Patent Baristas

The U.S. Supreme Court is being asked to review a decision in a patent case which questions what things are patentable, including software and business strategies.  The applicants have filed a Petition for Writ of Certiorari to the Supreme Court to appeal from the U.S. Court of Appeals for the Federal Circuit in In re Bilski.  See Bilski v. Doll (USPTO).

Questions Presented:

1. Whether the Federal Circuit erred by holding that a “process” must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing (“machine-or-transformation” test), to be eligible for patenting under 35 U.S.C. § 101, despite this Court’s precedent declining to limit the broad statutory grant of patent eligibility for “any” new and useful process beyond excluding patents for “laws of nature, physical phenomena, and abstract ideas.”
2. Whether the Federal Circuit’s “machine-or-transformation” test for patent eligibility, which effectively forecloses meaningful patent protection to many business methods, contradicts the clear Congressional intent that patents protect “method[s] of doing or conducting business.”  35 U.S.C. § 273.

This case raises the most fundamental question of what can be patented? Are patents only for manufacturing processes that are tied to a particular machine or produce some physical transformation? Or do patents also embrace modern business processes that do not depend on a particular machine or device?

The only limit the Supreme Court has imposed on the broad statutory grant is that patents may not be obtained for “laws of nature, natural phenomena, and abstract ideas.” Indeed, natural laws and phenomena can never qualify for patent protection because they cannot be invented at all. And abstract ideas are not eligible because they are not “useful” and thus must be applied to a practical use before they can be patented.

The Supreme Court has not considered what is patentable subject matter since 1981, when computers were just becoming part of daily life. It is now time to do so again to prevent the Federal Circuit’s outmoded “machine-or-transformation” test, while ostensibly rooted in this Court’s decisions, from stifling innovation in our most vital industries and frustrating Congress’ intent as expressed in the Patent Act. The Court should grant the petition so that it can instruct the Federal Circuit to return to first principles and restore the law of patent eligibility for processes under § 101.

The Bilski patent application, entitled “Energy Risk Management Method,” describes a method in which energy consumers, such as businesses and homeowners, are offered a fixed energy bill, for example, for the winter so they can avoid the risk of high heating bills due to abnormally cold weather. An intermediary or “commodity provider” sells natural gas, in this example, to a consumer at a fixed price based upon its risk position for a given period of time, thus isolating the consumer from an unusual spike in demand caused by a cold winter. Regardless of how much gas the consumer uses consistent with the method, the heating bill will remain fixed.

The method of the invention does not necessarily have to be performed on a particular machine or computer, although the practice of the invention will most likely involve both computers and modern telecommunications. The method steps are no less real, however, as they require communicating and negotiating with consumers and suppliers in a particular way to balance the risk positions.  The invention is claimed in a series of steps:

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.

The examiner rejected the Bilski application under 35 U.S.C. § 101, stating that “the invention is not implemented on a 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 applicants appealed the rejection to the PTO Board of Patent Appeals and Interferences, which affirmed the rejection.

Observing that there were “unresolved issues under § 101” for “non-machine-implemented” methods, such as claimed in the Bilski application, the Board stated that “[t]he question of whether this type of . . . subject matter is patentable is a common and important one” to the PTO, “as the bounds of patentable subject matter are increasingly being tested.” The Board added that, after the Federal Circuit’s decisions in State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), and AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352 (Fed. Cir. 1999), the PTO “has been flooded with claims to ‘processes,’ many of which bear scant resemblance to classical processes of manipulating or transforming compositions of matter or forms of energy from one state to another.”

Admitting that it was “struggling to identify some way to objectively analyze the statutory subject matter issue,” the PTO Board analyzed the claims under various tests.  The Board considered this Court’s exclusion of “abstract ideas” in Diamond v. Diehr, 450 U.S. 175 (1981), the Federal Circuit’s “useful, concrete, and tangible result” test from State Street Bank, the “transformation of physical subject matter” test discussed by the Board in Ex parte Lundgren, 76 U.S.P.Q.2d 1385, 2004 WL 3561262 (B.P.A.I. 2005), and the PTO’s Interim Guidelines for Examination of Patent Applications for Patent Subject Matter Eligibility.

Applying these various tests, the PTO Board concluded that the Bilski claims did not recite statutory subject matter. However, the Board stated: “‘mixing’ two elements or compounds to produce a chemical substance or mixture is clearly a statutory transformation although no apparatus is claimed to perform the step and although the step could be performed manually.”

According to the PTO Board, however, the Bilski claims do not involve any patent-eligible transformation because they only transform “non-physical financial risks and legal liabilities of the commodity provider, the consumer, and the market participants.” The Board concluded that the claims merely recite an “abstract idea” since they are not “instantiated in some physical way so as to become a practical application of the idea.”  Recognizing that actual physical acts of individuals or organizations would still be required to implement the steps of the method, the Board nevertheless held that the claims were directed to the “‘abstract idea’ itself” because they cover any and every possible way of performing those steps.

The Bilski applicants appealed the PTO Board’s decision to the Court of Appeals for the Federal Circuit, which heard the case en banc. In its decision, the court posed five questions to be addressed in supplemental briefing:

1. Whether claim 1 of the [Bilski] patent application claims patent-eligible subject matter under 35 U.S.C. § 101?
2. What standard should govern in determining whether a process is patent-eligible subject matter under section 101?
3. Whether the claimed subject matter is not patent-eligible because it constitutes an abstract idea or mental process; when does a claim that contains both mental and physical steps create patent-eligible subject matter?
4. Whether a method or process must result in a physical transformation of an article or be tied to a machine to be patent-eligible subject matter under section 101?
5. Whether it is appropriate to reconsider State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), and AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352 (Fed. Cir. 1999), in this case and, if so, whether those cases should be overruled in any respect?

