Source: http://smiplaw.wordpress.com/category/patents/invalidity/patentability/
Timestamp: 2014-04-24 09:45:46
Document Index: 565322761

Matched Legal Cases: ['§ 101', '§ 101', '§ 101', '§ 101', '§ 101', '§101', '§101', '§101', 'Application No. 08', '§101', '§101', '§101', '§101', '§101', '§101', '§101', '§101', '§101', '§101', '§101', '§101']

Patentability | Stein McEwen Blawg
Posted on April 20, 2012 by mstein03	Reply	By Zi Wang
In Fort Properties, Inc. v. American Master Lease LLC, 2012 WL 603969 (Fed. Cir. 2012), the Federal Circuit affirmed the district court’s holding that a method patent for creating real estate investment instrument adapted for performing tax-deferred exchanges is invalid because it is directed at an unpatentable abstract idea, even though the claim language of the patent at issue recited a computer in certain operations.
American Master Lease LLC (“AML”) holds the ‘788 patent at issue. The ‘788 patent discloses an investment tool designed to enable property owners to buy and sell properties without incurring tax liability pursuant to a tax law provision that exempts certain investment property exchanges when an owner of investment property exchanges one property for another of like kind and certain conditions are met.
Specifically, the claims require the aggregation of a number of properties into a “real estate portfolio.” The property interests in this portfolio are then divided into shares, called “deedshares”, and are sold to investors much in the same way that a company sells stock. Each deedshare can be encumbered by its own mortgage debt, which provides flexibility to real estate investors attempting to structure their debts in a way that complies with the exemption provision of tax law.
All claims in the ‘788 patent are method claims. Claim 1 discloses:
encumbering the property in the real estate portfolio with a master agreements; and
Two of the other independent claims, claims 22 and 32, are nearly identical to claim 1—though claim 32 contains an additional limitation requiring a computer to “generate a plurality of deedshares.” The only other independent claim, claim 11, discloses a method of transferring ownership of deedshares in a manner consistent with the tax law provision discussed above.
Fort Properties, Inc. brought action against AML and moved for summary judgment of invalidity in the district court. The district court invalidated all claims in the ‘788 patent for failing to claim patent-eligible subject matter under 35 U.S.C. § 101. In reaching its decision, the district court relied on In re Bilski, 545 F.3d 943 (Fed. Cir. 2008) and applied the machine-or-transformation test. The court held that the patent failed both prongs of the test and accordingly invalidated the whole patent. AML appealed the decision to the Federal Circuit.
In its opinion, The Federal Circuit cited to four seminal Supreme Court cases that deal with the question of when an invention qualifies as a patent-eligible process as opposed to an abstract idea, namely, Bilski v. Kappos, 130 S.Ct. 3218 (2010); Diamond v. Diehr, 450 U.S. 175 (1985); Parker v. Flook, 437 U.S. 584 (1978); and Gottschalk v. Benson, 409 U.S. 63 (1972). The Federal Circuit analogized the invention in the ‘788 patent to the invention in Bilski, which is an investment tool not requiring the use of a computer.
AML argued that claims 1-31 constitute a patentable process and not an abstract idea because they require a series of steps to take place in the real world that involve real property, deeds, and contracts. More specifically, AML contended that the deeds remove the invention from the realm of the abstract because they are physical legal documents signifying real property ownership. Fort Properties, on the other hand, argued that the claimed method of aggregating property, making it subject to an agreement, and then issuing ownership interests to multiple parties consists entirely of mental processes and abstract intellectual concepts. Fort Properties pointed out that the Bilski invention’s intertwinement with deeds, contracts, and real property does not transform the abstract method into a patentable process.
The Federal Circuit sided with Fort Properties and drew extensive similarities between the invention at issue and the Bilski invention. The Federal Circuit further stated that its reasoning is in accord with its own precedent in In re Comiskey, 554 F.3d 967 (Fed. Cir. 2009), and in In re Schrader, 22 F.3d 290 (Fed. Cir. 1994).
