Major issues: mental steps as unpatentable methods; Section 101; Bilski; claims to computer readable medium with executable programs instructions; Beauregard claims

A Federal Circuit panel, in an opinion by Judge Dyk, held that method claims to a credit card fraud prevention system, which could be carried out by a human mentally or with the aid of pencil, were unpatentably abstract in the Bilski sense.  The panel also held claims to “computer reaable medium” for carrying out the methods to be unpatentable.

Cross Reference. For a discussion of the “mental steps” doctrine, see Chisum on Patents Sec. 1.03[6].

A Growing Line of Post-Bilski Cases. This one of a line of Federal panel decisions that to apply the Supreme Court’s ambiguous analysis in Bilski.  For earlier decisions in the line, see Research Corp. Technologies, Inc. v. Microsoft Corp., 627 F.3d 859, CPLRG 0072 (Fed. Cir. 2010); Prometheus Laboratories, Inc. v. Mayo Collaborative Services, 628 F.3d 1347, CPLRG 0071 (Fed. Cir. 2010), on remand from 130 S. Ct. 3543 (2010), cert. granted, 180 L. Ed. 2d 844 (June 20, 2011); Ass’n for Molecular Pathology v. United States Patent and Trademark Office, CPLRG 0073 (Fed. Cir. July 29, 2011).   For a subsequent decision, see Classen Immuotherapies, Inc. v. Biogen Idec, 2011 U.S. App. LEXIS 18126 (Fed. Cir. Aug. 31, 2011) (with three opinions by three judges, Newman, Rader and Moore).
Pertinent to this decision is the Supreme Court’s June 20, 2011 grant of certiorari in Prometheus Laboratories, Inc. v. Mayo Collaborative Services, 628 F.3d 1347, CPLRG 0071 (Fed. Cir. 2010), which involves Section 101 issues on patent claims concerning medical diagnostics.  In Prometheus, the Supreme Court may–or, unfortunately, may not–clarify the current confusion in Section 101 doctrine, a confusion that dates back to Gottschalk v. Benson, 409 U.S. 63 (1972).  See Chisum, Patenting Intangible Methods: Revisiting Benson (1972) After Bilksi (2010), 27 Santa Clara Computer & High Tech. L. J.445 (2011) (SSRN 1698724).

Patent.  The patent concerned a credit card fraud detection system.  U.S. Pat. No. 6,029,145. USPatNo6029145
Claim 3; Method.  Claim 3 provided:

3. A method for verifying the validity of a credit card transaction over the Internet comprising the steps of:
a) obtaining information about other transactions that have utilized an Internet address that is identified with the [ ] credit card transaction;
b) constructing a map of credit card numbers based upon the other transactions and;
c) utilizing the map of credit card numbers to determine if the credit card transaction is valid.

Machine-or-Transformation Test Failed.  The Federal Circuit noted that the Supreme Court in Bilski confirmed that the Federal Circuit’s “machine-or-transformation” (MORT) test was a useful tool but not an exclusive test.  The court held that the claim failed the MORT test: “The mere collection and organization of data regarding credit card numbers and Internet addresses is insufficient to meet the transformation prong of the test, and the plain language of claim 3 does not require the method to be performed by a particular machine, or even a machine at all.”

Abstract Ideas: Mental Steps. As the Supreme Court had directed, the court did not stop with the MORT test, but it held that the claim “fails to recite patent-eligible subject matter because it is drawn to an unpatentable mental process–a subcategory of unpatentable abstract ideas.”  In the 1972 Benson decision, “the Supreme Court appeared to endorse the view that methods which can be performed mentally, or which are the equivalent of human mental work, are unpatentable abstract ideas–the “basic tools of scientific and technological work” that are open to all.”  Subsequent Supreme Court and Federal Circuit decisions similarly refused to uphold claims to “a mental process standing alone.”  In re Comiskey, 554 F.3d 967, 980 (Fed. Cir. 2009).

Method Claim 3. Claim 3 fell within the mental steps ban:  “the broad scope of claim 3 extends to essentially any method of detecting credit card fraud based on information relating past transactions to a particular `Internet address,’ even methods that can be performed in the human mind.”  For example, step (b) requires construction of a “map of credit card numbers”; a person could make such a map by writing down a list.
The court acknowledged that it would be proper to include “mental method steps as part of a process containing non-mental steps (citing In re Abele, 684 F.2d 902, 908 (CCPA 1982).

