Court Opinion

ID: 209376
Source: CourtListenerOpinion
Date Created: 2011-03-13 07:34:03+00
Date Added: 2024-06-11T17:27:55.978705
License: Public Domain

United States Court of Appeals for the Federal Circuit

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

                           IN RE STEPHEN W. COMISKEY

       Thomas J. Scott, Jr., Hunton & Williams LLP, of Washington, DC, argued for
appellant. With him on the brief was Robert L. Kinder. Of counsel was Yisum Song.

       Raymond T. Chen, Associate Solicitor, United States Patent and Trademark
Office, of Arlington, Virginia, argued for the Director of the United States Patent and
Trademark Office. With him on the brief was Thomas W. Krause, Associate Solicitor.

Appealed from:      United States Patent and Trademark Office
                    Board of Patent Appeals and Interferences
 United States Court of Appeals for the Federal Circuit

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

                            IN RE STEPHEN W. COMISKEY

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

                            ___________________________

                              DECIDED: January 13, 2009
                            ___________________________

Before MICHEL, Chief Judge, DYK and PROST, Circuit Judges.

DYK, Circuit Judge.

       Acting en banc, the court today vacated the September 20, 2007, judgment in

this case, and the panel’s original opinion, which is reported at 499 F.3d 1365 (Fed. Cir.

2007), was withdrawn.     The en banc court reassigned the opinion to the panel for

revision. The panel’s original opinion is revised as follows:

       Appellant Stephen W. Comiskey (“Comiskey”) appeals the decision of the Board

of Patent Appeals and Interferences (“Board”) affirming the examiner’s rejection of

claims 1-59 of his patent application as obvious in view of the prior art and therefore

unpatentable under 35 U.S.C. § 103.         We do not reach the Board’s obviousness

rejection of the independent claims under § 103.           We conclude that Comiskey’s

independent claims 1 and 32 and most of their dependent claims are unpatentable
subject matter under 35 U.S.C. § 101. With respect to independent claims 17 and 46

(and dependent claims 18-29, 31, 47-57, and 59) and dependent claims 15, 30, 44, and

58, we remand to the PTO to consider the § 101 question in the first instance. We

therefore affirm-in-part, vacate-in-part, and remand.

                                         BACKGROUND

                                               I

       Comiskey’s patent application No. 09/461,742 claims a method and system for

mandatory arbitration involving legal documents, such as wills or contracts. According

to the application, the claimed “program . . . requires resolution by binding arbitration of

any challenge or complaint concerning any unilateral document . . . [or] contractual

document.”

       Independent claim 1 recites a “method for mandatory arbitration resolution

regarding one or more unilateral documents” involving the following steps. First, the

unilateral document and its author are enrolled.          Second, arbitration language is

incorporated in the unilateral document requiring that any contested issue related to the

document be presented to the pre-chosen arbitration program for binding arbitration.

Third, the method “requir[es] a complainant [sic] to submit a request for arbitration

resolution.”   Fourth, the method conducts arbitration resolution.         Fifth, the method

provides “support to the arbitration.”     Finally, the method determines “an award or

decision . . . [that] is final and binding.” 1 Independent claim 32 is practically identical to

       1
               Claim 1 states in full:

       A method for mandatory arbitration resolution regarding one or more
       unilateral documents comprising the steps of:

2006-1286                                     2
claim 1, except that it refers to contractual documents rather than unilateral

documents. 2 Although the application’s written description references “an automated

system and method for requiring resolution through binding arbitration” and “a

mandatory arbitration system through a computer on a network,” claims 1 and 32 do not

      enrolling a person and one or more unilateral documents associated with
      the person in a mandatory arbitration system at a time prior to or as of the
      time of creation of or execution of the one or more unilateral documents;

      incorporating arbitration language, that is specific to the enrolled person,
      in the previously enrolled unilateral document wherein the arbitration
      language provides that any contested issue related to the unilateral
      document must be presented to the mandatory arbitration system, in
      which the person and the one or more unilateral documents are enrolled,
      for binding arbitration wherein the contested issue comprises one or more
      of a challenge to the documents, interpretation of the documents,
      interpretation or application of terms of the documents and execution of
      the documents or terms of the documents;

      requiring a complainant to submit a request for arbitration resolution to the
      mandatory arbitration system wherein the request is directed to the
      contested issue related to the unilateral document containing the
      arbitration language;

      conducting arbitration resolution for the contested issue related to the
      unilateral document in response to the request for arbitration resolution;

      providing support to the arbitration resolution; and

      determining an award or a decision for the contested issue related to the
      unilateral document in accordance with the incorporated arbitration
      language, wherein the award or the decision is final and binding with
      respect to the complainant.
      2
              In addition, Claim 32 notes that the inserted arbitration language would
cover a challenge to the contractual document “by any party to the Contract or by any
alleged third party beneficiary of the Contract.” It also notes that the party submitting a
request for arbitration resolution could be “a party to the Contractual document [or] a
party so designated in the contractual document.”

