The "German Bilski"? DE High Court Declares Client-Server Software Patentable Subject Matter

The Federal Court of Justice ("Bundesgerichtshof") is the supreme court (court of last resort) in all matters of  law in Germany.  Recently, the Court was asked to evaluate whether a client-server system, configured to dynamically generate structured documents, is sufficiently of a "technical nature" to warrant patent protection.

Unlike the US, Germany follows the EU prohibition on patents directed to "computer programs as such."  While this term is interpreted differently in different EU jurisdictions, German law requires software inventions to solve a "technical problem" in order to be eligible for patent protection. 

The (machine-translated) claim in question read

A method for dynamic generation of structured documents (SD) to at least one with a client (CL) communicating, with limited resources, a host computer (SRV), comprising the steps of:

receiving request data (REQ) of the client (CL) on the host computer (SRV);

extracting parameters from the request data request (REQ);

mapping the request parameter using a control module (CRT) on an instruction set of a software architecture-specific interface module (IF) of the master computer (SRV);

dynamically generating the structured document (SD) using at least one presentation document (TD) with included calls of service takers (JB), with instructions of the service takers (JB) through the interface module (IF) extracts and were confined to one corresponding to a section of service takers of will command the interface module (IF shown),


which are executed with the assistance of the depicted request parameters in a runtime environment of the control module (CRT) and define the content after the execution and / or structure of the structured document (SD) . . .

The Applicant argued that the invention addresses a "technical problem"  by providing a method that allows dynamically structured documents to be delivered to clients having computers of limited resources.  Since the method addresses a hardware-based problem (limited resources), it is "technical" in nature, and thus patentable.

The Court agreed, and overturned the (lower) Federal Patent Court.

[Machine translation]: A technical means to solve a technical problem exists not only when equipment components are modified or addressed fundamentally different. It is sufficient that when the ending of a data processing program that is used to solve the problem, is determined by technical factors outside the data processing system or if the solution consists precisely in a computer program in such a way that the technical characteristics of the data processing system have regard to.   That condition is satisfied in this case. The invention relates to teaching, such as the Patent Court in law, the basic approach for the generation of dynamic documents.  It is aimed not so to the programmer, but to the system designer who has the overall architecture of the data processing system in the eye and takes into account the different characteristics and performance of hardware and software components. Precisely for this reason it concerns the use of technical means to solve the underlying technical problem.

Read/download the original German Opinion (PDF)

Read the Google-translated version of the opinion here (link)

The anti-software patent community is apoplectic about this decision and has started to weigh in on the ruling - see Florian Mueller, "German high court declares all software potentially patentable" (link)

Into the Final Stretch: Surveying Bilski's Treatment in the Lower Courts

While everyone continues to fret over the issuance of the SCOTUS Bilski decision (which, by the way, is rumored to be delayed until at least May 17th), Blake Reese has published a timely article that survey's Post-CAFC-Bilski jurispridence in the Federal Circuit and the district courts.  The results aren't pretty - most of the patents challenged on section 101 grounds were found invalid.

FEDERAL CIRCUIT

In re Ferguson, 558 F.3d 1359 (Fed. Cir. 2009)
CLAIMED: A process for “marketing a product … using a shared marketing force” and a “paradigm for marketing a company….”
HELD: Unpatentable.  Methods of “organizing business or legal relationships in the structuring of a sales force (or marketing company)” do not transform “physical objects or substances” or “representati[ons] of physical objects or substances.”

Prometheus Labs., Inc. v. Mayo Collaborative Servs., 581 F.3d 1336 (Fed. Cir. 2009)
CLAIMED: "Methods for calibrating the proper dosage of thiopurine drugs, which are used for treating both gastrointestinal and nongastrointestinal autoimmune diseases.”
HELD: Patentable. The claims are transformative as that “[t]he transformation is of the human body following administration of a drug and the various chemical and physical changes of the drug’s matabolites that enable their concentrations to be determined.”   Unlike mere “data-gathering steps,” “[t]he asserted claims are in effect claims to method of treatment, which are always transformative when a defined group of drugs is administered to the body to ameliorate the effects of an undesiredcondition.”

--------------------

DISTRICT COURTS

Transamerica Life Ins. Co. v. Lincoln Nat’l Life Ins. Co., No. C 06-110-MWB, 2010 WL 785905, (N.D. Iowa March 8, 2010)
CLAIMED: “A five-step computerized method for administering a variable annuity plan having, inter alia, a guaranteed minimum payment feature associated with a systematic withdrawal program.”
RESULT: Court denied the alleged infringer's motion for leave to amend its pleadings aftger the CAFC Bilski decision was rendered.  However, the court interpreted Bilski to mean that the “machine-or-transformation test” is the sole test to determine the patent eligibility of method claims.

King Pharms., Inc. v. Eon Labs, Inc., 593 F. Supp. 2d 501 (E.D.N.Y. 2009)
CLAIMED: A method of “administering metaxalone to a patient with food.”
HELD: Unpatentable.  “The act of informing another person of the good effect of metaxalone does not transform the metaxalone into a different state or thing.” Id. court also noted that the claim’s recitation of “a particular transformation … must not constitute mere ‘insignificant postsolution activity.’”

