Source: http://www.waltmire.com/history-of-software-patents-and-business-method-patents/
Timestamp: 2019-04-20 08:33:54+00:00

Document:
Generally, computer software and business methods are both within patent eligible subject-matter (e.g. is of the type invention is capable of being patented if the other requirements of patentability are statisfied). Below provides a history of software patent and business method patent cases in the United States.
Computer software is patent-eligible. Research Corp. Technologies v. Microsoft Corp. 627 F. 3d 859 (Fed. Cir. 2010)(patentable process for half-toning computer images); State Street Bank & Trust v. Signature Financial Group 49 F.3d 1368 (Fed. Cir. 1988)(patentable data processing system for managing a hub and spoke mutual fund system); Alice v. CLS Bank, Dkt. No. 13-298 (June 19, 2014) (The Court noted that the claimed invention at issue in Alice did not improve the function of the computer nor did it improve any other technology or technical field. Therefore at least software that provides improvements to a computer or to another technical field should be patent eligible).
Although the Supreme Court stated that business methods are not categorically excluded from patenting, business methods that to not utilize a computer, or a machine, or transform matter, may have have a higher chance of running into the section 101 limitations against patenting laws of nature, mathematical formulas, or abstract ideas. Bilski v. Kapos 130 S.Ct. 3218 (2010).(method of hedging risk in a commodity market was patent-ineligible as an abstract idea); In re Comiskey, 499 F. 3d 1365 (Fed. Cir. 2007)(unpatentable method of requiring mandatory arbitration for unilateral and contractual documents did not required the use of a machine). This may be particularly true when the method can be carried out entirely in one’s mind without the need of a computer. CyberSource Corp. v. Retail Decisions, Inc.,654 F. 3d 1366 (Fed. Cir. 2011)(the court stated in support of conclusion of abstractness, “All of claim 3’s method steps can be performed in the human mind, or by a human using a pen and paper”).
Even when a patent claim recites the use of a computer, this does not end the inquiry. Dealertrack, Inc. v. Huber, 674 F. 3d 1315 (Fed. Cir. 2012) (invalidating method claims directed to car dealer credit application processing using a computer). A court will look past crafty claim draftsmanship to find a patent invalid when it violates section 101 regardless of the form of the claim. See CyberSource Corp., 654 F. 3d 1366 (finding the use of Beauregard claims—e.g. “A computer readable medium containing program instructions for …”—does not guarantee patent-eligibility). Patent eligibility under section 101 does not depend simply on the draftsman’s art. Mayo Collaborative v. Prometheus Labs, 132 S. Ct. 1289 (2012).
Insignificant or conventional post-solution computer activity will not impart patentability. Bilski, 130 S.Ct. 3218 (a prohibition against patenting abstract ideas cannot be circumvented by adding insignificant post-solution activity); Dealertrack, Inc.,674 F. 3d 1315 (simply adding a “computer aided” limitation to a claim covering an abstract concept, without more, insufficient to render the claim patent eligible); see also CyberSource, 654 F.3d at 1375 (the incidental use of a computer to perform the mental process does not impose a sufficiently meaningful limit on the claim’s scope); Parker v. Flook, 437 U.S. 584 (1978)(identification of a limited category of conventional, post-solution applications, e.g. a process comprising the catalytic chemical conversion of hydrocarbons, of the mathematical formula did not make the claimed process eligible for patent protection).
Insignificant or conventional pre-solution activity will not impart patentability. Mayo Collaborative, 132 S. Ct. 1289 (the determining the 6-MP metabolite levels in the blood found to be insignificant conventional pre-solution activity that could not transform an unpatentable law of nature into a patent-eligible application of such a law).
A new application of a law of nature my be patentable even when the law of nature itself is not patentable. Diamond v. Diehr, 450 U.S. 175 (1981) (patentable method of curing synthetic rubber, which employed a formula and computer to calculate the curing time).