2006-1286                                   3
reference, and the parties agree that these claims do not require, the use of a

mechanical device such as a computer.

       Independent claim 17 recites a “system for mandatory arbitration resolution

regarding one or more unilateral documents.” It includes the following limitations: (1) “a

registration module” to register the unilateral document and its executor; (2) “an

arbitration module” for incorporating arbitration language that requires any contested

issue related to the unilateral document be presented to the system; (3) “an arbitration

resolution module” that requires “a complainant to submit a request for arbitration

resolution”; and (4) “a means for selecting an arbitrator from an arbitrator database” and

“providing support to the arbitrator . . . where the arbitrator determines an award or a

decision . . . [that] is final and binding.” 3 Independent claim 46 is practically identical to

       3
              Claim 17 states in full:

       A system for mandatory arbitration resolution regarding one or more
       unilateral documents comprising:

       a registration module for enrolling a person who is executing and one or
       more unilateral documents associated with the person in a mandatory
       arbitration system at a time prior to or as of the time of creation of or
       execution of the one or more unilateral documents;

       an arbitration module for incorporating arbitration language, that is specific
       to the enrolled person, in the previously enrolled unilateral document
       wherein the arbitration language provides that any contested issue related
       to the unilateral document must be presented to the mandatory arbitration
       system, in which the person and the one or more unilateral documents are
       enrolled, for binding arbitration wherein the contested issue comprises one
       or more of a challenge to the documents, interpretation of the documents,
       interpretation or application of terms of the documents and execution of
       the documents or terms of the documents; and for providing this
       arbitration language to the enrolled person;

2006-1286                                     4
claim 17, except that it refers to contractual documents rather than unilateral

documents. 4 Four dependent claims (claims 15, 30, 44, and 58) also explicitly require

use of a computer or other machine. Each states, in full: “[t]he method[/system] of claim

[1, 17, 32, or 46] wherein access to the mandatory arbitration is established through the

Internet, intranet, World Wide Web, software applications, telephone, television, cable,

video [or radio], magnetic, electronic communication, or other communication means.”

                                            II

      Comiskey filed his patent application with the United States Patent and

Trademark Office (“PTO”) on December 16, 1999. On March 28, 2001, the examiner

issued a first office action rejecting claims 1-9, 11-24, 26-38, 40-52, and 54-59 under 35

U.S.C. § 103(a) as unpatentable over Ginter, U.S. Patent No. 6,185,683 (’683 patent),

in view of Perry, U.S. Patent No. 5,241,466 (’466 patent), and Walker, U.S. Patent No.

5,794,207 (’207 patent). Ginter discloses an electronic system for securely delivering

documents from the sender to the recipient through the electronic equivalent of a

      an arbitration resolution module for requiring a complainant to submit a
      request for arbitration resolution to the mandatory arbitration system
      wherein the request is directed to the contested issue related to the
      unilateral document containing the arbitration language; and

      a means for selecting an arbitrator from an arbitrator database to conduct
      an arbitration resolution for the contested issue related to the unilateral
      document in response to the request for arbitration resolution, for
      providing support to the arbitrator, and where the arbitrator determines an
      award or a decision for the contested issue related to the unilateral
      document in accordance with the incorporated arbitration language,
      wherein the award or the decision is final and binding with respect to the
      complainant.
      4
             Claim 46 also notes that the party submitting a request for arbitration may
be “a party to the contractual document [or] a party so designated in the contractual
document.”

2006-1286                                   5
“personal document carrier” that can validate transactions as well as actively participate

in the transaction by, among other things, providing arbitration. ’683 patent “Abstract.”

Walker discloses an electronic system that allows buyers to submit binding purchase

offers and sellers to create contracts by accepting a purchase offer on its terms. It also

teaches the inclusion of language in the purchase offers “requiring that both parties

submit to binding arbitration of all disputes” and suggests that a “central

controller . . . can support the arbitration process by providing an arbiter for each

dispute.” ’207 patent col.30 ll.47-54. Perry discloses an electronic central depository

for secure storage and rapid retrieval of unilateral documents such as wills.         The

examiner also found claims 10, 25, 39, and 53 (which added the additional limitation of

displaying an “arbitration schedule”) unpatentable over Ginter in view of a document

entitled “Arbitration Fee Schedule.” The examiner’s final office action on May 30, 2001,

provided the same basis for rejection.