The court then turned to the question of how claim limitations involving computers apply in the § 101 analysis. The court relied on three of its own 2011 and 2012 cases: Cybersource v. Retail Decisions, Inc., 654 F.3d 1366 (Fed. Cir. 2011); Ultramercial, LLC v. Hulu, LLC, 657 F.3d 1323 (Fed. Cir. 2011); and Dealertrack, Inc. v. Huber, 2012 WL 164439 (Fed. Cir. 2012). The court opined that the basic character of a process claim drawn to an abstract idea is not changed by claiming only its performance by computers, or by claiming the process embodied in program instructions on a computer readable medium. Instead, to impart patent-eligibility to an otherwise unpatentable process under the theory that the process is linked to a machine, the use of the machine must impose meaningful limits on the claim’s scope. As a positive example, the court pointed to the claimed invention in Ultramercial, which “required intricate and complex computer programming” and “specific application to the Internet and a cybermarket environment.” The addition of the computer to the claims was not merely insignificant post-solution activity; rather, the invention
itself involved “advances in computer technology,” and it was thus sufficient to qualify the claims for patent eligibility under § 101.
The court then held that the computer limitation in the patent at issue is akin to that in Dealertrack, and does not play a significant part in permitting the claimed method to be performed. The computer limitation here is a broad and general limitation that does not impose meaningful limits on the claim’s scope. AML simply added a computer limitation to claims covering an abstract concept—that is, the computer limitation is simply insignificant post-solution activity. Therefore the computer limitation cannot impart patent-eligiblity here.
In this case the Federal Circuit once again took on the task of drawing the line between patentable process claims and patent-ineligible abstract ideas after Supreme Court’s Bilski v. Kappos decision. Together with patents in Cybersource and Dealertrack, the patent in the present case was struck down for covering unpatentable abstract ideas, recitation to computers notwithstanding. In the most likely scenario, method patent claims that are otherwise unpatentable under § 101 will not be upheld by the court if the recitation to a computer is simply post-solution activity. To put it in another way, if a computer merely facilitates practice of an invention, rather than enables it, the recitation to a computer in patent claims is superfluous for § 101 purposes. On the other hand, if an invention has a complicated-enough interface with computerization that it can be described as an advance in computer technology, then Ultramercial should control and it is possible for the patent to be upheld.
Posted in Patentability, Patents, Statutory Subject Matter	| Leave a reply
Supreme Court Confirms Broad Standard for Patentability
Posted on June 6, 2010 by SteinMcewen, LLP	Reply	Supreme Court Rejects Precluding Business Method from Patentability
In Bilski et al. v. Kappos, 561 U.S. ____ (2010) June 29th, 2010, appellant, Bernard L. Bilski seeks a patent on a procedure for instructing buyers and sellers on protection against price fluctuations in a certain subsection of the economy. The application consisted of two key claims: the description of a series of steps instructing how to hedge risk; and reducing the procedure to a mathematical formula.
The application was rejected by the examiner, the Board of Patent Appeals and Interferences, and the United States Court of Appeals for the Federal Circuit. The Court of Appeals used the “machine or transformation test” as the sole test for section 101 of the Patent Act analysis in rejecting the application. It stated that, “a 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.” In re Bilski, 545 F. 3d 943, 954.
The Supreme Court said the Court of Appeals incorrectly used “machine or transformation” test as the sole test for section 101. Relying on a series of past Court precedent, the court held that the “machine or transformative test is a useful tool, but not the sole test for deciding patent eligibility. The Court was also concerned that a strict reliance on this test would “create uncertainty as to the patentability of software, advanced diagnostic medicine techniques, and inventions based on linear programming, data compression, and the manipulation of digital signals.” Bilski, 561 U.S.______ (2010).
The Court also looked at the language of 35 U.S.C. 273, in particular the phrase, “a method in [a] patent.” From this language, and interpretation of case history, the court stated that there are at least some circumstances where a business method may be eligible for patenting under 101. The Court however warned that a high standard needed to be set when dealing with such applications, in order to have the proper balance between flooding patent examiners and courts with frivolous applications, and protecting valid applications. Unfortunately, the Court declined to delineate the balance.
