language, or USER CONFIGURABLE LOGIC. If the “Consumer Class” wake up and see they are fat with rubbish, they will quit eating it and start USING it. Click AGREE to EULA be sorry, slave, OR disagree and be FREE. You cannot reinvent a general purpose machine, and non-GPCs are often the means by which a fool and his money are soon parted. GPC remains an all-purpose prior art invention which always does for free whatever it is told to do.
I do not negotiate with my machines. They must work and they must do whatever I tell them to. I highly recommend a class action against Microsoft for EULA Civil Rights violations of idiots, and for selling a defective and harmful product, by someone (like me) who has not paid the trashman to convey their soul to the Gates of Hell by buying Windows and signing the diabolical eula contract. Those bogus viruses which Microsoft is wilfully allowing have caused real wrongful deaths due to heart attacks and Blue Screams of Death, I am sure. Any Free Software programmer gets sick just thinking about Windows Viruses. Behold, how SONY writes viruses on their music CDs and Microsoft has not sued them, nor charged them with what would be a federal crime for an individual to do. And weeks ago when BSoDs in airports canceled a day of flights. Microsoft is a terrorist and a mob . Lock up the Gates of Hell! No more SICK, BROKEN WINDOWS. No more trying to take PAC-MAN bytes out of GPC’s. There is free software that does more than Windows on a Floppy Disk, which even has a nice simple Write Protection feature that makes viruses impossible, slowupdates impossible, a feature that Microsoft Abandoned when it introduced the ComputerAIDS plague of Windows. All you get with that, and all you get with software patents is Solitaire and SICKNESS and rip offs.
There is no new software to patent or invent. It’s all redundant to what has first been free. It is even possible to count higher than the binary number which the biggest program ever made consists of, which really means there just ain’t nothing new under the sun. Nobody should bother patenting the multiplication table to ruin those who need to use calculators. GPCs can’t even be bound by DRM, no more than the laws of physics can be legislated. A GPC cannot be compelled to say 2 plus 2 equals 5. General Purpose Computers are mind tools, and minds with corrupt realities are insane. Software Patents are insane, and Sick, Non-User-Controlled Machines lead to Armageddon.
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