      Comiskey filed an amendment after final rejection on August 29, 2001, “to more

distinctly claim and particularly point out” the aspects of his invention that he believed

were novel, namely pre-enrolling the person in a mandatory arbitration system,

including language in the document requiring submission of disputes to this pre-chosen

system, and enabling a person to submit a dispute pertaining to the document to this

pre-chosen system for binding arbitration. On December 31, 2001, the examiner mailed

a final rejection of the amended claims, which rejected the claims on the same basis.

After Comiskey filed a request for continued examination, the finality of the prior office

action was withdrawn, and the examiner mailed another non-final rejection on July 9,

2002, based again on the same grounds.            In response, Comiskey submitted a

2006-1286                                   6
“declaration of long felt need” on October 1, 2002, claiming that based on his

experience representing clients involved in family disputes concerning unilateral

documents, he believed his invention addressed an area of long felt need.           On

November 6, 2002, the examiner mailed a final rejection based on the same reasons as

the prior office actions and rejected Comiskey’s assertion of long felt need on the

ground that the cited prior art references had recognized and addressed the problem

prior to Comiskey.

      Comiskey appealed, and on November 30, 2005, the Board affirmed the

examiner’s rejection. The Board concluded that because all of the independent claims

were argued together they stood or fell together, and it chose claim 32 as

representative. It concluded that the combination of Ginter and Walker rendered this

claim obvious.   Despite concluding that all of the independent claims stood or fell

together, the Board proceeded to consider claims 1 and 17, directed to unilateral

documents, separately. It concluded that the addition of Perry to Ginter and Walker

rendered these claims obvious.      Finally, the Board considered and affirmed the

examiner’s rejection of claims 10, 25, 39, and 53 as obvious in light of Ginter, Perry,

Walker, and the “Arbitration Fee Schedule.”

      Comiskey timely appealed to this court. We have jurisdiction under 28 U.S.C.

§ 1295(a)(4)(A) (2000).   After oral argument, we requested supplemental briefing

directed at the patentability of the subject matter of Comiskey’s application under 35

U.S.C. § 101. In the supplemental briefing, Comiskey argued for the first time that we

lacked the power to consider a ground for rejection not relied on below. Alternatively,

Comiskey argued that his application was patentable under § 101, and that the subject

2006-1286                                 7
matter of his application did not fall within an exception to patentability, such as an

abstract idea, natural phenomena, or law of nature.

       The PTO urged that this court could properly consider the § 101 issue. Indeed,

the PTO urged that this court resolve the case on this ground to “give the Office needed

guidance in this area.”     PTO Supp. Br. 15.         The PTO argued that Comiskey’s

independent claims were directed at an unpatentable abstract idea, and not a

patentable process, because they neither were tied to a particular machine nor operated

to change materials to a different state or thing.      Rather the claims impermissibly

“encompasse[d] a method of controlling how humans interact with each other to resolve

a dispute, based on a human arbitrator’s perception of the dispute.” PTO Supp. Br. 12.

                                      DISCUSSION

       We do not reach the ground relied on by the Board below—that the claims were

unpatentable as obvious over Ginter in view of Walker, Perry, and “Arbitration Fee

Schedule”—because we conclude that many of the claims are “barred at the threshold

by § 101.” Diamond v. Diehr, 450 U.S. 175, 188 (1981). It is well-established that “[t]he

first door which must be opened on the difficult path to patentability is § 101.” State St.

Bank & Trust Co. v. Signature Fin. Group, Inc., 149 F.3d 1368, 1372 n.2 (Fed. Cir.

1998) (quoting In re Bergy, 596 F.2d 952, 960 (CCPA 1979)). Only if the requirements

of § 101 are satisfied is the inventor “allowed to pass through to” the other requirements

for patentability, such as novelty under § 102 and, of pertinence to this case, non-

obviousness under § 103. See id. As the Supreme Court stated in Parker v. Flook,

“[t]he obligation to determine what type of discovery is sought to be patented [so as to

determine whether it is “the kind of ‘discoveries’ that the statute was enacted to protect”]

2006-1286                                    8
must precede the determination of whether that discovery is, in fact, new or obvious.”

437 U.S. 584, 593 (1978) (emphases added).

      The PTO acknowledges that the examiner, consistent with his obligation under

the cases, must have addressed the predicate issue of patentable subject matter and

implicitly concluded that the claims met the requirements of § 101. See Oral Arg. Tr.

18:40. For the reasons discussed below, we disagree that § 101 is satisfied. See also

Manual of Patent Examining Procedures (“MPEP”) § 2106 “Guidelines Flowchart” (Rev.