Claim 2; Computer Readable Medium; “Beauregard” Claims. The court then considered claim 2:

2. A computer readable medium containing program instructions for detecting fraud in a credit card transaction between a consumer and a merchant over the Internet, wherein execution of the program instructions by one or more processors of a computer system causes the one or more processors to carry out the steps of:
a) obtaining credit card information relating to the transactions from the consumer; and
b) verifying the credit card information based upon values of plurality of parameters, in combination with information that identifies the consumer, and that may provide an indication whether the credit card transaction is fraudulent,
wherein each value among the plurality of parameters is weighted in the verifying step according to an importance, as determined by the merchant, of that value to the credit card transaction, so as to provide the merchant with a quantifiable indication of whether the credit card transaction is fraudulent,
wherein execution of the program instructions by one or more processors of a computer system causes that one or more processors to carry out the further steps of;
[a] obtaining information about other transactions that have utilized an Internet address that is identified with the credit card transaction;
[b] constructing a map of credit card numbers based upon the other transactions; and
[c] utilizing the map of credit card numbers to determine if the credit card transaction is valid.

This type of claim is known as a “Beauregard” claim after In re Beauregard, 53 F.3d 1583 (Fed. Cir. 1995), that is, “a claim to a computer readable medium (e.g., a disk, hard drive, or other data storage device) containing program instructions for a computer to perform a particular process.”
The patent owner argued that claim 2 was to Section 101 “manufacture” or “machine,” not a processor or method and, therefore, could not fall within any of the Bilski “exceptions” (law of nature, physical phenomena, abstract idea).  The court disagreed:  “Regardless of what statutory category (“process, machine, manufacture, or composition of matter,” 35 U.S.C. § 101) a claim’s language is crafted to literally invoke, we look to the underlying invention for patent-eligibility purposes.”
The court distinguished cases, such as Research Corp. CPLG 0072 (Fed. Cir. 2010), “where, as a practical matter, the use of a computer is required to perform the claimed method.”

Major issues:  claims to isolated genes; claims to comparing gene sequences to detect cancer; Bilski; patent eligible subject matter

In a much-watched case, known generally by the name of the patent owner, Myriad Genetics, a Federal Circuit panel addressed Section 101 issues concerning claims to isolated DNA and to methods of screening for cancer by DNA testing.  The panel also addressed the issue whether the plaintiffs, “an assortment of medical organizations, researchers, genetic counselors, and patients” had “standing under the Declaratory Judgment Act to challenge Myriad’s patents.”
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On standing, the Federal Circuit held that “at least one plaintiff,” a doctor, had standing.  On the merits, the majority distinguished between claims to isolated genes and screening by cell growth rates and claims to methods of comparing DNA sequences.  The former but not the latter were for patent eligible subject matter.

Pertinent to this decision is the Supreme Courts June 20, 2011 grant of certiorari in Prometheus Laboratories, Inc. v. Mayo Collaborative Services, 628 F.3d 1347, CPLRG 0071 (Fed. Cir. 2010), which involves Section 101 issues on patent claims concerning medical diagnostics.

Patents. At issue were seven patents.  U.S. Pat. No. 5,747,282; U.S. Pat. No. 5,837,492; U.S. Pat. No. 5,693,473;U.S. Pat. No. 5,709,999; U.S. Pat. No. 5,710,001; U.S. Pat. No. 5,753,441; U.S. Pat. No. 6,033,857.  USPatNo5747282 USPatNo5837492 USPatNo5693473 USPatNo5709999 USPatNo5710001 USPatNo5753441 USPatNo6033857

District Court. A district court held the challenged claims in the patents unpatentable under Section 101.  See Ass’n for Molecular Pathology v. U.S. Patent & Trademark Office, 702 F. Supp. 2d 181 (S.D.N.Y. 2010).

Isolated DNA Molecules. The majority held that “composition claims to `isolated’ DNA molecules” were not to “patent-ineligible products of nature under § 101″ because “the molecules as claimed do not exist in nature.”   An example of such a claim was claim 1 of the ‘282 patent:  “An isolated DNA coding for a BRCA1 polypeptide, said polypeptide having the amino acid sequence set forth in SEQ ID NO:2.”

The mutations in the human “BRCA1″ and “BRCA2″ genes were “associated with a predisposition to breast and ovarian cancers.”

The majority reasoned, inter alia, that isolated DNA was, by virtue of how it is obtained, chemical distinct from natural DNA: it is not merely “purified.”  The majority rejected a dissenting judge’s analogy to “snapping a leaf from a tree”:  “[N]o one could contemplate that snapping a leaf from a tree would be worthy of a patent, whereas isolating genes to provide useful diagnostic tools and medicines is surely what the patent laws are intended to encourage and protect. Snapping a leaf from a tree is a physical separation, not one creating a new chemical entity.”

