Court Opinion

ID: 9486664
Source: CourtListenerOpinion
Date Created: 2023-08-05 11:55:29.239048+00
Date Added: 2024-06-11T17:51:51.427967
License: Public Domain

PAULINE NEWMAN, Circuit Judge,
dissenting.
I respectfully disagree with my colleagues on this panel, for I do not view this subject matter as nonstatutory in terms of 35 U.S.C. § 101. However, on the record before us I do not deem the claims allowable. In view of the inadequate examination for patentability under sections 102 and 103 of the patent act, I would remand to the Patent and Trademark Office for further processing of the application.
A
The applicant Schrader is claiming a method whereby parcels of real property or other things are sold at auction by a procedure of bidding and determining optimum prices that, according to Schrader’s brief, is usefully but not necessarily performed with the aid of a computer. Schrader’s method involves more than mental steps or theories or plans, see Arrythmia Research Technology Inc. v. Corazonix Corp., 958 F.2d 1053, 1057, 22 USPQ2d 1033, 1037 (Fed.Cir.1992) (claim must be directed to physical elements or process steps), and is not a scientific principle, law of nature, natural phenomenon, or abstract idea, the terms generally used to delineate unpatentable subject matter.
Although Schrader’s claimed process requires computational steps, the fact that mathematical procedures are performed does not preclude patentability. It is necessary to ascertain whether the claim as a whole defines statutory subject matter, whether or not mathematical procedures are invoked along the way. Diamond v. Diehr, 450 U.S. 175, 187, 101 S.Ct. 1048, 1057, 67 L.Ed.2d 155, 209 USPQ 1, 8 (1981). In deciding this question
it must be determined whether a scientific principle, law of nature, idea, or mental process, which may be represented by a mathematical algorithm, is included in the subject matter of the claim. If it is, it must then be determined whether such principle, law, idea, or mental process is applied in an invention of a type set forth in 35 U.S.C. 101.
In re Meyer, 688 F.2d 789, 795, 215 USPQ 193, 198 (CCPA 1982).
Even if the Schrader claims are viewed as encompassing a mathematical algorithm1, it is applied in a statutory process as set forth in 35 U.S.C. § 101, in this case a process of conducting an auction of multiple lots of separable elements. Although one may debate whether the claimed process is a “method of doing business”, as the Board found, see post, I can not agree that the claimed invention is no more than a mathematical algorithm.
Indeed, the Schrader claims easily satisfy the Freemanr-Walter-Abele test. See In re *297Abele, 684 F.2d 902, 214 USPQ 682 (CCPA 1982). This court has made clear that the Freemam-Walter-Abele test is not the only test for the existence of statutory subject matter when computation is involved. Arrhythmia, 958 F.2d at 1057, 22 USPQ2d at 1037; In re Grams, 888 F.2d 835, 838-39, 12 USPQ2d 1824, 1827 (Fed.Cir.1989). However, the test is useful and, when met, ends the inquiry, for it implements the principle set forth in Diamond v. Diehr, 450 U.S. at 182, 101 S.Ct. at 1054, 209 USPQ at 7, that “Congress intended statutory subject matter to ‘include anything under the sun that is made by man’ ” (quoting legislative history of 1952 Patent Act).
As stated in In re Musgrave, 431 F.2d 882, 893, 167 USPQ 280, 289-90 (CCPA 1970), a statutory “process” is limited only in that it must be technologically useful. A process does not become nonstatutory because of the nature of the subject matter to which it is applied, or the nature of the product produced. In re Toma, 575 F.2d 872, 877-78, 197 USPQ 852, 857 (CCPA 1978). The nation has benefitted from the adaptability of the patent system to new technologies, as was recognized in Diamond v. Chakrabarty, 447 U.S. 303, 316, 100 S.Ct. 2204, 2211, 65 L.Ed.2d 144, 206 USPQ 193, 200 (1980) (“Mr. Justice Douglas reminded that the inventions most benefiting mankind are those which ‘push back the frontiers of chemistry, physics and the like.’”)
The majority now imposes fresh uncertainty on the sorts of inventions that will meet the majority’s requirements. All mathematical algorithms transform data, and thus serve as a process to convert initial conditions or inputs into solutions or outputs, through transformation of information. Data representing bid prices for parcels of land do not differ, in section 101 substance, from data representing electrocardiogram signals (Arrhythmia) or parameters in a process for curing rubber (Diehr). All of these processes are employed in technologically useful arts2. Even were a mathematical formula viewed as “like a law of nature”, Diehr, 450 U.S. at 186, 101 S.Ct. at 1056, 209 USPQ at 8, or as an abstract idea, see Gottschalk v. Benson, 409 U.S. 63, 71-72, 93 S.Ct. 253, 257, 34 L.Ed.2d 273, 175 USPQ 673, 676 (1972), the requirements of section 101 are met when the formula is applied in a technological process to produce a useful result. The Freemani-Walter-Abele test facilitates this analysis, for once one has determined that a mathematical algorithm is implicated in the claimed invention, the inquiry proceeds to the invention as a whole, as the statute requires. The test is simply whether the mathematical formula or equation is all that is claimed, or whether the procedures involving the specified mathematics are part of a useful process. When the latter requirement is met the subject matter is statutory.
In the continuum wherein the jurisprudence relating- to computer-implemented inventions has evolved, as noted in Arrythmia, 958 F.2d at 1057 n. 4, 22 USPQ2d at 1036 n. 4, judge-made law has retreated from specifying how a mathematical algorithm must interact in the claimed invention in order to constitute statutory subject matter, and advanced toward the test of whether the overall process is for a technologically useful art. See Freeman and Walter and Abele.
Schrader’s claimed process requires the performance of specified steps and procedures, including calculations, to achieve a technologically useful result; it is not a mathematical abstraction. As stated in Diamond v. Diehr, 450 U.S. at 187, 101 S.Ct. at 1057, 209 USPQ at 8, subject matter does not become nonstatutory “simply because it uses a mathematical formula” in an otherwise statutory process. Thus I respectfully dissent from the panel majority’s view that Schrader’s claims do' not comply with 35 U.S.C. § 101,