Fort Props., Inc. v. Am. Master Lease, LLC, 609 F. Supp. 2d 1052 (C.D. Cal. 2009)
CLAIMED: A “method for creating an investment instrument out of real property.”
HELD:  Unpatentable.  The claims at issue “involve only the transformation or manipulation of legal obligations and relationships.”  In particular, those claims “only transform or manipulate legal ownership interests in real estate” and, therefore, “[u]nder Bilski, the [c]ourt [could not] find that those claims transform an article or thing.

CyberSource Corp. v. Retail Decisions, Inc., No. C 04-03268, 2009 WL 815448 (N.D. Cal. May 26, 2009)
CLAIMED:  “A method and system for detecting fraud in a credit card transaction between a consumer and a merchant over the internet.”
HELD:  Unpatentable.  Performing the method “over the Internet” was not a tie to a particular machine because “the internet is an abstraction … as [o]ne can touch a computer or a network cable, but one cannot touch ‘the internet.’ . . . [under Bilski] the use of the internet does not impose meaningful limits on the scope of the claims.”   Uunpatentable subject matter “does not become patentable by tossing in references to internet commerce.”

Versata Software, Inc. v. Sun Microsystems, Inc., No. 2-06-CV-358 (TJW), Memorandum Opinion & Order, Dkt. No. 90, at p. 2 (E.D. Tex. Aug. 19, 2008)
CLAIMED:  "A computer-based configuration system" for modifying configuration instances in a computer model.
RESULT: The accused infringer filed a motion for judgment on the pleadings, based on the recently-issued (CAFC) Bilski decision.  The court denied the motion, noting that the Federal CIrcuit "declined to adopt a broad exclusion over software or any other such category of subject matter beyond the exclusion of claims drawn to fundamental principles …[and noted] the process claim at issue in the appeal is not, in any event, a software claim. Thus, the facts here would be largely unhelpful in illuminating the distinctions between those software claims that are patent-eligible and those that are not.

Every Penny Counts, Inc. v. Bank of America Corp., No. 2:07-cv-042, slip op. (M.D.Fla. May 27, 2009)
CLAIMED: “A system whereby consumers can save and/or donate a portion of a credit or debit transaction.”
HELD:  Unpatentable.  The claimed “process” includes “a mathematical algorithm [that] uses machines for data input and data output and to perform the required calculations.”  But, “those machines do not … impose any limit on the process itself.”

DealerTrack, Inc. v. Huber, 657 F. Supp. 2d 1152, 1153 (C.D. Cal. July 7, 2009)
CLAIMED: “A computer aided method of managing a credit application.”
HELD:  Unpatentable.  Each of the structures were not a “particular machine” pursuant to Bilski.  The patent “does not specify precisely how the computer hardware and database are ‘specially programmed,’ and the claimed central processor is nothing more than a general purpose computer that has been programmed in some unspecified manner.”

Research Corp. Techs. v. Microsoft Corp., No. CV-01-658, 2009 WL 2413623. (D. Ariz. July 28, 2009)
CLAIMED: “Image halftoning technology used in computers and printers.”
HELD:  Unpatentable. While other claims reciting “the production of an image as a result of the comparison numbers” were transformative, the claims at issue that merely “assembl[ed] … gray scale images to generate final dot profiles” were not transformative because they did not “mandate a further visual display or image."


Abstrax, Inc. v. Dell, Inc., No. 2:07-CV-221-DF-CE, 2009 WL 3255085, at *2 (E.D. Tex. Oct. 7, 2009)
CLAIMED:  “a method for assembling a product having components wherein the variable portions of a set of abstract assembly steps are resolved in accordance with data from a desired configuration.”
HELD: Patentable.  The data in the claim “represents physical and tangible objects and their respective structures” because it concerns “how parts, pieces, or components of a product fit together and how they are configured . . . the raw data is transformed into assembly instructions for assembling the product to have the requested configuration.”

Fuzzysharp Techs. Inc. v. 3D Labs Inc., Ltd., No. C 07-5948 SBA, 2009 WL 4899215, at *1 (N.D. Cal. Dec. 11, 2009).
CLAIMED: “mathematical algorithms that can be used to reduce the number of calculations required to determine whether a 3D surface is visible or invisible on a display screen.”
HELD:  Unpatentable.  “The salient question is not whether the claims are tied to a computer,” but “[r]ather, as Bilski makes clear, the question is whether the claims are ‘tied to a particular machine.’ . . . Courts applying Bilski have concluded that the mere recitation of ‘computer’ or reference to using a computer in a patent claim is insufficient to tie a patent claim to a particular machine.”

Accenture Global Servs. GmBH v. Guidewire Software Inc., --- F. Supp. 2d ---, 2010 WL
771595, at *2 (D. Del. 2010)
CLAIMED:  Patent directed to “a computer program for developing component based software for the insurance industry. The program includes a data component, a client component, and a controller component. The client component is responsible for allowing users to edit tasks, add new tasks, and ‘achieve an insurance-related goal upon completion,’ as well as to generate a historical record of completed tasks.”
HELD:  Wait until SCOTUS issues opinion.  In the meantime, the court found that the claims manipulated “non-tangible information” such as “the cost of automobile repair, hours worked, or the amount of medical expenses.”  Accordingly, “even if a tangle visual ‘display’ [was] provided, that visual image would not represent any specific tangible objects (or type of data).”