Method of Screening by Comparing Cell Growth Rates. The majority also upheld that a method claim to “screening potential cancer therapeutics via changes in cell growth rates” as not drawn “to a patent-ineligible scientific principle.”  An example of such a claim was ‘282 patent claim 20:

20. A method for screening potential cancer therapeutics which comprises: growing a transformed eukaryotic host cell containing an altered BRCA1 gene causing cancer in the presence of a compound suspected of being a cancer therapeutic, growing said transformed eukaryotic host cell in the absence of said compound, determining the rate of growth of said host cell in the presence of said compound and the rate of growth of said host cell in the absence of said compound and comparing the growth rate of said host cells, wherein a slower rate of growth of said host cell in the presence of said compound is indicative of a cancer therapeutic.

The majority noted that “the claim includes transformative steps, an `important clue’ that it is drawn to a patent-eligible process. Bilski, 130 S. Ct. at 3227.  Also,

the claim is not so “manifestly abstract” as to claim only a scientific principle, and not a patent-eligible process. See Research Corp. Techs., Inc. v. Microsoft Corp., 627 F.3d 859, 869, CPLRG 0072 (Fed. Cir. 2010). The claim does not cover all cells, all compounds, or all methods of determining the therapeutic effect of a compound. Rather, it is tied to specific host cells transformed with specific genes and grown in the presence or absence of a specific type of therapeutic. Moreover, the claim is tied to measuring a therapeutic effect on the cells solely by changes in the cells’ growth rate. The claim thus presents “functional and palpable applications” in the field of biotechnology. Id. at 868; see also Prometheus, 628 F.3d at 1355 (“[T]he claims do not preempt all uses of the natural correlations; they utilize them in a series of specific steps.”).

Methods of Comparing or Analyzing DNA Sequences. In contrast, the majority held not patentable “claims directed to “comparing” or “analyzing” DNA sequences.”  An example of such a claim was claim 1 of the ‘999 patent.

1. A method for screening a tumor sample from a human subject for a somatic alteration in a BRCA1 gene in said tumor which comprises [] comparing a first sequence selected from the group consisting of a BRCA1 gene from said tumor sample, BRCA1 RNA from said tumor sample and BRCA1 cDNA made from mRNA from said tumor sample with a second sequence selected from the group consisting of BRCA1 gene from a nontumor sample of said subject, BRCA1 RNA from said nontumor sample and BRCA1 cDNA made from mRNA from said nontumor sample, wherein a difference in the sequence of the BRCA1 gene, BRCA1 RNA or BRCA1 cDNA from said tumor sample from the sequence of the BRCA1 gene, BRCA1 RNA or BRCA1 cDNA from said nontumor sample indicates a somatic alteration in the BRCA1 gene in said tumor sample.

Those claims “include[d] no transformative steps and cover[ed] only patent-ineligible abstract, mental steps.”

“[The claims] recite[] nothing more than the abstract mental steps necessary to compare two different nucleotide sequences: look at the first position in a first sequence; determine the nucleotide sequence at that first position; look at the first position in a second sequence; determine the nucleotide sequence at that first position; determine if the nucleotide at the first position in the first sequence and the first position in the second sequence are the same or different, wherein the latter indicates an alternation; and repeat for the next position.

The majority distinguished Prometheus (which was written by the same judge, Judge Lourie).

[In Prometheus,] the court held that because the metabolite levels could not be determined by mere inspection, the determining step necessarily required a transformation: `Some form of manipulation … is necessary to extract the metabolites from a bodily sample and determine their concentration.
Myriad’s claims, in contrast, do not include the step of “determining” the sequence of BRCA genes by, e.g., isolating the genes from a blood sample and sequencing them, or any other necessarily transformative step. Rather, the comparison between the two sequences can be accomplished by mere inspection alone. Accordingly, Myriad’s claimed methods of comparing or analyzing nucleotide sequences fail to satisfy the machine-or-transformation test, and are instead directed to the abstract mental process of comparing two nucleotide sequences. The claims thus fail to claim a patent-eligible process under § 101.”

MAJOR ISSUES: Section 101 patent eligible subject matter; Bilski; medical diagnostic claims

In 2009, before the Supreme Court’s Bilski decision on patent eligible subject matter and abstract ideas, see Bilski v. Kappos, 130 S. Ct. 3218, CPLRG 0015 (2010), the Federal Circuit held that medical diagnostic claims were to patent eligible subject matter. The Supreme Court remanded the case for reconsideration in light of Bilski.  The Federal Circuit reaffirmed its prior decision.  On June 20, 2011, the Supreme Court granted review, indicating the Supreme Court’s intent to address again issues on what constitutes patent eligible subject matter under Section 101, this time in regard to biomedical subject matter.