After stating that Bilski’s application was not necessarily outside the principles stated above, the Court then held that the application was not patentable because all that was being claimed were two things: the concept of hedging, which is well-known, and an algorithm, which is an abstract idea.
Filing a patent application for an algorithm alone is not valid, as the Court showed in case precedent. In Benson, 409 U.S., at 64-67, the Court held that an algorithm to convert binary-coded decimal numerals into binary was not a process, but an unpatentable abstract idea. Building on this, in Flook, 437 U.S., there was an application for a procedure to monitor conditions during the catalytic conversion process in the petrochemical and oil-refining industries. Note that the catalytic conversion process was well known in the industry. The only innovation here was the mathematical algorithm describing the procedure. The Court held because the key mathematical algorithm “was assumed to be within the prior art, the application, considered as a whole, contained no patentable invention.” Id., at 594.
The Court differentiated those two rejections with the different result held in Diehr, 450 U.S. Here, an application was filed for a previously unknown way of curing synthetic rubber into new products using a mathematical formula to complete some of its several steps by way of a computer. Diehr, 450 U.S. at 177. That court found that the patent in Diehr was for an application of a law of nature or mathematical formula, not a patent for the mathematical formula itself.
“Hedging is a fundamental economic practice long prevalent in our system of commerce and taught in any introductory finance class.” D. Chorafas, Introduction to Derivative Financial Instruments 75-94 (2008). Because hedging is essentially prior art, the only thing trying to be patented in the case at bar is the algorithm, which is just an abstract idea.
Stevens Concurrence
Justice Stevens presented the case as one key issue: “whether the machine or transformation test is the exclusive test for what constitutes a patentable “process” under 35 U.S.C. 101.” While Stevens agrees that the machine or transformation test is not the sole test, he diverges from the majority by saying that Bilski’s application is not a “process” because it describes only a general method of engaging in business transaction, which isn’t patentable.
Stevens believes that although the majority came to the correct conclusion, their process of reasoning was incorrect. He thinks that the majority incorrectly narrowed Bilski’s claims to hedging, and then came to the conclusion that the claims were abstract ideas. Stevens believes that it would be more accurate to say that the hedging is a term that describes a “category of processes.”
Steven’s first argument is textual. He first attempts to define a “process.” He rejects the lay meaning of the word “process” in the context of patents. Instead, Stevens starts by looking at terms adjacent to “process” in 101. He concludes from the placement of words that a patentable “process” was not likely meant to cover any series of steps.
Next, Stevens sets up the groundwork to his conclusion by making a grand appeal to the entire history of patents. The result of much of the history was enshrined into the Patent Act of 1952. He notes that in pre-Colonial times that one can infer from the Statute of Monopolies that patents on business methods didn’t qualify with the very narrow exception of discoveries that were considered “state privileges.” Then, at the time of the crafting of the Constitution, he notes that the Founders gave Congress the power to “promote the Progress of… useful arts.” He then tries to give another textual analysis of the term “art.” Oddly enough, while Stevens rejected using the lay meaning of the term “process,” he references Webster’s first dictionary for authority on the term “art.” From this, he assumes that the “useful arts” at the time were the technological arts and not the business and finance fields.
Stevens then looks through cases for the next 160 years after the country’s founding, and notes that courts consistently rejected patents on methods of doing business.
Looking into the 20th century, he notes that courts began using the terms “art,” “method,” “process,” and “system” interchangeably. By 1952, Congress changed the operative language in 101 of the Patent Act, replacing the word “art” with “process.” However, he notes that the intent of the court had never changed; arts still excluded methods of doing business. Then, from looking at the Committee Reports, Stevens comes to the conclusion that the Act of 1952 codified the generally understood practice that business practices were to remain not patentable.
As we looked to the end of the 20th century, Stevens notes a federal court decision implying that business methods could be patented. State Street, 149 F. 3d 1368. Congress then passed the Act of 1999, which included 35 U.S.C. 273, which expanded defenses to patent infringement claims for “method[s] of doing or conducting business. Thus, it appears that Congress’s intent was to reinforce the Act of 1952’s limitation of patents on business methods.