 
Read/download "Judicially Re(De)Fining Software Patent Eligibility: A Survey of Post-Bilski Jurisprudence" (link)

Business Method Patents - Down, But Not Out (At Least Not Yet)

Transamerica Life Insurance Company et al v. Lincoln National Life Insurance Company, N.D. IA (1-06-cv-00110)

Lincoln accused Transamerica and others of infringing U.S. Patent 7,089,201, titled "Method and apparatus for providing retirement income benefits." One of the claims recited in the preamble "a computerized method for administering a variable annuity plan having a guaranteed minimum payment feature associated with a systematic withdrawal program, and for periodically determining an amount of a scheduled payment to be made to the owner under the plan."

On February 13, the jury returned a verdict in favor of Lincoln, finding the patent valid and infringed - a reasonable royalty of $13,098,349 was assessed against Transamerica.

Read the verdict form here (from Docket Navigator).

NOTE: It appears that Bilski was not decided in time for this case. Presumably, Transamerca will appeal and/or negotiate a settlement based on the opinion.

The First Domino? C.D. Ca. Invalidates Business Method Patent Under Bilski

Fort Properties, Inc. v. Master Lease LLC, (SACV07-365 AG) C.D. Ca., January 22, 2009

Fort Properties filed suit against Master Lease, seeking a declaration from the court that Master Lease's patent on business methods for creating an investment instrument out of real property (US patent 6,292,788) was not infringed and/or invalid.

Shortly after the CAFC decided Bilski, Fort Properties filed a SJ motion arguing that the patent was invalid under 35 U.S.C. 101. The district court agreed with Fort Properties, relying first on the prosecution history of the patent:

[T]he Court is convinced that review of the ‘788 Patent is appropriate in this case. Defendant’s application to the U.S. Patent Office was declined twice because the examiner found the claims were not “in the technological arts” and thus not patentable under Section 101 . . . The patent examiner who rejected those applications then apparently left the U.S. Patent Office, and the application was assigned to another patent examiner . . . who ultimately allowed the claims in April 2001. While the Notice of Allowance did not address the Section 101 issues, Defendant’s previous correspondence with [the examiner] discussed the “useful, concrete and tangible results” of the claims. . . . Defendant also noted [the examiner, during an interview] “explained his view that the claims as written met the statutory requirement of patentable subject matter under 35 U.S.C. § 101, and provided a useful, concrete, and tangible result.” . . . The Court finds that [the examiner's] decision to allow the claims relied in large part on the “useful, concrete, and tangible result” test rejected by Bilski. The Court thus examines the claims of the ‘788 Patent under the proper machine-or-transformation test.

Machine

Defendant explicitly acknowledged during the patent application process that the recited methods “need not be performed by a computer.” (Ex. 2:199.) In its opposition brief, Defendant acknowledges that “the ‘machine’ prong of the Benson test is not what gives rise to patentability in [the ‘788 Patent], but rather the ‘transformation of an article.’”

Transformation

Defendant points out . . . the “creation of deedshares,” arguing that “[t]he creation of the deedshare certainly qualifies as the ‘transformation and reduction of an article.’” “Certainly,” Defendant argues, “there can be no greater transformation for an article than the very creation of the article itself.” But the deedshares themselves are not physical objects or substances. See Bilski, 545 F.3d at 963. As Plaintiff explains, “what is allegedly created is nothing more than an arrangement of conceptual legal rights, which may or may not be in a printed document.” Nor do the deedshares represent physical objects or substances. See Bilski, 545 F.3d at 963. Again, the deedshares represent only legal ownership interests in property. Those ownership rights are not physical objects. Creation of a deedshare does not constitute transformation of an article or thing under Bilski.

Download a copy of the opinion here.

CAFC Decides Bilski, Rules In Favor Of the USPTO

Read all the opinions (9-3, 132 pages) here

HIGHLIGHTS:

** Freeman-Walter-Abele "inadequate" and "should no longer be relied on"

*** HOWEVER, "'useful, concrete and tangible result' inquiry is [also] inadequate." Noted the CAFC: "As a result, those portions of our opinions in State Street and AT&T relying solely on a 'useful, concrete and tangible result' analysis should no longer be relied on (emphasis added)."

**** CAFC reaffirms Benson approach : claims are patent eligible under 101 if (1) it is tied to a particular machine or apparatus, or (2) transforms a particular article into a different state or thing

State Street still good law, but methods must be implemented on a machine. Noted the court in footnote 18: "In State Street, as is often forgotten, we addressed a claim drawn not to a process but to a machine."

"PURE" BUSINESS METHODS IN JEOPARDY:

From p. 28 of the opinion:

Purported transformations or manipulations simply of public or private legal obligations or relationships, business risks, or other such abstractions cannot meet the test because they are not physical objects or substances, and they are not representative of physical objects or substances.

RETURN OF "TECHNOLOGICAL ARTS" TEST?

Heck no. The CAFC clearly rebuffed the PTO in this regard:

[W]hile we agree with the PTO that the machine-or-transformation test is the correct test to apply in determining whether a process claim is patent-eligible under § 101, we do not agree, as discussed earlier, that this amounts to a "technological arts" test . . . Neither the PTO nor the courts may pay short shrift to the machine-or-transformation test by using purported equivalents or shortcuts such as a "technological arts" requirement. Rather, the machine-or-transformation test is the only applicable test and must be applied. (p. 29)

UPDATE:

The PLI Blog is pronouncing "Federal Circuit Decides Software No Longer Patentable" - I disagree with this completely. The opinion clearly provides that if some machine exists and a well-defined data structure is manipulated, 101 will be satisfied. The large majority of software patents will be just fine.

