BPAI Decides to Test "Pure" Business Methods at CAFC - Holds Application Unpatentable under 35 U.S.C. §101

Ex Parte Bilski (Appeal No. 2002-2257) - Mailed September 26, 2006

This 71-page opinion from the BPAI stems from the recent USPTO policy of publishing "Informative Opinions" that are not precedential, but are intended to inform the patent bar about positions being taken at the USPTO. What is interesting about this opinion is that the Bilski panel (Frankfort, McQuade, Barrett, Bahr and Nagumo) has appeared to take a position that contradicts the majority holding in Ex Parte Lundgren (where ALJ Barrett - the only ALJ participating in Bilski - provided a dissenting-in-part opinion). While Lundgren appeared at first to close the chapter on patentable subject matter at the USPTO, the subsequent actions of the examining corps, the Nuijten case, and now Bilski, make clear that the Office is preparing to test the limits of §101 at the CAFC.

Claim 1 of Bilski's patent application (08/833,892) reads as follows:

1. A method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price comprising the steps of:

(a) initiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumers purchase said commodity at a fixed rate based upon historical averages, said fixed rate corresponding to a risk position of said consumer;

(b) identifying market participants for said commodity having a counter-risk position to said consumers; and

(c) initiating a series of transactions between said commodity provider and said market participants at a second fixed rate such that said series of market participant transactions balances the risk position of said series of consumer transactions.

During prosecution, the Applicants admitted that hardware, such as a computer, was not necessary to perform the recited steps. In rejecting the application, the examiner relied (almost verbatim) on a Lundgren-type rejection:

"[rlegarding claims 1-11, the invention is not implemented on specific apparatus and merely manipulates [an] abstract idea and solves a purely mathematical problem without any limitation to a practical application, therefore, the invention is not directed to the technological arts . . . The definition of 'technology' is the 'application of science and engineering to the development of machines and procedures in order to enhance or improve human conditions, or at least improve human efficiency in some respect.' (Computer Dictionary 384 (Microsoft Press, 2d ed. 1994))"

This time, BPAI skirted the Lundgren result by (1) interpreting the rejection as being one on an "abstract idea," and (2) distinguishing Lundgren by making the rather contorted argument that the abdication of the "technological arts" test didn't affect the requirement that claims possess some aspect of "technology":

The Board held in Lundgren that the 'technical arts' test is not a separate and distinct test for statutory subject matter. Although commentators have read this as eliminating a 'technology' requirement for patents, this is not what was stated or intended. As APJ Barrett explained, "[tlhe 'technology' requirement implied by technological arts' is contained within the definitions of the statutory classes . . . All machines, manufactures, or [man-made] compositions of matter" are things made by man and involve technology. Methods which define a transformation of physical subject matter from one state or thing to another involve technology and qualify as a statutory 'process' under § 101.

Apparently, the Board has chosen to draw a line with applications directed to non-machine-implemented inventions, (grudgingly) noting that all of the CAFC decisions on statutory subject matter were directed to computer-related inventions:

[T]he holding in State Street is "clearly limited to "transformation of data . . . by a machine." AT&T involved a machine-implemented process. Machines are physical things that nominally fall within the class of a "machine" in § 101, and machine-implemented methods inherently act on and transform physical subject matter, such as objects or electrical signals, and nominally fall within the definition of a "process under § 101. No machine is required by the present claims. Until instructed otherwise, we interpret State Street and AT&T to address the "special case" of subject matter that nominally falls within § 101, a general purpose machine or machine-implemented process, but which is nonetheless unpatentable because the machine performs an "abstract idea."

Read the opinion here: Ex parte Bilski. The application has been appealed to the CAFC (case number 07-1130), and briefs will be submitted to the court by March 12, 2007.

See USPTO's database of Informative Opinions here.

See more from the Patently-Unobvious blog, which broke the story.

More comments from Dennis at Patently-O