Stevens then makes more practical concerns about business methods patents. He notes that the lack of patent protection for business methods hasn’t stifled innovation in that area; companies will always be trying to develop business methods to one-up their competition. Furthermore, giving patent protection in that area would lead to businesses to over obsess over litigation. After all, “if business methods could be patented, then many business decisions, no matter how small, could be potential patent violations.” Long, Information Costs in Patent and Copyright, 90 Va. L. Rev. 465, 487-488 (2004).
By the end, Stevens says that “in the absence of clear guidance from Congress, we only have limited textual, historical, and functional clues on which to rely. Those clues all point toward the same conclusion: that petitioners’ claim is not a “process” within the meaning of 101 because methods of doing business are not, themselves, covered by the statute.”
While the issuance of the Bilski et al. v. Kappos, the resulting decision has done little to add certainty to the true definition of what constitutes a patentable process under 35 U.S.C. §101. At the very least, the Supreme Court has confirmed that 35 U.S.C. §101 has broadly defined patentable subject matter, and is limited only when the invention is too abstract. In applying this abstractness test in the context of a process, 35 U.S.C. §101 encompasses at least those processes which are tied to a machine or transform data. Thus, while the Supreme Court has indicated that the test is broader than this specific test, the lack of guidance as to what constitutes an abstract versus non-abstract invention means that applicants should ensure that their claims and specifications meet the machine or transformation test by setting for specific machinery being used in the processes or how a transformation between states is being achieved.
Posted in Patentability, Patents	| Leave a reply
Federal Circuit Limits Which Methods Can be Patented
Posted on December 5, 2008 by SteinMcewen, LLP	Reply	In En Banc Ruling, Federal Circuit Requires Methods to Comply with Machine-or-Transformation Test
In In re Bilski, 545 F.3d 943, 88 USPQ2d 1385 (Fed. Cir. 2008), the Federal Circuit upheld the final decision of the Board of Patent Appeals and Interferences (hereinafter, “the Board”) in rejecting all eleven claims of U.S. Patent Application No. 08/833,892 (hereinafter, “the ‘892 application”). As will be explained below, the Federal Circuit held that, for purposes of defining patentable subject matter for method claims, claims must meet the “machine-or-transformation” test for subject matter eligibility and expressly rejected the “useful, concrete, and tangible result” test spelled out in State Street Bank & Trust Company v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998).
As background, Bernard L. Bilski and Rand A. Warsaw (hereinafter, “the Applicants”) filed the ‘892 application on April 10, 1997. Claim 1 of the ‘892 application reads:
That is, taking claim 1 as representative, the ‘892 application claims a method of hedging risk in commodities trading. During prosecution, the Examiner ultimately rejected claims 1-11 under 35 U.S.C. §101 because “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.” On appeal, the Board affirmed the rejection of claims 1-11, while also holding that the Examiner erred in requiring implementation on a specific apparatus. That is, the claims may still be statutory if “there is a transformation of physical subject matter from one state to another.”
In response, the Applicants appealed to the Federal Circuit on the question of whether the claims are drawn to statutory subject matter under 35 U.S.C. §101. The Federal Circuit decided sua sponte to hear the case en banc in order to decide a standard to determine whether a given claim recites a “new and useful” process so as to be statutory subject matter under 35 U.S.C. §101.
The Federal Circuit noted that 35 U.S.C. §101 reads as follows:
While recognizing that the term “process” has a broad ordinary meaning which the claims otherwise would meet, the Federal Circuit held that the Supreme Court has more narrowly defined the term “process.” Specifically, the Federal Circuit found that the Supreme Court has already established that a process claim is not statutory if it claims “laws of nature, natural phenomena, [or] abstract ideas,” Diamond v. Diehr, 450 U.S. 175, 185 (1981). Diehr emphasized a pre-emption test that held a process claim unpatentable if the effect of allowing it would allow the patentee to pre-empt substantially all uses of that fundamental principle. The Federal Circuit noted that Diamond relied upon an earlier Supreme Court case, Gottschalk v. Benson, 409 U.S. 63, 70 (1972) for the proposition that processes drawn only to a fundamental principle are not patentable as fundamental principles are exclusive to no one. Thus, the Federal Circuit found that patentability of process claims under 35 U.S.C. §101 was dependant on whether the ‘892 claims recite a fundamental principle and, if so, whether they would pre-empt substantially all uses of that fundamental principle if allowed. In so doing, the Federal Circuit definitively articulated a standard of review to determine whether a process claim pre-empts all uses of a fundamental principle in contravention of 35 U.S.C. §101.