Bloomberg is reporting that "In today's ruling, the appeals court overturned a 1998 decision involving State Street Corp. that made clear that business methods are entitled to patent protection." Again, this is not correct - the CAFC clearly stated that State Street remains good law (i.e., nothing was overturned).

I won't get into the preliminary reactions from the anti-software patent crowd, but they may want to read the opinion a little more closely before popping their champagne corks . . .

A Different Kind of Battle At the USPTO Over 35 U.S.C. 101

Back in 2005 (just prior to today's "great patentable subject matter debate"), a certain buzz was created when Andrew Knight began promoting the idea of "storyline patents" and followed up by filing applications (e.g., 10/722,463) in pursuit of his goal of establishing a new form of intellectual property. An exemplary claim from his application:

1. A process of relaying a story having a timeline and a unique plot involving characters, comprising:

indicating a character's desire at a first time in said timeline for at least one of the following:

a) to remain asleep or unconscious until a particular event occurs; and

b) to forget or be substantially unable to recall substantially all events during the time period from said first time until a particular event occurs;

indicating said character's substantial inability at a time after said occurrence of said particular event to recall substantially all events during the time period from said first time to said occurrence of said particular event; and

indicating that during said time period said character was an activeparticipant in a plurality of events.

It turns out that the "storyline" application recently received a first office action, and the PTO is taking the matter quite seriously: almost 8 pages of the office action are directed to constitutional arguments (including prior restraint of expression under the 1st amendment), 4 pages on section 101, and an interesting 103(a) argument, rejecting the claims "over any movie recorded on a DVD."

From the Office Action:

It should also be pointed out that storylines are not subject to improvement. Storylines may be changed, but not improved. Adding a plot element involving a white rabbit in a top hat would not improve Huckleberry Finn; it would merely make it different. Nothing in a storyline patent application can be used by other practitioners to advance the storytelling art. Thus storyline patents would not carry out the constitutionally mandated purpose behind the patent laws - i.e., to promote the progress of science and the useful arts.

Under current law, if a potential author reads a Narrative of the Most Extraordinary and Distressing Shipwreck of the Whale-Ship Essex and thinks he can do a better job telling the story, he may make an attempt. Thus the public gets two versions of the story from which to choose - Owen Chase's or Herman Melville's. But under the proposed scheme, it is unlikely that the public would have either version. Instead of writing the great American novel, existence of a storyline patent would create an incentive for potential authors to write the great American patent application. This is hardly the result that the framers of the Constitution had in mind.

Also, under a footnote:

Some people are critical of the patent system because there are people who have patents for invention they have no intention of making or using. Examiner will not join in this debate, but will make two observations:

(1) To the extent that this represents a problem, it would be unwise to add to the problem by creating yet another class of intellectual property to be held by those who are not going to make or use their invention.

(2) In defense of the holders of patents for inventions currently patentable, they at least provide an increase in human knowledge upon which others can improve. If A. Lincoln invents a device for lifting boats over shoals, others can improve upon the invention - whether Lincoln builds such a device or not. Thus science and technology advance. Storyline patents, on the other hand, are not amenable to "improvement".

Read the Office Action in its entirety here.

Read Knight's (68 page) Response here.

Gor Blimey! Software Patent Rejection Gets Pipped at the Post (UK-IPO)

Lest anyone think the USPTO is the only office having issues with patentable subject matter, the UK-IPO is now in full-fledged "struggle" mode trying to conform the Office's policy on software patents with that of the EPO.

The UK Patents Act is aligned with the European Patent Convention (EPC). Among other things, the Act states that patents are not available for computer programs as such. Accordingly, patent protection is typically denied for applications that are solely computer programs, such as an improved word processing program.

In the case of Symbian's Patent Application, the UK-IPO rejected an application directed to dynamic link library (DLL) access algorithms because it related to "nothing more than a computer program" (read the decision here).

Today, the UK-IPO issued a press release announcing that the High Court overturned the rejection. While the decision hasn't formally published, it's big news for software developers in the UK, who have wondered recently whether improvements in computer technology would ever be patentable in the UK if they didn't involve novel hardware elements.

The High Court has picked up on this as well. Recently, Justice Kitchin in Aerotel/Macrossan, stated the following to the UK-IPO:

The question I must now consider is whether the decision prohibits the patenting of all computer programs and, in particular, those which under the old approach would have been considered to make a conventional computer operate in a new way so as to deliver a relevant technical contribution . . . UK-IPO has apparently concluded that it does and so has reverted to its previous practice of rejecting all computer program claims . . . I do not detect anything in the reasoning of the Court of Appeal which suggests that all computer programs are necessarily excluded

It is presumed that similar reasoning exists in the soon-to-be-published Symbian decision. Additionally, and perhaps more importantly, it appears that UK-IPO's handling of software patents conflicts with EPO practice. From the UK-IPO press release:

[The opinion] observes that the UK-IPO's decision in this case illustrates the divide which exists between the UK-IPO and the European Patent Office (EPO) about how the patentability of inventions involving computer programs is assessed. This is because although the UK-IPO refused Symbian’s patent application, the EPO has granted Symbian a patent for its invention.