5, Aug. 2006) (listing the steps an examiner should follow in determining patentability,

with “determine whether the claimed invention complies with . . . 101” listed before

“determine whether the claimed invention complies with 35 U.S.C. 102 and 103”).

                                            I

      We first address Comiskey’s argument that we cannot properly address the issue

of patentable subject matter. At oral argument, Comiskey admitted that the court “could

affirm on [the § 101] ground if in fact [we] came to the conclusion that . . . the subject

matter of this claim does not address the statutory subject matter.” In his supplemental

briefing, Comiskey attempts to “withdraw[] any statement made at oral argument which

would infer that this Court could even consider a new statutory grounds for rejecti[on].”

Appellant’s Supp. Br. 19. Comiskey now asserts that “[t]his Court lacks the power to

sua sponte raise and thereafter decide a statutory ground of patentability never raised

during the agency proceeding below” because our review of the Board’s decision is

required to be “on the record before the Patent and Trademark Office” under 35 U.S.C.

§ 144 and the Administrative Procedure Act (“APA”), 5 U.S.C. § 706. Id. at 16-17.

2006-1286                                   9
       Over sixty years ago in Securities & Exchange Commission v. Chenery Corp.,

318 U.S. 80 (1943), the Supreme Court made clear that a reviewing court can (and

should) affirm an agency decision on a legal ground not relied on by the agency if there

is no issue of fact, policy, or agency expertise. The Court said:

       In confining our review to a judgment upon the validity of the grounds
       upon which the Commission itself based its action, we do not disturb the
       settled rule that, in reviewing the decision of a lower court, it must be
       affirmed if the result is correct although the lower court relied upon a
       wrong ground or gave a wrong reason. . . . It would be wasteful to send a
       case back to a lower court to reinstate a decision which it had already
       made but which the appellate court concluded should properly be based
       on another ground within the power of the appellate court to formulate.
       But it is also familiar appellate procedure that where the correctness of the
       lower court's decision depends upon a determination of fact which only a
       jury could make but which has not been made, the appellate court cannot
       take the place of the jury. Like considerations govern review of
       administrative orders. If an order is valid only as a determination of policy
       or judgment which the agency alone is authorized to make and which it
       has not made, a judicial judgment cannot be made to do service for an
       administrative judgment.

Id. at 88 (emphases added; internal citations and quotation marks omitted). We have

repeatedly applied Chenery and have said that “[w]e may, however, where appropriate,

affirm the [agency] on grounds other than those relied upon in rendering its decision,

when upholding the [agency’s] decision does not depend upon making a determination

of fact not previously made by the [agency].” Killip v. Office of Pers. Mgmt., 991 F.2d

1564, 1568-69 (Fed. Cir. 1993) (emphases added); see also Newhouse v. Nicholson,

497 F.3d 1298, 1301 (Fed. Cir. 2007) (“[T]he Chenery doctrine is not implicated when

the new ground for affirmance is not one that calls for a determination or judgment

which an administrative agency alone is authorized to make.” (internal quotation marks

omitted)); Spears v. Merit Sys. Prot. Bd., 766 F.2d 520, 523 (Fed. Cir. 1985). We note

2006-1286                                   10
that the APA specifically states that “the reviewing court shall decide all relevant

questions of law.” 5 U.S.C. § 706. The Supreme Court has emphasized that in general

the PTO should be treated like other administrative agencies, and that patent cases are

subject to the same general administrative law legal principles. Dickinson v. Zurko, 527

U.S. 150, 154-55 (1999). Thus, the same rules governing affirmance of agency action

on a ground not relied on below necessarily apply in the PTO context as in the

administrative context generally.

      As Comiskey points out, some of our cases have concluded that “it is

inappropriate for this court to consider rejections that had not been considered by or

relied upon by the Board.” In re Margolis, 785 F.2d 1029, 1032 (Fed. Cir. 1986). But

these statements referred to situations that required factual determinations not made by

the agency. For example, in Margolis and other cases the new grounds for decision

would require this court to make factual determinations involving “the scope and content

of the prior art [and] differences between the prior art and the claims at issue,” Dippin’

Dots, Inc. v. Mosey, 476 F.3d 1337, 1343 (Fed. Cir. 2007), which had not been

2006-1286                                  11
considered by the PTO. 5 We decline to read these cases as rejecting the breadth of the

Chenery decision on which they explicitly relied.