B

The Board also relied on the “method of doing business” ground for finding Schrad*298er’s subject matter non-statutory under section 101. In so doing the Board remarked that the “method of doing business” is a “fuzzy” concept, observed the inconclusiveness of precedent, and sought guidance from this court. Indeed it is fuzzy; and since it is also an unwarranted encumbrance to the definition of statutory subject matter in section 101,3 my guidance is that it be discarded as error-prone, redundant, and obsolete. It merits retirement from the glossary of section 101.
The decisions that have spoken of “methods of doing business” have, or could have, resolved the issue in each case simply by relying on the statutory requirements of pat-entability such as novelty and unobviousness. An illustration is the CCPA’s analysis in In re Howard, 394 F.2d 869, 167 USPQ 615 (CCPA 1968), wherein the court affirmed the Board of Appeals’ rejection of the claims for lack of novelty, the court finding it unnecessary to reach the Board’s section 101 ground that a method of doing business is “inherently unpatentable”. Id. at 872, 157 USPQ at 617.
Ex parte Murray, 9 USPQ2d 1819 (Bd. Pat-App. & Interf.1988), relied on herein by the Board, can be viewed similarly, for the Murray holding that “the claimed accounting method [requires] no more than the entering, sorting, debiting and totaling of expenditures as necessary preliminary steps to issuing an expense analysis statement”, 9 USPQ2d at 1820, states grounds of obviousness or lack of novelty, not of non-statutory subject matter. Indeed, in Dann v. Johnston, 425 U.S. 219, 96 S.Ct. 1393, 47 L.Ed.2d 692 189 USPQ 257 (1976) the Supreme Court declined to discuss the section 101 argument concerning the computerized financial record-keeping system, in view of the Court’s holding of patent invalidity under section 103.
A case often cited as establishing the business methods “exception” to patentable subject matter is Hotel Security Checking Co. v. Lorraine Co., 160 F. 467 (2nd Cir.1908); however, the court discussed the “obviousness” of the system of records kept to prevent embezzlement by waiters at considerably greater length than whether the subject matter was “statutory”. Although a clearer statement was made in In re Patton, 127 F.2d 324, 327, 53 USPQ 376, 379 (CCPA 1942) that a system for transacting business, separate from the means for carrying out the system, is not patentable subject matter, the jurisprudence does not require the creation of a distinct business class of unpatentable subject matter.
The cases simply reaffirm that the patent system is directed to tangible things and procedures, not mere ideas. See Rubber-Tip Pencil Co. v. Howard, 87 U.S. (20 Wall.) 498, 507, 22 L.Ed. 410 (1874) (“An idea of itself is not patentable, but a new device by which it may be made practically useful is”). Any historical distinctions between a method of “doing” business and the means of carrying it out blur in the complexity of modern business systems. See Paine, Webber, Jackson and Curtis v. Merrill Lynch, 564 F.Supp. 1358, 218 USPQ 212 (D.Del.1983), wherein a computerized system of cash management was held to be statutory subject matter.
I discern no purpose in perpetuating a poorly defined, redundant, and unnecessary “business methods” exception, indeed enlarging (and enhancing the fuzziness of) that exception by applying it in this case. All of the “doing business” cases could have been decided using the clearer concepts of Title 35. Patentability does not turn on whether the claimed method does “business” instead of something else, but on whether the method, viewed as a whole, meets the requirements of patentability as set forth in Sections 102, 103, and 112 of the Patent Act.

C

Although I conclude that the requirements of section 101 were met, the examination in this case was not adequate to determine the *299merits of patentability. The record does not show analysis in terms of sections 102 and 103. It is not reasonable to believe that the activity here described is devoid of prior art, particularly in view of the breadth with which it is claimed. It would be improper for this court to authorize issuance of a patent in these circumstances.

. I do not believe that they do. The Supreme Court has defined mathematical algorithm as a "procedure” or "formulation" for solving a particular mathematical problem. Gottschalk v. Benson, 409 U.S. 63, 65, 93 S.Ct. 253, 254, 34 L.Ed.2d 273, 175 USPQ 673, 674 (1972). The only mathematical problem in Schrader's invention is identifying that combination of bids which yields the highest return, and he does not claim any particular procedure or formula for solving that problem. Neither the trivial procedure of adding up the returns on all permissible combinations of bids and selecting the combination with the highest return, nor some more elegant mathematical manipulation, is claimed. One must distinguish the answer to be found from the method of finding that answer. The latter might be a mathematical algorithm; the former is not.

. By enlarging section 101 beyond its statutory scope, the majority implies that it is more desirable, from the viewpoint of social policy, to withhold the patent incentive from innovative activity such as that here illustrated. Such policy decisions have been made for a variety of reasons, as exemplified in the denial of patents on inventions relating to nuclear weapons, perpetual motion machines, and, until 1977, gambling machines.

. 35 U.S.C. § 101 Inventions patentable.
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.