Not daunted on the reversal, the UK-IPO vows to fight on:

The UK-IPO believes that when deciding whether this computer implemented invention is patentable, Mr Justice Patten did not apply the so-called "Aerotel/Macrossan test", which was established by the Court of Appeal in an earlier case, in the way intended by the Court of Appeal. This in UK-IPO's view has created uncertainty about how the Aerotel/Macrossan test should be applied for inventions of this type.

The UK-IPO will therefore appeal this judgment with a view to seeking clarification from the Court of Appeal. Pending a decision by the Court of Appeal, the UK-IPO will be continuing to follow the practice, set out in its Practice Notices issued in November 2006 and February 2008, which are founded on the established Aerotel /Macrossan test. When applying this test, the UK-IPO will take account of the Symbian judgment in appropriate cases.

Read the press release here.

P.S., in case you're wondering about the "Aerotel/Macrossan test", it's basically a four-step process for determining patentable subject matter. The adjudicator must:

• Properly construe the claim;
• Identify the actual contribution;
• Ask whether the contribution falls solely within excluded subject matter; and
• Check whether the contribution is technical in nature.

In Re Nuijten: En Banc Denied

In Re Petrus A.C.M. Nuijten, (2006-1371) Fenruary 11, 2008

In a 9-3 decision, the CAFC denied Nuijten's petition for panel rehearing and rehearing en banc. Judges Linn, Newman and Rader dissented from the denial, stating that the law surrounding 35 U.S.C. §101 is in a "conflicted" state:

[O]ur decision conflicts with our own precedents as well as those of the Supreme Court . . . It conflicts with our own precedent because our predecessor court’s decision in In re Breslow, 616 F.2d 516 (C.C.P.A. 1980), forecloses the majority’s conclusion . . . that something "transient" or "fleeting" cannot constitute a "manufacture" under 35 U.S.C. § 101. And it conflicts with Supreme Court precedent because it ignores the Supreme Court’s analysis of how, in general terms, § 101 is to be construed. As the Court discussed in Diamond v. Chakrabarty, patentable subject matter includes "anything under the sun that is made by man" except for certain enumerated exceptions: "The laws of nature, physical phenomena, and abstract ideas have been held not patentable." 447 U.S. 303, 309 (1980). The majority’s narrow construction of "manufacture" ignores this framework.

Also, the dissent argued that the Nuijten holding muddles the distinction between § 101 and § 103, as the PTO considers data per se to be "printed matter" under Lowry, and thus cannot form the sole basis for nonobviousness:

In addition, this case raises important questions about the relationship between § 101 and § 103. In this case, we affirm the PTO’s rejection of claims to a signal simpliciter, but the PTO has allowed a claim to a storage medium containing the very same signal, on the grounds that the storage medium is a manufacture that can be rejected, if at all, only under some provision other than § 101. In particular, the PTO considers the patentability of such claims under the "printed matter" doctrine of § 103. See In re Lowry, 32 F.3d 1579 (Fed. Cir. 1994). These distinctions make no practical sense and are poorly supported by precedent, which, to the contrary, requires a more holistic approach to the question of whether a claim is directed only to an unpatentable abstraction or whether it is directed to a patentable application of such an abstraction to an otherwise statutory invention . . . The distinctions that are drawn between signals and storage media containing those signals would appear to apply equally to the distinctions between software and hardware and are artificial at best.

The stage is set: with the current denial, the case may likely go to the Supreme Court for certiorari review. If certiorari is not sought or granted, expect further inter-panel disputes until the matter is resolved by an en banc court.

Download the opinion here (link)

For an example of the PTO's treatment of §§101/103 issues, see Ex Parte Nehls et al., Appeal 2007-1823, Decided: January 28, 2008 (alleged non-statutory feature to be considered for the purposes of 101, but same feature considered "nonfunctional descriptive material" for the purposes of 103) (link)

Close Call at the BPAI - Near-Precedential Decision Sinks Computer Claim Under Utility Requirement

Ex Parte Nehls et al., Appeal 2007-1823, Decided: January 28, 2008

After a busy Summer in 2007, the BPAI has been (ominously?) quiet as of late, issuing no precedential opinions since Ex Parte Catan in July 2007, and only issuing 4 informative opinions during the same time.

In Ex Parte Nehls, the BPAI came close to breaking their silence, where Chief Administrative Judge Fleming, along with Administrative Patent Judges Adams, Grimes, Green, Linck, Prats and Fredman decided a controversial case over an application that claimed a computer-based system for comparing nucleic acid sequences:

13. A computer-based system for identifying nucleic acid fragments of the human genome of commercial importance comprising the following elements:

a) a data storage means comprising the sense or antisense sequence of at least 18 contiguous nucleotides of any one of SEQ ID NOS:9-1,008;

b) search means for comparing a target sequence to each of the sequences of the data storage means of step a) to identify homologous sequence(s); and

c) retrieval means for obtaining said homologous sequence(s) of step (b).

The claims were rejected by the Examiner under 35 U.S.C. §§ 101 and 112, first paragraph, on the basis that the Specification did not disclose a patentable utility for the claimed computer system comprising SEQ ID NO: 9 in its data storage means.

Under the CAFC's decision in In re Fisher, § 101 requires a utility that is both "substantial" and "specific." The court held that a substantial utility requires showing that “an invention is useful to the public as disclosed in its current form, not that it may prove useful at some future date after further research. Simply put, to satisfy the ‘substantial’ utility requirement, an asserted use must show that that claimed invention has a significant and presently available benefit to the public.”