However, limiting a claimed process to a particular field will not necessarily impart patentability. Mayo Collaborative, 132 S. Ct. 1289 (patentability could not be premised on limiting the method to a particular technological environment). Claims that attempt preempt all uses of mathematical formal will likely run into patent-eligibility problems. Gottschalk v. Benson, 409 US 63 (1972) (claim that would wholly preempt the mathematical formula and in practical effect would be a patent on the algorithm itself found patent ineligible).
A claim that utilizes an algorithm does not prevent patentability depending on the application of the algorithm. Diamond, 450 U.S. 175 (patentable method of curing synthetic rubber, which employed a formula and computer to calculate the curing time). Research Corp. Technologies, 627 F. 3d 859 (patentable process for half-toning computer images).
The manipulation of real world legal agreements, financial instruments, and contracts alone will not save a claim that is otherwise directed to unpatentably abstract subject matter. Bilski, 130 S.Ct. 3218 (method of hedging financial risk found unpatentable); Alice v. CLS Bank, Dkt. No. 13-298 (June 19, 2014)(method, computer readable medium, and system claims directed to using a computer to mitigate financial settlement risk found not patent eligible); Fort Properties, Inc., 671 F. 3d 1317(a method of creating a real estate investment instrument adapted for performing tax-deferred exchanges found unpatentable); In re Comiskey, 499 F. 3d 1365 (A method of requiring mandatory arbitration for unilateral and contractual documents found unpatentable).
Using a generic computer and generic computer functions to implement a long known fundamental economic/financial practice, e.g. mitigating financial settlement risk, without more is unlikely to be patent eligible. Alice, Dkt. No. 13-298 (method, computer readable medium, and system claims directed to using a computer to mitigate financial settlement risk found not patent eligible).
The machine-or-transformation test is not the exclusive test for section 101 patent-eligibility and can fail to predict the correct patent-eligibility result under section 101. Mayo Collaborative, 132 S. Ct. 1289 (drugs administered according to the method would change the composition of blood not determinative of patent-eligibility even though arguably transformative of the blood composition).
Currently 35 USC 101 (section 101) provides whether a particular invention falls within the type of invention that can be patented (e.g. whether the subject matter of the invention is eligible to be patented). Section 101 provides: “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.” The courts have created exceptions that prohibit patenting of laws of nature, mathematical formulas, or abstract ideas. The cases on software and business method patents generally focus on interpreting section 101 and prior cases related to section 101.
Early on the Patent Office considered patents on computer programs unpatentable. For example, in 1966 the Patent Office published a rule that provided that a computer program, whether claimed as an apparatus or as a process, was not patentable. In 1968, the Court of Customs and Patent Appeals changed course and thereafter began to allow for patentabiliy of computer programs. Then in 1972 the U.S. Supreme Court weighed in on the topic in Gottschalk v. Benson.
Gottschalk v. Benson, 409 US 63 (1972).
In Bensen, the court found a process (including a program) of converting binary-coded decimal (BCD) numerals into pure binary numerals in a general-purpose computer was not patentable. The claims were not limited to any particular (a) art or technology, (b) apparatus or machinery, or (c) end use. The patent sought to cover the claimed method in any general purpose computer of any type.
Parker v. Flook – 437 U.S. 584 (1978).
In Flook, the court rejected a claim of patentability over a process of updating an alarm limit for any process variable in a process comprising the catalytic chemical conversion of hydrocarbons, where the only novel feature was the algorithm or mathematical formula used to calculate the alarm limit.
The identification of a limited category of useful, though conventional, post-solution applications—e.g. a process comprising the catalytic chemical conversion of hydrocarbons— of the mathematical formula did not make the claimed process eligible for patent protection.
In Diehr, the court found that a process of curing synthetic rubber, which employed a formula and a computer to calculate the curing time, was patentable. The process also included installing rubber in a press, closing the mold, constantly determining the temperature of the mold, constantly recalculating the appropriate cure time through the use of the formula and a digital computer, and automatically opening the press at the proper time. The constant monitoring was an improvement over the prior art which had difficulties in determining the appropriate time to open the press due to a problem of accurately measuring internal mold temperature.