In order to determine this standard, the Federal Circuit contrasted Diehr and Benson. The Federal Circuit noted that the Supreme Court held in Diehr that an automated process of curing rubber using an algorithm was patentable as it did not preempt all uses of that particular algorithm since the claim was tied to a specific application and process and could be used for other substances or with other process steps. In contrast, in Benson, a binary conversion technique using an algorithm could only be used on a computer and therefore allowing the claimed process would preempt all uses of that algorithm. Thus, the Federal Circuit held that the Supreme Court requires that, for a process to be patentable, the process must be directed to an application of a principle, but cannot be directed to all applications of the principle which would pre-empt substantially all uses of the principle.
The Federal Circuit further found that the Supreme Court, in Parker v. Flook, 437 U.S. 584, 589 n. 9 (1978), additionally held that processes which are tied to a particular apparatus are also patentable since it does not preempt substantially all uses of the principle behind the claimed process.
After reviewing these cases, the Federal Circuit held that such a test had been collectively articulated by the Supreme Court in Benson, 409 U.S. at 70, Diehr, 450 U.S. at 192, and Parker, 437 U.S. at 589 n. 9. The Federal Circuit named this test the machine-or-transformation test, which is as follows:
“A 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 Federal Circuit, in explaining the machine-or-transformation test, noted two corollaries to the test. For the first corollary, the Federal Circuit explained that field of use limitations did not render non-statutory process claims statutory. Specifically, the Federal Circuit noted that the Supreme Court in Diehr found that patent ineligibility “cannot be circumvented by attempting to limit the use of the formula to a particular technological environment.” Diehr, 450 U.S. at 191-92. While recognizing that there is tension between preemption and whether a field of use limitation provides sufficient limitation to be compliant with 35 U.S.C. §101, the Federal Circuit found that such field of use limitations are not effective in limiting claims to a particular application of a fundamental principle. Specifically, the Federal Circuit held that “[p]re-emption of all uses of a fundamental principle in all fields and pre-emption of all uses of the principle in only one field both indicate that the claim is not limited to a particular application of the principle.” As such, field of use limitations still retain the characteristic of improper claiming of a fundamental principle and do not convert an unpatentable process into a patentable process.
For the second corollary, the Federal Circuit stated that insignificant post-solution activity does not render a non-statutory process claim compliant with 35 U.S.C. §101. Diehr at 191-92. The Federal Circuit thus stated that even in situations where a process is nominally tied to a specific machine or transformation, if such a tie is insignificant, the process remains non-statutory.
Relying on this analysis, the Federal Circuit held that whether a process is statutory is now exclusively determined by the machine-or-transformation test, and found that its prior tests were incorrect. Thus, in addition to establishing the machine-or-transformation test, the Federal Circuit dismissed its prior tests: the Walter-Abele test and the State Street test.
Specifically, the Federal Circuit found that the Walter-Abele test has two steps: (1) determining whether a claim recites an algorithm, then (2) determining whether the algorithm is applied in any manner to physical elements or process steps. In re Walter, 618 F.2d 758 (CCPA 1980) and In re Abele, 684 F.2d 902 (CCPA 1982). Citing other cases that had already recognized a claim’s patentability despite failing that test (In re Grams, 888 F.2d 835 (Fed. Cir. 1989)), the Federal Circuit held the Walter-Abele test inadequate.