Turning to the claims, the BPAI summed up the issue this way:

Here, the claimed computer system is disclosed to be useful for identifying nucleic acids that are similar to SEQ ID NOs 9-1008 . . . The utility of the claimed computer system therefore depends on the utility of the nucleic acids of SEQ ID NOs 9-1008: if the disclosed nucleic acids lack utility, so do nucleic acids similar to them and a computer system for identifying such similar nucleic acids.

Finding that the gene trapped sequences (GTSs) (SEQ ID NOs 9-1008) were mere "research intermediaries", the majority decided that such a disclosure lacked utility:

The uses asserted in the Specification for the disclosed nucleic acids . . . are not “substantial” or “specific,” as those terms were defined by the Fisher court. They are not substantial because . . . the GTSs represented by SEQ ID NOs 9-1008 are “no more than research intermediates that may help scientists to isolate the particular underlying protein-encoding genes and conduct further experimentation on those genes.” . . . Accordingly, the GTSs represented by SEQ ID NOs 9-1008 are merely “objects upon which scientific research could be performed with no assurance that anything useful will be discovered in the end.” The uses asserted for the GTSs represented by SEQ ID NOs 9-1008 therefore do not meet the standard for a substantial utility under § 101.

Nor are they specific utilities, because they could be asserted for any partial cDNA transcribed from any gene in the human genome. Because nothing about Appellants’ asserted utilities sets the nucleic acids of SEQ ID NOs 9-1008 apart from any other human cDNA fragment, Appellants have only disclosed general uses for the disclosed GTSs, not specific ones that satisfy § 101.

Now, here's the rub - in deciding an obviousness issue on the same claim, the majority ruled that "the particular sequence data recited in claim 13 is nonfunctional descriptive material and does not distinguish the claimed computer-based system from the prior art system that is the same except for its sequence data" (emphasis added). Adds the opinion:

Here, the descriptive material (SEQ ID NOs) recited in the claims is not functional material like the data structures in Lowry. There is no evidence that SEQ ID NOs 9-1008 functionally affect the process of comparing a target sequence to a database by changing the efficiency or accuracy or any other characteristic of the comparison. Rather, the SEQ ID NOs are merely information being manipulated by a computer; the SEQ ID NOs are inputs used by a computer program that calculates the degree of similarity between a target sequence and each of the sequences in a database. The specific SEQ ID NOs recited in the claims do not affect how the method of the prior art is performed – the method is carried out the same way regardless of which specific sequences are included in the database.

APJ GREEN, dissenting-in-part:

The position of the Majority is inconsistent. It is unfair to Appellants to rely primarily on the sequence data to find that the claims do not meet the utility requirement of 35 U.S.C. § 101, and then state that the sequence data are only nonfunctional descriptive material that does not contribute to the patentability of the claim under 35 U.S.C. § 103(a). Which is it?

I agree with the Majority’s analysis under 35 U.S.C. § 101 that the claimed SEQ ID NOs do not have patentable utility, and thus concur in the result. I do not agree, however, that the SEQ IDs are nonfunctional, descriptive subject matter, which should not be considered in the obviousness analysis. I thus respectfully dissent as to the Majority’s opinion as to the obviousness analysis.

APJ ADAMS, dissenting-in-part:

Along the way the majority engages in a metaphysical discussion of the difference between nucleic acid molecules and SEQ ID NOS . . . Cutting through the chaff, there is no doubt that SEQ ID NOS per se are data, and if Appellants had simply claimed SEQ ID NOS per se, the claims would properly be rejected under 35 U.S.C. § 101 as directed to patent ineligible subject matter. This is, however, not what Appellants have claimed, and a rejection of the claims as drawn to patent ineligible subject matter under 35 U.S.C. § 101 is not before this panel for review.

Nevertheless, the majority blends the concept of patent eligible subject matter under 35 U.S.C. § 101 with the “printed matter” doctrine under 35 U.S.C. § 103 to arrive at their conclusion that the claimed invention is obvious over a prior art reference that does not teach the SEQ ID NOS recited in Appellants’ claims.

Accordingly, I cannot join with the majority’s analysis of the record.

View/download the 53-page opinion here (link)

- Some interesting remarks from the footnotes in this case:

Footnote 3: "The Lowry [CAFC] court did not consider whether, and under what circumstances, computer-readable information that is analogous to printed matter can distinguish a claimed invention from the prior art."

Footnote 4: "a claim to a computerized system for searching a phonebook placed in a database would not be patentable, absent some novel and nonobvious characteristic of the computer hardware or search tools."

Footnote 5: "MP3 files encoding different songs will cause a computer’s speaker to output different music, but music is a paradigmatic nonfunctional descriptive material. Descriptive material is not functional merely because it results in different outputs when acted on by a computer program."

Coalition Being Formed Next Month to Restrict Software Patents

Smelling blood in the patent waters, the Free Software Foundation has spearheaded an organization, called the "End Software Patents" (ESP) coalition, that aims to curb software patents in the U.S. While the organization has not officially formed yet, the coalition has obtained seed funding of a quarter million dollars (from sources that aren't being disclosed), and is planning on a formal launch towards the end of November.