The Court stated, “when a claim containing a mathematical formula implements or applies that formula in a structure or process which, when considered as a whole, is performing a function which the patent laws were designed to protect (e. g., transforming or reducing an article to a different state or thing), then the claim satisfies the requirements of 101 [and is patent eligible].”In other words, the application of a law of nature or mathematical formula to a known structure or process may be patent-eligible.
In re Lowry, 32 F. 3d 1579 (Fed. Cir. 1994).
There the Federal Circuit Court of Appeals, the highest appeals court on patent issues other than the Supreme Court, ruled that a computer data structure was patent-eligible. The court determined that the arrangement of data in computer memory was not similar to the arrangement of print words or characters on paper (or another substrate).
Where the printed matter is not functionally related to the substrate, the printed matter will not distinguish the invention from the prior art in terms of patentability. Although the printed matter must be considered, in that situation it may not be entitled to patentable weight.
Therefore, the Board concluded that the claimed arrangement of a data structure was similar to the arrangement of printed matter on a substrate and because printed matter generally did not distinguish the invention from the prior art, then neither would the arrangement of the data structure in a computer memory. The Federal Circuit rejected this view.
The Federal Circuit said that the arrangement of data structures in computer memory should not be treated in the same way as printed matter on a substrate. Therefore a novel data structure could impart patentability to a claimed invention.
The court stated that the printed matter rejections were limited to printed lines or characters, useful and intelligible only to the human mind. The court stated that a computer data structure was not a mere abstraction, but comprised specific electrical or magnetic elements in memory. The court concluded that the data structure enabled more efficient data processing operations and thus perform a function. Therefore the data structure was not subject to a printed matter rejection.
State Street Bank & Trust v. Signature Financial Group, 149 F.3d 1368 (Fed. Cir. 1988).
The court found that a claim to a data processing system for managing a hub and spoke mutual fund system was patentable. The system provided a means for a daily allocation of assets for two or more mutual funds or Spokes that are invested in the same portfolio or Hub. The system determined the percentage share that each Spoke maintains in the Hub, while taking into consideration daily changes both in the value of the Hub’s investment securities and in the concomitant amount of each Spoke’s assets. The complexity of the calculations required that a computer be used to perform the task.
After State Street, it was clear that software and data structures were patentable in the United States.
In re Comiskey, 499 F. 3d 1365 (Fed. Cir. 2007).
The court determined that claims were not patent-eligibile, which were directed to a method of requiring mandatory arbitration for unilateral and contractual documents but did not required the use of a machine such as a computer and did not comprise a process of manufacture or a process for the alteration of a composition of matter.
The court summarized the broadest claims at issue as covering, “in essence ‘conducting arbitration resolution for [a] contested issue’ and ‘determining an award or a decision for the contested issue’ through a predetermined ‘mandatory’ arbitration system, and thus claim the use of mental processes to resolve a legal dispute.” These claims did not (1) require a machine, (2) describe a process of manufacture, or (3) a process for the alteration of a composition of matter.
The court stated, “The routine addition of modern electronics to an otherwise unpatentable invention typically creates a prima facie case of obviousness.” This statement provides a basis to reject patent claims as obvious rather than as not patent-eligible subject matter when the claims simply add electronics to known business processes without more.
In re Bilski, 545 F.3d 943 (Fed. Cir. 2008).
In Bilski the Federal Circuit found patent-ineligible a patent claim directed to a method of hedging risk in the field of commodities trading, which was not limited to use in a computer or in any particular apparatus.
Further looking to the Diehr and Benson Supreme Court cases, the Federal Circuit presented what became known as the machine-or-transformation test, which provided, “claimed process is surely patent-eligible under § 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.” The court noted that inventions satisfying the machine-or-transformation test would not pre-empt substantially all uses of a fundamental principle.