Under State Street, a method claim is found patentable if it produces a “useful, concrete, and tangible result.” While recognizing that this test may provide guidance in determining whether a claim is drawn to a fundamental principle or a practical application thereof, the Federal Circuit unequivocally found this test to be “insufficient,” “inadequate,” and “never intended to supplant the Supreme Court’s test” (i.e., the machine-or-transformation test). However, the court did evoke State Street’s rejection of categorical exclusions beyond fundamental principles to reaffirm that all process claims (including business method claims) are subject to the same legal requirements (i.e., the machine-or-transformation test), and specifically declined, in footnote 23, to extend such a categorical exclusion to software claims.
In applying the machine-or-transformation test to claim 1 at issue, rather than provide guidance, the Federal Circuit noted that there was no machine at issue and claim 1 did not attempt to be tied to a particular machine. Instead, the Federal Circuit specifically held that they “leave to future cases the elaboration of the precise contours of machine implementation, as well as the answers to particular questions, such as whether or when recitation of a computer suffices to tie a process claim to a particular machine.” Thus, as claim 1 was not tied to a machine, it could only be patentable if the recited process was compliant with the transformation prong of the machine-or-transformation test.
In applying the transformation prong, the Federal Circuit addressed the types of things that constitute an “article” such that their transformation is sufficient to be compliant with 35 U.S.C. §101. The Federal Circuit held that chemicals and physical objects and substances are articles for purposes of the machine-or-transformation test. On the more difficult questions of electronic signals and electronically-manipulated data, the court turned to prior case law to convey some benchmarks.
The Federal Circuit began by noting that electronic signals and electronically-manipulated data are the “raw material-age processes.” Thus, data and signals can be transformed by a process for purposes of statutory process claims. Specifically, where a claim does not specify a particular type or nature of data, or how or from where the data is obtained, such data is not an article for purposes of transformation. Abele, 684 F.2d at 909. However, where data clearly represents physical and tangible objects (for example, X-ray attenuation data represents the structure of bones, organs, and other body tissues), the data is an article. Id. at 908-909. Accordingly, an electronic transformation of said data into a visual form does constitute a transformation and there is no requirement that the underlying physical objects be transformed.
In contrast, a data-gathering step added to an algorithm does not convert that algorithm into a patent eligible process. In re Grams, 888 F.2d 835, 840 (Fed. Cir. 1989). That is, gathering data (for example, by performing a clinical test) does not constitute a transformation of an article. Moreover, such operations may be inherently required in the recited process such that the extra step does not restrict the scope of the claim and preempts substantially all uses of the fundamental principle of the recited algorithm. The court, though, did indicate that by specifying how the data is gathered or on what medium data is recorded after a process is performed on the gathered information, some relevance may be imputed onto such data gathering or recording such that it is not an insignificant extra-solution activity.
On the facts of the case at hand, the court dismissed the Applicants’ reliance on the State Street test, and asserted the machine-or-transformation test as exclusively dispositive. Applying this test, the court holds that the ‘892 application seeks to “claim a non-transformative process that encompasses a purely mental process of performing requisite mathematical calculations without the aid of a computer or any other device, mentally identifying those transactions that the calculations have revealed would hedge each other’s risks, and performing the post-solution step of consummating those transactions” (emphasis added). Thus, because the claimed process does not involve transforming an article into a different state or thing and, as admitted by the Applicants, does not involve a machine implementation, the ‘892 claims are not drawn to patent-eligible subject matter under 35 U.S.C. §101.
Bilksi represents a significant retrenchment of the prior interpretations as to the scope of patentable inventions under 35 U.S.C. §101. While the decision itself focused on preventing pure business methods from qualifying as patentable subject matter and even specifically noted that software patents themselves are not categorically unpatentable, it is very likely that this analysis will be broadly used by the United States Patent and Trademark Office to reject method claims involving software. That being said, the decision is limited to method claims, and does not affect apparatus or recording medium claims. Moreover, of significance for software method claims, Bilksi specifically noted that certain types of data transformation methods are patentable, as well as methods which are tied to a particular machine in more than a nominal way. As such, while it is likely that Examiners will aggressively apply Bilksi against all kinds of method claims, the extent to which Bilksi will represent a long-term hurdle to patenting non-business-method inventions has yet to be seen.