Facts. The facts (briefly): a category of drug, thiopurines, including 6-MP and AZA, had been used to treat gastrointestinal disorders. When administered to a patient, the patient’s body transformed the thiopurine drug into metabolites (6-MMP and 6-TG).

The patents at issue (‘623 and ‘302) disclosed a correlation between the level of the metabolites in a patient and the efficacy and toxicity of the drug. The correlation could be used to adjust a patient’s dosage of the drug.  U.S. Pat. No. 6,355,623; U.S. Pat. No. 6,680,302.  USPatNo.6355623 USPatNo6680302

Claims: Administering Drug and Determining Metabolite Level; Indication of Need to Increase or Decrease Drug Level. Claims in the patents recited two steps: first, administering a 6-TP drug to a patient and second, determining the levels of metabolite (6-TG and 6-MMP) in the patient. The claims concluded with a “wherein” clause. The clause provided that the measured level of metabolite “indicated a need” to increase drug dosage to optimize drug efficacy, if the metabolite was above a designated level, or to decrease drug dosage to reduce toxicity, if the metabolite was below a designated level.
Claim 1 was representative:
1. A method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder, comprising:
(a) administering a drug providing 6-thioguanine to a subject having said immune-mediated gastrointestinal disorder; and
(b) determining the level of 6-thioguanine in said subject having said immune-mediated gastrointestinal disorder,
wherein the level of 6-thioguanine less than about 230 pmol per 8×10 8 red blood cells indicates a need to increase the amount of said drug subsequently administered to said subject and
wherein the level of 6-thioguanine greater than about 400 pmol per 8×10 8 red blood cells indicates a need to decrease the amount of said drug subsequently administered to said subject.

One claim (46) omitted the administering step, reciting only the “determining” step.
46. A method of optimizing therapeutic efficacy and reducing toxicity associated with treatment of an immune-mediated gastrointestinal disorder, comprising:
(a) determining the level of 6-thioguanine or 6-methylmercaptopurine in a subject administered a drug selected from the group consisting of 6-mercaptopurine, azathiop[u]rine, 6-thioguanine, and 6-methyl-mercaptoriboside, said subject having said immune-mediated gastrointestinal disorder,
wherein the level of 6-thioguanine less than about 230 pmol per 8×10 8 red blood cells indicates a need to increase the[] amount of said drug subsequently administered to said subject, and
wherein the level of 6-thioguanine greater than about 400 pmol per 8×10 8 red blood cells or a level of 6-methylmercaptopurine greater than about 7000 pmol per 8×10 8 red blood cells indicates a need to decrease the amount of said drug subsequently administered to said subject.

Original Prometheus; Supreme Court Remand. In the original Prometheus, Prometheus Laboratories, Inc. v. Mayo Collaborative Services, 581 F.3d 1336 (Fed. Cir. 2009), vacated and remanded, 130 S. Ct. 3543 (2010), the court held that the claims were directed to patent-eligible subject matter. Applying the Federal Circuit’s exclusive machine-or-transformation (MORT) test, which the Federal Circuit had adopted in its en banc Bilski (2009) decision, the panel held that the claims’ “administering” and “determining” steps were transformative and not merely data-gathering steps. After its Bilski decision, the Supreme Court remanded Prometheus.

Prometheus After Remand. In the rebound Prometheus, the Federal Circuit noted that the Supreme Court’s Bilski decision did not dictate “a wholly different analysis or a different result.” True, the original decision did rely on the MORT test, finding that the claimed methods were transformative as part of body-transforming treatment methods. However, the Supreme Court did not reject the MORT test, only its exclusivity. Thus, transformation was still an important “clue” or “tool.” Also, the original decision addressed the “preemption” concept of Bilski. As the original decision reasoned, the claims here are not “drawn to a natural phenomenon, the patenting of which would entirely preempt its use as in” Gottschalk v. Benson, 409 U.S. 63 (1972); Parker v. Flook, 437 U.S. 584 (1978). The claims recited specific steps of treating a specific disease by administering specific drugs and measuring specific metabolites. The claimed invention was an improvement in a treatment process.
In Prometheus, the Federal Circuit dismissed an accused infringer’s argument that the claims here are similar to those found to be unpatentable in an opinion by three Supreme Court justices. Lab. Corp., 548 U.S. 124 (Breyer, J., dissenting from dismissal of certiorari as improvidently granted). However, the Federal Circuit noted, a dissenting opinion is not controlling law and need not be discussed. The accused infringer argued that two concurrences in Bilski, representing a majority of five Supreme Court justices, cited the Lab. Corp. dissent. However, that citation did not turn a dissent into controlling law. One opinion (by Justice Stevens) cited Lab. Corp. for the proposition that excessive patent protection can retard technological progress, but it did so in arguing for a rule categorically banning business method patents. “[T]his case does not involve business method patents.”