The court also noted that the mere recitation of a specific machine or of a particular transformation of a specific article would not be sufficient to impart patent-eligibility if such machine or transformation was a mere insignificant post-solution activity. The court reviewed prior test for patent-eligibility and determined that the machine-or-transformation was the test for patentability rejecting other tests.
The Federal Circuit’s decision was appealed to the Supreme Court which is discussed next.
The Supreme Court rejected the Federal Circuit machine-or-transformation test as the sole test for patent-eligibility, but instead provided that is may be a useful clue as to patent-eligibility. However, the Court agreed that the Bilski claims were not patent-eligible because they attempted to claim an abstract idea.
The court further stated that section 101 did not categorically exclude business methods from patentability. The Court’s precedents on the unpatentability of abstract ideas show useful tools for providing limiting principles in considering business method patent-eligibility.
Research Corp. Technologies v. Microsoft Corp., 627 F. 3d 859 (Fed. Cir. 2010).
The court stated that the algorithms and formulas incorporated in the claimed methods that control the halftoning, did not bring the claimed invention “even close to abstractness that would override the statutory categories and context.” The court stated that for abstractness to invalidate a claim it must “exhibit itself so manifestly as to override the broad statutory categories of eligible subject matter and the statutory context that directs primary attention on the patentability criteria of the rest of the Patent Act.” The court concluded a process of halftoning in a computer application was patent-eligible.
CyberSource Corp. v. Retail Decisions, Inc., 654 F. 3d 1366 (Fed. Cir. 2011).
The Federal Circuit determined that claims directed to a method and system for detecting fraud in a credit card transaction between a consumer and a merchant over the Internet did not provide patent-eligible subject-matter under section 101. The claims were broad enough to cover any method or system for detecting credit card fraud by correlating Internet addresses—such as an IP address, MAC addresses, e-mail addresses—used with credit card transactions. Claims 2 and 3 were at issue in the case.
The court noted that the claims at issue did not meet the machine or transformation test. The court stated that the “mere collection and organization of data regarding credit card numbers and Internet addresses is insufficient to meet the transformation prong of the test.” Also, the court did not view the fact that the claimed invention would not be possible without the Internet as establishing that the claim was tied to a particular machine. The Internet, as claimed, was merely a data gathering means or source and mere data gathering steps cannot make an otherwise nonpatent-eligible process patent-eligible.
The court continued and determined that the method claim 3, failed to claim patent-eligible subject matter because it was drawn to a unpatentable mental process.
The court noted that the method of claim 3 (1) could be performed in the human mind, or by a human using a pen and paper and (2) was not limited to any particular fraud detection algorithm, and no such algorithm was disclosed in the description in the patent.
The court stated that the incidental use of a computer to perform the mental process does not impose a sufficiently meaningful limit on the claim’s scope. The court also stated that the transformation prong of the machine-or-transformation test is not satisfied by the mere manipulation or reorganization of data. The court also noted that unlike prior cases, the claims here could be performed entirely in a human’s mind. As a result, the court found that claims 2 and 3 were invalid as unpatentable mental processes (i.e. abstract ideas).
Ultramercial v. Hulu and Wildtangent, 657 F.3d 1323 (Fed. Cir. 2011).
The patent at issue claimed a method for distributing copyrighted products over the Internet where a consumer receives a copyrighted product for free after viewing an advertisement. The court stated, “[I]nventions with specific applications or improvements to technologies in the marketplace are not likely to be so abstract that they override the statutory language and framework of the Patent Act.” The court found that the patent sought to fix the problem of declining click-through rates of banner advertising by introducing a method of distribution that caused consumers to view advertisements before granting access to the desired media such as video.
The claim provided a controlled interaction via a website with a customer, and the court found the claim did not comprise only purely mental steps. The court cautioned that not every use of an Internet website in a method will be sufficient alone to find that method patent-eligible.