The coalition leader will be Ben Klemens, guest scholar at the Brookings Institution, and author of Math You Can't Use: Patents, Copyright, and Software. Klemens commented that the group will be active in advocacy projects, and intends to partake in legislative in judiciary matters in an effort to redefine patentable subject matter. "Our sole goal is to fix patentable subject matter. That's the gaping wound in patent law today. Not everything should be patentable, and this is true whether you look at it legally, economically, or ethically."

According to ESP organizers, there has "never been a better time to challenge software patents directly in the United States . . . Once we restore a rule that not everything can be patented, the rest of patent reform will either fall into place naturally or be much easier to fix."

• Read Linux.com article "Software patent abolition campaign will launch next month" (link)

• Read Klemens article "Drawing the Line: The Rise of the Information Processing Patent." (link)

• Read the transcript from Brookings Institution symposium "Software and Law: Is Regulation Fostering or Inhibiting Innovation?"

• See earlier 271 Blog coverage on Klemens here (link)

CAFC Releases a Big "Two-Fer" On Patentable Subject Matter

Will all the fuss over 35 U.S.C. 101 and the USPTO's McGruff-like approach to "taking a bite out of patentable subject matter," one would expect that any forthcoming decisions from the CAFC on section 101 would firmly address the boundaries of of patentable subject matter. Last week, the CAFC provided two ("two, TWO!") decisions for the price of one on section 101:

In re Comiskey (2006-1286) September 20, 2007 (link)

Comiskey’s patent application claims a method and system for mandatory arbitration involving legal documents, such as wills or contracts. The claims in question did not reference, and do not require, the use of a device such as a computer. Considered a "mental process," the CAFC found the claims were not intended to be covered by the patent statute:

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.

The rub here was that two of the independent claims recited software "modules" that performed specific tasks related to the arbitration. Some of the dependent claims specifically recited structures embodying hardware as well (WWW, electronic communication, etc.). Giving a tacit nod to In re Schraeder and Warmerdam, the CAFC ruled that reciting limitations relating to hardware (or other "tangible" mediums) could bring otherwise unpatentable mental processes into the realm of patentable subject matter:

When an unpatentable mental process is combined with a machine, the combination may produce patentable subject matter, as the Supreme Court’s decision in Diehr and our own decisions in State Street Bank and AT&T have confirmed . . . While the mere use of the machine to collect data necessary for application of the mental process may not make the claim patentable subject matter . . . these claims in combining the use of machines with a mental process, claim patentable subject matter.

However, while the 101 barrier may be satisfied in this context, the obviousness hurdle becomes more of a factor:

The routine addition of modern electronics to an otherwise unpatentable invention typically creates a prima facie case of obviousness. Moreover, there is no pertinent evidence of secondary considerations because the only evidence offered is of long-felt need for the unpatentable mental process itself, not long-felt need for the combination of the mental process and a modern communication device or computer.

In re Nuijten (2006-1371 ), September 20, 2007 (link)

The sole issue in this case was whether or not a signal is patentable subject matter. Nuijten’s patent application discloses a technique for reducing distortion induced by the introduction of "watermarks" into signals. Nuijten recited claims directed to "[a] method of embedding supplemental data in a signal" and "[a]n arrangement for embedding supplemental data in a signal", which were found to be patentable by the PTO.

The no-no came when Nuijten claimed "[a] signal with embedded supplemental data." Because of the transitory nature of signals, the CAFC (in a 2-1 decision) found that claiming a signal itself could not fall under any of the statutory categories of 35 U.S.C. 101:

The claims on appeal cover transitory electrical and electromagnetic signals propagating through some medium, such as wires, air, or a vacuum. Those types of signals are not encompassed by any of the four enumerated statutory categories: "process, machine, manufacture, or composition of matter."

The Nuijten court also clarified State Street which stated that "[t]he question of whether a claim encompasses statutory subject matter should not focus on which of the four categories of subject matter a claim is directed to—process, machine, manufacture, or composition of matter—but rather on the essential characteristics of the subject matter, in particular, its practical utility." While patentees have previously argued that utility was the main focus, the CAFC stated that this approach was not entirely correct:

In telling courts where they "should not focus" their analysis, State Street was advising not to be concerned about debates over "which of the four categories" . . . subject matter falls into—that is, not to be overly concerned with pigeonholing subject matter once the court assures itself that some category has been satisfied. If, for instance, a court determines that a claim encompasses either a process or machine but is unsure which category is appropriate, it need not resolve the ambiguity. The claim must be within at least one category, so the court can proceed to other aspects of the § 101 analysis.

Linn, dissenting-in-part:

I agree with the majority that the subject of Nuijten’s signal claims is not a "machine," "process," or "composition of matter" as used in 35 U.S.C. § 101. As the majority recognizes, however, "[t]he question of whether the claimed signals are ‘manufactures’ is more difficult." . . . As mentioned, the Supreme Court quoted in American Fruit the following definition of "manufacture," upon which the majority relies today: "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 by machinery." . . . Based on this definition and the associated definition of "article," the majority concludes that manufactures must be "tangible," a definition that excludes "[a] transient electric or electromagnetic transmission." . . . With all due respect, I believe that these conclusions are erroneous.