Supreme Court Grant of Certiorari. On June 20, 2011, the Supreme Court granted a petition for certiorari.

In an early response to Bilski v. Kappos, 130 S. Ct. 3218, CPLRG 0015 (2010), the Federal Circuit, in an opinion by Chief Judge Rader, rebuffed a Section 101 challenge to claims in two patents to methods of “digital image halftoning.”  The court indicated a reluctance to find the kind of abstractness that the Supreme Court relied upon in Bilski to reject claims as ineligible subject matter under Section 101.  The court suggested that it would be more fruitful to apply specific standards of patentability, such as indefiniteness and lack of written description under 35 U.S.C. Section 112.

The struggle to make sense out of Bilski continued in subsequent Federal Circuit decisions.  See, e.g., Prometheus Laboratories, Inc. v. Mayo Collaborative Services, 628 F.3d 1347, CPLRG 0071 (Fed. Cir. 2010), on remand from 130 S. Ct. 3543 (2010), cert. granted, 180 L. Ed. 2d 844 (June 20, 2011); Ass’n for Molecular Pathology v. United States Patent and Trademark Office, CPLRG 0073 (Fed. Cir. July 29, 2011); Cybersource Corp. v. Retailed Decisions, Inc., CPLRG 0074 (Fed. Cir. Aug. 16, 2011).

Patents: Digital Imaging; “Blue Masks.” The patents at issue concerned “digital image halftoning.”  U.S. Pat. No. 5,111,310; U.S. Pat. No. 5,341,228.  USPatNo5111310
USPatNo5341228 The claims implemented certain “blue masks” used in computer generation of digital color and black-and-white images.

Claims. Three asserted claims were as follows:
1. A method for the halftoning of gray scale images by utilizing a pixel-by-pixel comparison of the image against a blue noise mask in which the blue noise mask is comprised of a random non-deterministic, non-white noise single valued function which is designed to produce visually pleasing dot profiles when thresholded at any level of said gray scale images.
2. The method of claim 1, wherein said blue noise mask is used to halftone a color image.
11. A method for the halftoning of color images, comprising the steps of utilizing, in turn, a pixel-by-pixel comparison of each of a plurality of color planes of said color image against a blue noise mask in which the blue noise mask is comprised of a random non-deterministic, non-white noise single valued function which is designed to provide visually pleasing dot profiles when thresholded at any level of said color images, wherein a plurality of blue noise masks are separately utilized to perform said pixel-by-pixel comparison and in which at least one of said blue noise masks is independent and uncorrelated with the other blue noise masks.

Not Abstract; Functional Applications. Reversing a district court decision to the contrary, the court held that the subject matter of the claimed processes did not fail for abstractness. The invention had “functional and palpable applications” in computer technology. Some claims required hardware, such as film, memory and a display. The claimed methods used “algorithms and formulas that control the masks and halftoning,” but these “do not bring this invention even close to abstractness that would override the statutory categories and context.”

Restrictive Approach to Bilski.  In Research Corp. Technologies, Chief Judge Rader threw down a generally restrictive approach to Bilski abstractness:  “[T]his court … will not presume to define “abstract” beyond the recognition that this disqualifying characteristic should exhibit itself so manifestly as to override the broad statutory categories of eligible subject matter and the statutory context that directs primary attention on the patentability criteria of the rest of the Patent Act.”

Section 112. Judge Rader cautioned that Section 112 contained “powerful tools to weed out claims that may present a vague or indefinite disclosure of the invention”:

Thus, a patent that presents a process sufficient to pass the coarse eligibility filter may nonetheless be invalid as indefinite because the invention would “not provide sufficient particularity and clarity to inform skilled artisans of the bounds of the claim.” Star Scientific., Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1371 (Fed. Cir. 2008). That same subject matter might also be so conceptual that the written description does not enable a person of ordinary skill in the art to replicate the process.

Chisum explores these questions in a work in progress: “Weeds and Seeds in the Supreme Court’s Business Method Patents Decision: New Directions for Regulating Patent Scope.”  Essay on Bilski

In Bilski v. Kappos (2010), the Supreme Court affirmed the Federal Circuit’s decision upholding rejection of the applicant Bilski’s claims to a commodities trading risk-hedging method. The claims were to abstract ideas and thus unpatentable under the hoary Benson-Flook-Diehr trilogy. The Court declined to adopt “categorical rules that might have wide-ranging and unforeseen impacts.”