       It is well-established that “whether the asserted claims . . . are invalid for failure

to claim statutory subject matter under 35 U.S.C. § 101, is a question of law which we

review without deference.” AT&T Corp. v. Excel Commc’ns, Inc., 172 F.3d 1352, 1355

(Fed. Cir. 1999). As a question of law, lack of statutory subject matter is a “ground [for

affirmance] within the power of the appellate court to formulate.” Chenery, 318 U.S. at

88. While there may be cases in which the legal question as to patentable subject

matter may turn on subsidiary factual issues, Comiskey has not identified any relevant

fact issues that must be resolved in order to address the patentability of the subject

matter of Comiskey’s application. Moreover, since we would review a Board decision

on the issue of patentability without deference, see AT&T, 172 F.3d at 1355, the legal

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

2006-1286                                     12
issue concerning patentability is not “a determination of policy or judgment which the

agency alone is authorized to make.” Chenery, 318 U.S. at 88.

      In these circumstances, Chenery not only permits us to supply a new legal

ground for affirmance, but encourages such a resolution where, as here, “[i]t would be

wasteful to send” the case back to the agency for a determination as to patentable

subject matter.   318 U.S. at 88. 6    We therefore may consider the patentability of

Comiskey’s claims under § 101, and we turn to the merits of that question. 7

                                            II

      Comiskey’s application may be viewed as falling within the general category of

“business method” patents. At one time, “[t]hough seemingly within the category of

process or method, a method of doing business [was] rejected as not being within the

statutory classes.”   State St. Bank, 149 F.3d at 1377 (quoting MPEP § 706.03(a)

(1994)).   In State Street Bank, we addressed the “business method” exception to

statutory subject matter, and stated that “[w]e take this opportunity to lay this ill-

conceived exception to rest.”      Id. at 1375.    State Street Bank involved “a data

processing system for managing a financial services configuration of a portfolio

established as a partnership,” and “[g]iven the complexity of the calculations, a

      6
              The situation is quite different where a party seeks for the first time on
appeal to raise a new ground on appeal for setting aside agency action. See Boston
Scientific Scimed, Inc. v. Medtronic Vascular, Inc., 497 F.3d 1293, 1298 (Fed. Cir.
2007).
      7
              As we recently noted in our en banc decision in In re Seagate Technology,
LLC, “a court may consider an issue ‘antecedent to . . . and ultimately dispositive of’ the
dispute before it, even an issue the parties fail to identify and brief.” 497 F.3d 1360,
1372 (Fed. Cir. 2007) (quoting U.S. Nat’l Bank of Or. v. Indep. Ins. Agents of Am., Inc.,
508 U.S. 439, 447 (1993) (quoting Arcadia v. Ohio Power Co., 498 U.S. 73, 77 (1990))).
The § 101 issue is an antecedent question to the § 103 issue, as discussed above.

2006-1286                                   13
computer or equivalent device [wa]s a virtual necessity to perform the task.” Id. at 1371.

We held that this system was patentable, concluding that patentability does “not turn on

whether the claimed subject matter does ‘business’ instead of something else.” Id. at

1377.

        Although it has been suggested that State Street Bank supports the patentability

of business methods generally, 8 State Street Bank explicitly held that business methods

are “subject to the same legal requirements for patentability as applied to any other

process or method.” Id. at 1375; see also MPEP § 2106(I) (Rev. 4, Oct. 2005) (“Claims

should not be categorized as methods of doing business. Instead, such claims should

be treated like any other process claims.”). We must then consider the requirements of

§ 101 in determining whether Comiskey’s claims 1 and 32 for a method of mandatory

arbitration for unilateral and contractual documents claim statutory subject matter.

                                             A

        The very constitutional provision that authorized Congress to create a patent

system, Article I, § 8, also limited the subject matter eligible for patent protection to the

“useful Arts.” 9   According to the Supreme Court, this constitutional limitation on

patentability “was written against the backdrop of the [English] practices—eventually

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

2006-1286                                    14
curtailed by the Statute of Monopolies—of the Crown in granting monopolies to court

favorites in goods or businesses which had long before been enjoyed by the public.”

Graham, 383 U.S. at 5. In the 16th and 17th centuries, the English Crown granted

monopolies over entire types of business to specific individuals, for example the grant

by James I to Darcy in 1600 of the exclusive right to manufacture or sell playing cards

or the exclusive right to the printing business held by the London guild of booksellers

and printers.   See Peter Meinhardt, Inventions, Patents, and Monopoly 31 (2d ed.

1950); Eldred v. Ashcroft, 537 U.S. 186, 200 n.5 (2003).        The purpose of such

monopolies “was to enrich the King . . . as well as the grantee, at the expense of the

community.”     Meinhardt, supra, at 31.   With this background in mind, the framers

consciously acted to bar Congress from granting letters patent in particular types of

business. The Constitution explicitly limited patentability to “the national purpose of

advancing the useful arts—the process today called technological innovation.” Paulik v.

Rizkalla, 760 F.2d 1270, 1276 (Fed. Cir. 1985) (en banc).