WildTangent appealed and the U.S. Supreme Court vacated the Federal Circuit’s decision and remanded the case the Federal Circuit to consider in light of Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U. S. ___ (2012). The Federal Circuit has yet to consider this case again after remand. On remand from the Supreme Court, the Federal Circuit again found that the claimed method of monetizing copyrighted content on the Internet was a patent-eligible process. Ultramercial v. Hulu and Wildtangent, Dkt No. 2010-1544 (Fed Cir. 2013).
Dealertrack, Inc. v. Huber, 674 F. 3d 1315 (Fed. Cir. 2012).
The court found the main computer aided method claim was invalid as directed to an abstract idea. The court stated that simply adding a “computer aided” limitation to a claim covering an abstract concept, without more, is insufficient to render the claim patent eligible. The court also noted that the claim did not require a specific application or a particular machine. The court found that directing the claims to use in only car dealership clearing house situations rather than all credit clearinghouse situations did not impart patentabiliy.
Fort Properties, Inc. v. American Master Lease LLC, 671 F. 3d 1317 (Fed. Cir. 2012).
The court found unpatentable as an abstract idea a real estate investment tool designed to enable tax-free exchanges of property which did not require the use of a computer. The claims at issue were directed to a method of creating a real estate investment instrument adapted for performing tax-deferred exchanges. The claims involved these conceptual steps: “aggregating real property into a real estate portfolio, dividing the interests in the portfolio into a number of deedshares, and subjecting those shares to a master agreement.” The court found the fact that the method steps involvement real world items such as real property, deeds, and contracts did not prevent the subject matter claimed from being unpatentably abstract.
Mayo Collaborative v. Prometheus Labs, 132 S. Ct. 1289 (2012).
In Mayo, the U.S. Supreme court found a method of medical treatment not patent-eligibile because it the claims ran afoul of the rule against patenting laws of nature. The claim was directed to a method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder, comprising the steps of (1) administering a drug and (2) determining the 6-MP metabolite levels in the blood. The claim further provided wherein clauses that informed whether the 6-MP metabolite levels were above or below recommended levels such that negative side effects or ineffectiveness, respectively, was likely to result. The court found that the claims at issue impermissibly claimed a law of nature.
The court relied on several prior decisions involving software and business methods in its analysis. It was already known in the medical art that 6-MP metabolite levels was an indicator of the dosing effectiveness of the drug at issue. The claims were directed at a more specific effectiveness range as indicated by the 6-MP metabolite levels. The Court concluded that claims directed to utilization of that more effective range by a treating doctor was an impermissible attempt to claim a law of nature.
The court found that the step of administering the drug simply referred to the relevant audience, e.g. doctors treating with thiopurine drugs. Patentability could not be premised on limiting the method to a particular technological environment.
The court found the determining step told doctors to engage “in well-understood, routine, conventional activity previously engaged in by scientists who work in the field.” The court found that this insignificant conventional pre-solution activity could not transform an unpatentable law of nature into a patent-eligible application of such a law.
Last the court found that the combination of the steps added “nothing to the laws of nature that [was] not already present when the steps are considered separately.” Therefore the court found that steps of the claim insufficient to transform unpatentable correlations into patentable applications of those correlations. Moreover, the court refused to make an exception for narrow laws of nature as opposed to broadly applicable laws of nature.
Alice v. CLS Bank, Dkt. No. 13-298 (June 19, 2014).
The U.S. Supreme Court found not-patent-eligible the method, computer readable medium, and system claims directed to using a computer to mitigate financial settlement risk, i.e., the risk that only one party to an agreed-upon financial exchange will satisfy its obligation. The court found that all of the claims at issue are drawn to “the abstract idea of intermediated settlement, and that merely requiring generic computer implementation fail[ed] to transform the abstract idea into a patent-eligible invention.” The decision continues to allow patent protection for software innovation and technological solutions implemented with software. Read the full analysis here.
While software and business methods are patentable, the boundaries of patent-eligibility are somewhat gray. Determining whether your invention falls within patent-eligibility under section 101 should involve a careful comparison of the features of your invention to the inventions claimed in the relevant cases above.

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