The Court did not fully endorse the view of any of the five opinions by the Federal Circuit judges in the en banc Bilski.  However, the Court was consolatory: “Students of patent law would be well advised to study these scholarly opinions.”

1. Inconclusive Contribution. Bilski is a remarkably inconclusive contribution to the law on patent eligible subject matter. One reason for the inconclusiveness may have been that the concurring opinion by Justice Stevens, discussed below, reads as if  it were drafted to be a majority opinion. That opinion and the opinion for the Court by Justice Kennedy, discussed below, reach the same conclusion on the merits of the specific application, to wit, that the Federal Circuit’s affirmance of the PTO’s rejection should be affirmed. The Stevens opinion may have become a concurring one only after it failed to garner the necessary fifth vote. The relatively shorter Kennedy opinion reads as if  it were drafted as a compromise statement later in the Court’s deliberative process. Justice Scalia, who declined to concur in two parts of the Justice Kennedy opinion and concurred in one part of the Justice Breyer opinion, may have been the potential swing vote. Justice Scalia’s action suggests that he was sympathetic with some of the views in the Stevens and Breyer opinions that advocated restricting the scope of patent eligible subject matter but that he could not accept the categorical ban on business method patents espoused by Justice Stevens.

2. The “Majority” Opinion; Holdings. In Bilski, Justice Kennedy wrote the lead opinion. Chief Justice Roberts and Justices Thomas and Alito joined “in full.” Justice Scalia, without explanation, joined the Kennedy opinion “except for Parts II-B-2 and II-C-2.” Thus, Justice Kennedy’s opinion is the majority opinion of the Court except as to what is said in those two subparts.

In the portions of the Kennedy opinion concurred in by the Court majority, the Court held that:

(a) the “three specific exceptions to §101’s broad patent-eligibility principles” derived from case law, to wit: ” `laws of nature, physical phenomena, and abstract ideas’,” remain the law even though those exceptions were “not required by the statutory text” (Section 101).

(b) the MORT (machine-or-transformation) test is a “useful and important clue, an investigative tool, for determining whether some claimed claimed inventions are processes under §101,” but, contrary to the Federal Circuit majority, the MORT test “is not the sole test for deciding whether an invention is a patent-eligible `process’.”

(c) Section 101’s category of “process,” which Section 100(b) defines as including a “method,” does not “categorically exclude[] business methods,” because (a) the ordinary meaning of “method” does not exclude business methods, (b) it was not clear “how far a prohibition of business method patents would reach,” (c) it was not clear whether such a prohibition “would exclude technologies for conducting a business more efficiently,” and (d) the Section 273 infringement defense clarified that “a business method is simply one kind of `method’ that is, at least in some circumstances, eligible for patenting under §101.”

(d) Bilski’s “patent application … falls outside of §101,” not because of either of the two rejected “broad and atextual approaches,” that is, the MORT test and the business method categorical exclusion, but because its claims cover an abstract idea–to wit, either the “basic of concept of hedging” (claim 1), that concept reduced to a mathematical formula (claim 4), or that concept limited to a particular field or to “token post solution components,” abstract ideas being one of the Section 101 exceptions established in the Benson, Flook and Diehr decisions.

Concluding, the Court cautioned that it was neither endorsing past Federal Circuit precedent nor precluding the Federal Circuit from developing “other limiting criteria,” including “less extreme means of restricting business method patents.”

3. Stevens, Concurring. Justice Stevens, who, inter alia, had authored Parker v. Flook (1978), and dissented in Diamond v. Diehr (1981), wrote a lengthy concurring opinion, joined by Justices Ginsburg, Breyer and Sotomayor. In the opinion, issued the day of his retirement from the Supreme Court, Justice Stevens agreed that the MORT test was “reliable in most cases” but “not the exclusive test.” However, he argued that the Court should “restore patent law to its historical and constitutional moorings” by declaring that “methods of doing business are not, in themselves, covered by the statute.”

4. Breyer, Concurring. Justice Breyer also wrote a concurring opinion. In part I, Justice Breyer agreed with Justice Stevens that “business methods” are not patentable. In part II, in which Justice Scalia joined, Justice Breyer argued that four points were consistent with both the Court’s opinion (that is, Justice Kennedy’s opinion) and Justice Steven’s concurring opinion: (1) Section 101 is “broad” but “not without limit,” excluding phenomena of nature (though newly discovered), mental processes, and abstract intellectual concepts; (2) the MORT test has repeatedly helped the Court determine what is a patentable “process” in cases extending “back over a century,” (3), MORT has never been the “sole test,” and (4) the suggestion in State Street Bank (1998) that “anything which produces a `useful, concrete, and tangible result” “may be patented” is unsupported by Supreme Court authority, and the Court’s decision in this case should not be taken as disapproving of the Federal Circuit’s rejection of the “useful, concrete and tangible result” test.