      Beginning with the first patent act, the Patent Act of 1790, “Congress []

responded to the bidding of the Constitution,” Graham, 383 U.S. at 6, by including

provisions limiting patentable subject matter. See An Act to Promote the Progress of

Useful Arts, Ch. 7, 1 Stat. 109, 110 (1790). The standard used by the Patent Act of

1793, which limited patentability to “any new and useful art, machine, manufacture, or

composition of matter, or any new or useful improvement [thereof],” is essentially the

same as that used today. An Act to Promote the Progress of Useful Arts; and to Repeal

the Act Heretofore Made for that Purpose, Ch. 11, 1 Stat. 318, 319 (1793). The Patent

2006-1286                                  15
Act of 1952 did replace the word “art” with the word “process” so that current § 101

states:

          Whoever invents or discovers any new and useful process, machine,
          manufacture, or composition of matter, or any new and useful
          improvement thereof, may obtain a patent therefor, subject to the
          conditions and requirements of this title. 10

However, the Supreme Court has made clear that the 1952 language change had no

substantive effect, stating that “[a]nalysis of the eligibility of a claim of patent protection

for a ‘process’ did not change with the addition of that term to § 101.” Diehr, 450 U.S. at

184.

          Patentable subject matter under the 1952 Act is extremely broad. Given the

breadth of the categories listed in § 101, it is not surprising that the legislative history of

the 1952 Act noted that “Congress intended statutory subject matter to include anything

under the sun that is made by man.” Chakrabarty, 447 U.S. at 309 (quoting S. Rep. No.

1979, 82d Cong., 2d Sess., 5 (1952); H.R. Rep. No. 1923, 82d Cong., 2d Sess., 6

(1952) (internal quotation marks omitted)). On the other hand, the Supreme Court has

made clear that this statement does “not . . . suggest that § 101 has no limits or that it

embraces every discovery.” Id.

          Specifically, Supreme Court decisions after the 1952 Patent Act have rejected a

“purely literal reading” of the process provision and emphasized that not every “process”

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

2006-1286                                     16
is patentable. Flook, 437 U.S. at 589. Instead “[t]he question is whether the method

described and claimed is a ‘process’ within the meaning of the Patent Act.” Gottschalk

v. Benson, 409 U.S. 63, 64 (1972); see also Flook, 437 U.S. at 593 (“[R]espondent

incorrectly assumes that if a process application implements a principle in some specific

fashion, it automatically falls within the patentable subject matter of § 101.”). “Abstract

ideas” are one type of subject matter that the Supreme Court has consistently held fall

beyond the broad reaches of patentable subject matter under § 101. As early as Le

Roy v. Tatham, 55 U.S. 156, 175 (1852), the Supreme Court explained that “[a]

principle, in the abstract, is a fundamental truth; an original cause; a motive; these

cannot be patented, as no one can claim in either of them an exclusive right.” Since

then, the unpatentable nature of abstract ideas has repeatedly been confirmed. See,

e.g., Diehr, 450 U.S. at 185; Chakrabarty, 447 U.S. at 309; Flook, 437 U.S. at 589;

Benson, 409 U.S. at 67; Rubber-Tip Pencil Co. v. Howard, 87 U.S. 498, 507 (1874).

The very cases of this court that recognized the patentability of some business methods

have reaffirmed that abstract ideas are not patentable. See AT&T, 172 F.3d at 1355;

State St. Bank, 149 F.3d at 1373; see also In re Alappat, 33 F.3d 1526, 1542-43 (Fed.

Cir. 1994) (en banc).

       The prohibition against the patenting of abstract ideas has two distinct (though

related) aspects. First, when an abstract concept has no claimed practical application, it

is not patentable.      The Supreme Court has held that “[a]n idea of itself is not

patentable.” Rubber-Tip Pencil, 87 U.S. at 507 (emphasis added). In Benson, the claim

was for a method of converting binary-coded decimal numerals into pure binary

numerals that was “not limited to any particular art or technology, to any particular

2006-1286                                   17
apparatus or machinery, or to any particular end use.” 409 U.S. at 64. Since the claim

would therefore “wholly pre-empt the mathematical formula and in practical effect would

be a patent on the algorithm itself,” the claim was unpatentable because its “practical

effect” was to “patent an idea” in the abstract. Id. at 71-72. 11 See also AT&T, 172 F.3d

at 1358 (holding that a mathematical algorithm must produce “a useful, concrete, and

tangible result” to be patentable); State St. Bank, 149 F.3d at 1373 (same); MPEP

§ 2106 (Rev. 5, Aug. 2006) (“[C]laims define nonstatutory processes if they . . . simply

manipulate abstract ideas . . . without some claimed practical application.”).