* * *

The PTO’s position makes little sense. As a doctrinal matter, the PTO should not look to § 101 sometimes and § 103 at other times to accomplish essentially the same end. As a matter of principle, there is little reason to allow patent claims to otherwise unpatentable, deemed abstractions just because those deemed abstractions are stored in a tangible medium, while rejecting the same inventions standing alone. Nuijten’s signal involves the same degree and type of human ingenuity whether or not it happens to be encoded in the magnetic fields of a hard disk drive, the optical pits of a compact disc, a stream of photons propagating across a vacuum, or any other specific form that technology might put it in. The signal is either a "new and useful" manufacture or it is not. To allow a patent on a storage medium containing the signal but to deny one to the real underlying invention "make[s] the determination of patentable subject matter depend simply on the draftman’s art" in the sense criticized by the Supreme Court in Flook. 437 U.S. at 593.

So what has changed? Not too much. Unfortunately, the CAFC has not provided any significant guidance on the application of 35 U.S.C. § 101, other than clarifying that (1) some nexus to a tangible medium is required, and (2) signals, per se, are not patentable. Of course, judge Linn's dissent is correct: applicants seeking to overcome the strictures of 35 U.S.C. § 101 need only tie in some "processor" (or similar) limitations to have their claims recognized by the PTO. Form over substance? You bet.

NOTE: In re Bilski, which rounds out the CAFC's "holy trinity" of patentable subject matter cases for the year, is scheduled for oral argument on October 1. Stay tuned.

"Waiting for Nuijten" - 101 Rejections at the BAPI (Part 2)

As yesterday's post explained, 101 rejections at the BPAI are at an all-time high. Particularly troubling are the rationales supporting many of the decisions. Over the last year, the BAPI has regressed 35 U.S.C. 101 back to the Warmerdam days, where methods describing algorithmic processes are presumed unpatentable, while machines performing algorithmic processes will be allowed.

This, of course, was done away with in State Street, but you couldn't tell this from reading many of the BPAI's opinions. In fact, it is apparent that the BPAI doesn't favor State Street at all, since the case (as well as AT&T) is typically cited only in passing. Instead, the BPAI starts with the Supreme Court cases - Gottschalk v. Benson (decided in 1972) and Diamond v. Diehr (decided in 1981) - and then proceeds to cite many of the pre-State Street CAFC cases to support their decision to find the claim(s) unpatentable.

This approach is played out in numerous BPAI opinions:

Appeal 2007-1251 (U.S. Application 09/451,097):

Claim 37 recites two steps, (1) calculating statistics of motion vector information, and (2) generating a frame feature value comprising numerical information representing a quantity of a feature contained in a frame of image data using the calculated statistics. Both steps are mathematical functions, and the result is a mathematical value. Further, the claimed method includes no recitation of a computer. Thus, the method appears to be a disembodied concept.

[W]e find no physical subject matter being transformed, just numerical values being manipulated. Further, though the preamble recites "[a] method of associating frame feature values with a plurality of frames of image data," the method steps merely calculate statistics and generate a numerical value from the statistics. Thus, we find no physical subject matter being transformed.

We also find that the method of claim 37 fails to produce a useful, concrete, and tangible result. Specifically, the result of claim 37 is a numerical representation of a quantity of a feature. However, a number is neither concrete nor tangible. Thus, claim 37 is an abstract idea that is nonstatutory under 35 U.S.C. § 101.

Appeal 2007-0759 (U.S. Application 10/177,732):

Appellant’s disclosed and claimed invention is completely silent as to what is used to solve the algorithms and mathematical equations. The Examiner mentions a computer, but we find no mention in the disclosure of the use of such a device to solve the algorithms and equations (Answer 3). Thus, the disclosure does not rule out the use of a pencil and paper to solve the algorithms and equations. Even if a computer was used by Appellant, we find that the solved result of the algorithms and equations is merely a solved mathematical result that is never applied to something to produce some kind of response or result.

Appeal 2007-1089 (U.S. Application 10/348,277):

This is probably one of the most controversial decisions from the BPAI in 2007. Despite finding that a computer process is involved, and despite the finding that the process was useful, the BPAI nevertheless found the claims directed to nonstatutory subject matter. In an odd twist of logic, the panel looked to the specification (which described the computers, software, and "media objects") and concluded that this alone described data structures per se. Stranger still, the use of the term "media objects" were interpreted as "nonfunctional descriptive material":

[W]e find the scope of the instant claimed system and associated components broadly encompasses software, and/or data structures per se. We further find the scope of the instant claimed media objects broadly encompasses nonfunctional descriptive material (i.e., pictures, photographs, music, sounds, text, e-mail, movies, video, messages, documents, slides, movie or video stills, streaming video and/or audio and/or any combination thereof) .

Also, according to this panel, the key to finding patentable subject matter (where a machine is not explicitly recited) lies with In re Schrader. Moreover, the death of the Freeman-Walter-Abele test (FWA) at the BPAI appears to have been greatly exaggerated:

Although the FWA test is no longer considered particularly probative in the context of computer-implemented process inventions in view of Diehr . . . the erosion of FWA provides no support for the position that a non-machine implemented process, not
involving any transformation, might be patentable. The answer to that question is still provided by Schrader, and that answer, so far, is negative. While AT&T indicated that Schrader is "unhelpful" because it did not reach the question whether a "useful, concrete, and tangible result" occurred, the reason that case did not need to reach that question was because it found that Schrader’s method claims were unpatentable for lack of any transformation. In addition, Schrader’s claims did not require machine-implementation, unlike AT&T’s claims.

You can sample these, and numerous other BPAI opinions on patentable subject matter here (link).

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