The last specific point, repudiation of the State Street “useful, concrete and tangible” test, reflected the views of at least five Justices and hence can be regarded as the holding of the Court.

5. Structure of the Majority Opinion. The Court’s opinion by Justice Kennedy first summarized the determinative question in the case and the three arguments why the patent application at issue was “outside the scope of patent law.”

In Part I, it reviewed the subject matter of the application and claims, the rejections by the Patent and Trademark Office, and the Federal Circuit’s holding with its concurring and dissent opinions.

In Part II, the Court discussed the applicable legal principles.

In Part III, the Court resolved the case “in the light of” three precedents, Benson, Flook, and Diehr.

Finally, the Court concluded:

Today, the Court once again declines to impose limitations on the Patent Act that are inconsistent with the Act’s text.  The patent application here can be rejected under our precedents on the unpatentability of abstract ideas.  The Court, therefore, need not define further what constitutes a patentable “process,” beyond pointing to the definition of that term provided in §100(b) and looking to the guideposts in Benson, Flook, and Diehr. And nothing in today’s opinion should be read as endorsing interpretations of §101 that the Court of Appeals for the Federal Circuit has used in the past. See, e.g., State Street [Bank & Trust Co. v. Signature Financial Group, Inc., 149 F. 3d 1368, 1373 (1998)], and AT&T Corp. [v. Excel Communications, Inc., 172 F. 3d 1352, 1357 (1999)]. It may be that the Court of Appeals thought it needed to make the machine-or-transformation test exclusive precisely because its case law had not adequately identified less extreme means of restricting business method patents, including (but not limited to) application of our opinions in Benson, Flook, and Diehr. In disapproving an exclusive machine-or-transformation test, we by no means foreclose the Federal Circuit’s development of other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text.”

6. Comment on “Abstract Ideas.”  The Court’s characterization of the claims as “abstract ideas” is palpably unsatisfying. The claims were to a series of specified steps a human can take (e.g, “identifying market participants” and “initiating a series of transactions.” The claimed subject matter may have been very obvious in view of the state of the art or possibly unduly vague, but to characterize it  as an ”abstract idea” stretches the meaning of “abstract” and “idea” beyond recognition.

BilskiUSSCt06282010

MAJOR ISSUES: Business method patents; “process” in Section 101; exceptions for abstract ideas, natural phenomena, and laws of nature

For discussions of “processes” patent eligible subject matter, see Chisum on Patents 1.03. On business methods, see Chisum on Patents 1.03[5]. See also Chisum Patent Law Digest 1110. For an essay on Bilski, see Chisum Essay.   Essay on Bilski

In this landmark, must-read decision, the Supreme Court affirms the judgment (but not reasoning) of the Federal Circuit, which upheld rejection of the applicant Bilski’s claims to a commodities trading risk hedging method. See In re Bilski, 545 F.3d 943 (Fed. Cir. 2008) (en banc), aff’d, 130 S. Ct. 3218 (2010). The claims were to an abstract idea or would pre-empt use of the idea, generally or in the particular field of commodities and energy markets. The claims were, therefore, unpatentable under the Supreme Court’s decisions in Gottschalk v. Benson, 409 U.S. 63 (1972); Parker v. Flook, 437 U.S. 584 (1978), and Diamond v. Diehr, 450 U.S. 175 (1981). The Court declined to adopt “categorical rules that might have wide-ranging and unforeseen impacts.”

1. OPINIONS. The Court issued three opinions.

     a. KENNEDY, J. FOR COURT (EXCEPT AS TO TWO PARTS). Justice Kennedy wrote the lead opinion. Chief Justice Roberts and Justices Thomas and Alito joined “in full.” Justice Scalia, without explanation, joined the Kennedy opinion “except for Parts II-B-2 and II-C-2.” Thus, the lead Kennedy opinion is a majority opinion for the Court except as to Part II-B-C and Part II-C-2.

     b. STEVENS, J., CONCURRING. Justice Stevens, who had authored Flook (1978), and dissented in Diehr (1981), wrote a lengthy concurring opinion, joined by Justices Ginsburg, Breyer and Sotomayor.

     c. BREYER. Justice Breyer wrote a short concurring opinion.