       Second, the abstract concept may have a practical application. The Supreme

Court has reviewed process patents reciting algorithms or abstract concepts in claims

directed to industrial processes. In that context, the Supreme Court has held that a

claim reciting an algorithm or abstract idea can state statutory subject matter only if, as

employed in the process, it is embodied in, operates on, transforms, or otherwise

involves another class of statutory subject matter, i.e., a machine, manufacture, or

composition of matter. 35 U.S.C. § 101. As the PTO notes, “[t]he Supreme Court has

recognized only two instances in which such a method may qualify as a section 101

process: when the process ‘either [1] was tied to a particular apparatus or [2] operated

to change materials to a ‘different state or thing.’’” See PTO Supp. Br. 4 (quoting Flook,

437 U.S. at 588 n.9). In Diehr, the Supreme Court confirmed that a process claim

reciting an algorithm could state statutory subject matter if it: (1) is tied to a machine or

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

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(2) creates or involves a composition of matter or manufacture. 12 450 U.S. at 184.

There, in the context of a process claim for curing rubber that recited an algorithm, the

Court concluded that “[t]ransformation and reduction of an article ‘to a different state or

thing’ is the clue to the patentability of a process claim that does not include particular

machines.” Id. (quoting Benson, 409 U.S. at 70); 13 see also In re Schrader, 22 F.3d

290, 295 (Fed. Cir. 1994) (holding when a claim does not invoke a machine, “§ 101

requires some kind of transformation or reduction of subject matter”). Thus, a claim that

involves both a mental process and one of the other categories of statutory subject

matter (i.e., a machine, manufacture, or composition) may be patentable under § 101.

See Diehr, 450 U.S. at 184 (holding a process that involved calculations using the

“Arrhenius equation” patentable because the claim “involve[d] the transformation of an

article, in this case raw, uncured synthetic rubber, into a different state or thing”). For

example, we have found processes involving mathematical algorithms used in computer

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

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technology patentable because they claimed practical applications and were tied to

specific machines. 14

       However, mental processes—or processes of human thinking—standing alone

are not patentable even if they have practical application. The Supreme Court has

stated that “[p]henomena of nature, though just discovered, mental processes, and

abstract intellectual concepts are not patentable, as they are the basic tools of scientific

and technological work.” Benson, 409 U.S. at 67 (emphasis added). In Flook the

patentee argued that his claims did not seek to patent an abstract idea (an algorithm)

because they were limited to a practical application of that idea—updating “alarm limits”

for catalytic chemical conversion of hydrocarbons. 437 U.S. at 586, 589-90. The Court

rejected the notion that mere recitation of a practical application of an abstract idea

makes it patentable, concluding that “[a] competent draftsman could attach some form

of post-solution activity to almost any mathematical formula.” Id. at 590. Since all other

features of the process were well-known, including “the use of computers for ‘automatic

monitoring-alarming,’” the Court construed the application as “simply provid[ing] a new

and presumably better method for calculating alarm limit values.” Id. at 594-95. The

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

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Court held the application unpatentable because “if a claim [as a whole] is directed

essentially to a method of calculating, using a mathematical formula, even if the solution

is for a specific purpose, the claimed method is nonstatutory.” Id. at 595 (quoting In re

Richman, 563 F.2d 1026, 1030 (CCPA 1977)).

      Following the lead of the Supreme Court, this court and our predecessor court

have refused to find processes patentable when they merely claimed a mental process

standing alone and untied to another category of statutory subject matter even when a

practical application was claimed.     In Schrader we held unpatentable a “method

constitut[ing] a novel way of conducting auctions” by allowing competitive bidding on a

plurality of related items. 22 F.3d at 291. In doing so, we rejected the patentee’s

argument that the process used a machine. Two of the alleged machines—a “display”

in the front of the auction room and “a closed-circuit television system” for bidders in

different cities—were not claimed by the patent, and the third—a “record” in which bids

could be entered—could be “a piece of paper or a chalkboard.” Id. at 293-94. We

therefore concluded that the patent impermissibly claimed unpatentable subject matter.

Similarly, in In re Warmerdam, 33 F.3d 1354, 1359-60 (Fed. Cir. 1994), we held

unpatentable a process for controlling objects so as to avoid collisions because the key

steps of “‘locating’ a medial axis” and “‘creating’ a bubble hierarchy” described “nothing

more than the manipulation of basic mathematical constructs, the paradigmatic ‘abstract

idea.’” A machine was not required, id. at 1358, nor was there any indication that the

process operated on a manufacture or composition of matter.

      Decisions of our predecessor court are in accord. In re Meyer, 688 F.2d 789,

795-96 (CCPA 1982), held that “a mental process that a neurologist should follow” was

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not patentable because it was “not limited to any otherwise statutory process, machine,

manufacture, or composition of matter.” Similarly, In re Maucorps held that an invention

“[u]ltimately . . . directed toward optimizing the organization of sales representatives in a

business” was unpatentable. 609 F.2d 481, 482, 486 (CCPA 1979); see also Alappat,

33 F.3d at 1541 (“Maucorps dealt with a business methodology for deciding how

salesmen should best handle respective customers and Meyer involved a ‘system’ for

aiding a neurologist in diagnosing patients. Clearly, neither of the alleged ‘inventions’ in

those cases falls within any § 101 category.”). 15

       It is thus clear that the present statute does not allow patents to be issued on

particular business systems—such as a particular type of arbitration—that depend

entirely on the use of mental processes. In other words, the patent statute does not

allow patents on particular systems that depend for their operation on human

intelligence alone, a field of endeavor that both the framers and Congress intended to

be beyond the reach of patentable subject matter.         Thus, it is established that the

application of human intelligence to the solution of practical problems is not in and of

itself patentable.

                                             B

       Having considered the governing legal principles, we now turn to Comiskey’s

application and begin with independent claims 1 and 32 which recite “[a] method for

mandatory arbitration resolution” regarding unilateral and contractual documents.

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

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Comiskey has conceded that these claims do not require a machine, and these claims

evidently do not describe a process of manufacture or a process for the alteration of a

composition of matter.   Comiskey’s independent claims 1 and 32 claim the mental

process of resolving a legal dispute between two parties by the decision of a human

arbitrator. They describe in essence “conducting arbitration resolution for [a] contested

issue” and “determining an award or a decision for the contested issue” through a pre-

determined “mandatory” arbitration system, and thus claim the use of mental processes

to resolve a legal dispute.    Thus, like the claims that the Supreme Court found

unpatentable in Benson and Flook and the claims found unpatentable in our own cases,

Comiskey’s independent claims 1 and 32 seek to patent the use of human intelligence

in and of itself. Like the efforts to patent “a novel way of conducting auctions” which

Schrader, 22 F.3d at 291, found to be directed to an abstract idea itself rather than a

statutory category, Comiskey’s independent claims 1 and 32 describe an allegedly

novel way of requiring and conducting arbitration and are unpatentable.

                                           C

      We consider independent claims 17 and 46 separately. They recite the use of

“module[s],” including “a registration module for enrolling” a person, “an arbitration

module for incorporating arbitration language,” and “an arbitration resolution module for

requiring a complainant [or party] to submit a request for arbitration resolution to the

mandatory arbitration system.”     Claim 17 also recites “a means for selecting an

arbitrator from an arbitrator database.” These claims, under the broadest reasonable

interpretation, could require the use of a machine as part of Comiskey’s arbitration

system. See Alan Freedman, The Computer Glossary 268 (8th ed. 1998) (defining

2006-1286                                  23
module as “[a] self-contained hardware or software component that interacts with a

larger system); id. at 90 (defining database as “any electronically-stored collection of

data”). Similarly, even though Comiskey did not separately argue his dependent claims,

our decision is based on a different ground than the Board’s, and we think it is

appropriate to separately consider dependent claims 15, 30, 44, and 58. Each of these

claims adds the following limitation to its corresponding independent claim: “wherein

access to the mandatory arbitration is established through the Internet, intranet, World

Wide Web, software applications, telephone, television, cable, video [or radio],

magnetic, electronic communication, or other communications means.”

      As to all of these claims, which under the broadest reasonable interpretation

recite the use of a machine, we think that the § 101 question should be addressed in the

first instance by the PTO.    We therefore remand to the PTO to consider whether

independent claims 17 and 46 (with dependent claims 18-29, 31, 47-57, and 59) and

dependent claims 15, 30, 44, and 58 recite patentable subject matter under § 101.

                                    CONCLUSION

      We conclude that Comiskey’s independent claims 1 and 32 and dependent

claims 2-14, 16, 33-43, and 45 do not claim patentable subject matter. With respect to

independent claims 17 and 46 (with dependent claims 18-29, 31, 47-57, and 59) and

dependent claims 15, 30, 44, and 58, we remand to the PTO to determine in the first

instance whether § 101 is satisfied. If the Board had relied on the new § 101 ground for

rejection in the first instance, Comiskey would have had the opportunity to amend his

application under 37 C.F.R. § 41.50(b).      We think that it is appropriate to afford

2006-1286                                 24
Comiskey the same protections in this respect as he would have had before the Board

with respect to the claims that we have held unpatentable.

            AFFIRMED-IN-PART, VACATED-IN-PART, AND REMANDED

                                        COSTS

      No costs.

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