2. HOLDINGS. The portions of the Stevens opinion concurred in by the Court majority include four holdings.

     a. EXCEPTIONS TO SECTION 101. The “three specific exceptions to §101’s broad patent-eligibility principles” derived from case law, to wit: ” `laws of nature, physical phenomena, and abstract ideas’,” remain the law even though those exceptions were “not required by the statutory text” (Section 101).

     b. MACHINE-OR-TRANSFORMATION TEST: USEFUL TOOL, NOT AN EXCLUSIVE TEST. The MORT (machine-or-transformation) test is a “useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under §101,” but, contrary to the Federal Circuit majority, the MORT test “is not the sole test for deciding whether an invention is a patent-eligible `process’.”

     c. BUSINESS METHODS: NOT CATEGORICALLY EXCLUDED. Section 101’s category of “process,” which Section 100(b) defines as including a “method,” does not “categorically exclude[] business methods.”

          i. ORDINARY MEANING. The ordinary meaning of “method” does not exclude business methods.

          ii. HOW FAR WOULD A PROHIBITION REACH? It was not clear “how far a prohibition of business method patents would reach.”

          iii. TECHNOLOGIES FOR CONDUCTING A BUSINESS MORE EFFICIENTLY. It was not clear whether such a prohibition “would exclude technologies for conducting a business more efficiently.”

          iv. SECTION 273 DEFENSE. The Section 273 infringement defense, added in 1999, clarified that “a business method is simply one kind of `method’ that is, at least in some circumstances, eligible for patenting under §101.”

3. REJECTION OF CLAIMS AFFIRMED. Bilski’s “patent application … falls outside of §101,” not because of either of the two rejected “broad and atextual approaches,” that is, the MORT test and the business method categorical exclusion, but because its claims cover an abstract idea–to wit, either the “basic of concept of hedging” (claim 1), that concept reduced to a mathematical formula (claim 4), or that concept limited to a particular field or to “token post solution components,” abstract ideas being one of the Section 101 exceptions established in the Benson, Flook and Diehr decisions.

4. PAST FEDERAL CIRCUIT PRECEDENT: NOT ENDORSED. The Court cautioned that it did not endorse past Federal Circuit precedent.

5. FEDERAL CIRCUIT MAY DEVELOP “OTHER LIMITING CRITERIA”; “LESS EXTREME MEANS OF RESTRICTING BUSINESS METHOD PATENTS.” The Court did not preclude the Federal Circuit from developing “other limiting criteria,” including “less extreme means of restricting business method patents.”

7. STEVENS, CONCURRING: BUSINESS METHODS NOT PATENTABLE. Justice Stevens agreed that the MORT test was “reliable in most cases” but “not the exclusive test.” However, in an extensive opinion, he garnered historical and policy support for excluding patents on business methods. In his view, the Court should “restore patent law to its historical and constitutional moorings” by declaring that “methods of doing business are not, in themselves, covered by the statute.”

8. BREYER, CONCURRING. In a separate opinion joined in pertinent part by Justice Scalia, Justice Breyer argued that four points were consistent with both the Court’s opinion (that is, Justice Kennedy’s opinion) and Justice Steven’s concurring opinion.

     a. Section 101 is “broad” but “not without limit,” excluding phenomena of nature (though newly discovered), mental processes, and abstract intellectual concepts.

     b. The MORT test has repeatedly helped the Court determine what is a patentable “process” in cases extending “back over a century,”

     c. MORT has never been the “sole test.”

     d. STATE STREET BANK (1998); “USEFUL, CONCRETE, AND TANGIBLE RESULT” TEST NOT SUPPORTED BY SUPREME COURT AUTHORITY. The suggestion in State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368, 1373 (1998), that “anything which produces a `useful, concrete, and tangible result,’” can be patented, is not supported by Supreme Court authority, and the Court’s decision in this case should not be taken as disapproving of the Federal Circuit’s rejection in this case of the “useful, concrete and tangible result” test.

9. STRUCTURE OF OPINION FOR THE COURT. The Court’s opinion by Justice Kennedy addressed in separate parts the three arguments why the patent application at issue was “outside the scope of patent law.”

     a. In Part I, it reviewed the subject matter of the application and claims, the rejections by the Patent and Trademark Office, and the Federal Circuit’s holding with its concurring and dissent opinions.

     b. In Part II, the Court discussed the applicable legal principles.

          i. In Part II A, the Court discussed the statute, Section 101.

          ii. In Part II B, the Court discussed whether the MORT test was an exclusive one, holding that it was not. Justice Scalia joined Part II B 1 but not Part II B 2, making only the former the opinion for the Court.

          iii. In Part II C, the Court discussed business methods, rejecting the argument that they were categorically excluded from patentability. Justice Scalia joined Part II C 1 but not Part II C 2, making only the former the opinion for the Court.

     c. In Part III, the Court resolved the case “in the light of” three precedents, Benson, Flook, and Diehr.

Bilski Watch; Supreme Court on Business Method Patents