Thirty-eight amicus briefs – representing vastly different views — were filed by patent owners, bar associations, industry associations, professors, and interested individuals.

The en banc Federal Circuit held that Bilski’s claims are not eligible for patenting and set forth a single, “definitive” test for determining whether a process is patent-eligible under § 101: a process is patent-eligible only if  “(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.”

The opinion seized on a sentence from Diamond v. Diehr, 450 U.S. 175, 184 (1981), quoted from Benson, 409 U.S. at 70, that “[t]ransformation and reduction of an article ‘to a different state or thing’ is the clue to the patentability of a process claim that does not include particular machines” (emphasis added). Taking this Court’s description of the machine-or-transformation test as “the” clue literally, the majority held that this test was not “optional or merely advisory” but rather “the only applicable test” for patent-eligible processes.

In doing so, the Federal Circuit majority overruled its earlier decisions in State Street Bank and AT&T to the extent they relied on a “useful, concrete, and tangible result” as the test for patent eligibility under § 101.

Circuit Judge Newman maintained in dissent that the majority’s test is “a new and far-reaching restriction on the kinds of inventions that are eligible to participate in the patent system.” The majority’s decision, she wrote, introduces untold uncertainties that “not only diminish the incentives available to new enterprise, but disrupt the settled expectations of those who relied on the law as it existed.”

See the Bilski Petition here.

See also:
Biotech Claims Need to be Tied to a “Particular Machine or Apparatus”
Appeals Court Smacks Down Software And Business Method Patents without Apparatus or Transformative Powers
How Did We Get to Bilski and What Can We Do About It?

Cordis and Johnson & Johnson tried to get a new trial and judgment as a matter of law (JMOL) following a jury verdict finding that they infringed Boston Scientific’s patent. Boston Scientific v. Cordis Corp. (08-1073).  The U.S. Court of Appeals for the Federal Circuit said that “because the court erred … in failing to hold the ’536 patent to have been obvious, we reverse the judgment.”

Cordis makes the Cypher drug-eluting expandable stent, which has two coatings: an undercoat containing the drug and a topcoat.  Early in the manufacturing process, the Cypher stent’s topcoat is drug-free.  The topcoat is sprayed on as a solution containing no drug but containing a polymer and two solvents.  The solvents dissolve the drug, allowing it to diffuse from the undercoat into the topcoat.  Thus, when the Cypher stent is sterilized, removing any remaining solvent, the drug has moved into the topcoat to such an extent that the topcoat and undercoat contain the same concentration of drug.

U.S. Patent 6,120,536 relates to a drug-eluting expandable stent with a coating that has a non-thrombogenic surface.  Boston Scientific sued Cordis alleging that Cordis’s Cypher stent infringed claim 8 of the ’536 patent.

The patent covers:

[An expandable stent comprising a tubular body having open ends and an open lattice sidewall structure] wherein at least a part of the device portion is metallic and at least part of the metallic device portion is covered with a coating for release of at least one biologically active material, wherein said coating comprises an undercoat comprising a hydrophobic elastomeric material incorporating an amount of biologically active material [and] a topcoat …  comprising a biostable, non-thrombogenic material which provides long term non-thromobogenicity to the device portion during and after release of the biologically active material, and wherein said topcoat is substantially free of an elutable material [and wherein the coating conforms to said sidewall structure in a manner that preserves said open lattice].

The district court construed the phrase “non-thrombogenic material which provides long term non-thrombogenicity to the device portion during and after release of the biologically active material” in claim 1 as meaning “a material that does not promote thrombosis for a period of time that extends both during and after release of the biologically active material.”  The court relied on medical dictionary definitions for the meaning of “thrombogenic” (“causing thrombosis or coagulation of the blood”) and “thrombolytic” (“break[ing] up or dissolv[ing] a thrombus”).

The court rejected Cordis’s proposed definition of “non-thrombogenic,” which required a “significant reduction in thrombogenicity over that experienced with bare metal stents.”  The court also construed the phrase “substantially free of an elutable material” to mean “largely or approximately free of an elutable material.”

At trial, the jury found that claim 8 of the ’536 patent would not have been obvious based on, among other prior art references, U.S. Patent 5,545,208 (Wolff) and U.S. Patent 5,512,055 (Domb).  The jury also found that the Cypher stent infringed claim 8.

The court reasoned that Domb, which discloses esophageal stents, does not suggest the use of metal in a stent, and that there was no evidence of motivation to combine Domb with other references.  The court reasoned that Wolff does not teach a metallic stent having a two-layer coating, and the failure of Wolff’s assignee to create the claimed stent after more than a decade of work evidenced a lack of motivation to combine the features of its various prior art stents with each other.

The court found support for the jury’s infringement finding in a witness’s testimony that the topcoat is drug-free when applied and “has about 1 to 2% drug . . . after manufacturing is completed,” finding that 1 to 2% drug may be considered “substantially free.” The court also pointed to evidence that a stent need not be sterilized to be implantable and thus that the stent could infringe during manufacture, when the topcoat was first applied and was then drug-free.

Finally, the court found that the ’536 patent specifically contemplates that the drug will move into the topcoat prior to implantation, implying that the “substantially free” limitation does not preclude the topcoat from containing 23% of the drug.

On appeal, Cordis argued that the district court erred by declining to construe the “non-thrombogenic” limitation to require less thrombogenicity than an uncoated metal stent.  Cordis asserted that that Cypher stents and bare-metal stents were equally thrombogenic.

A little like politician, Cordis publicly said that its stents were non-thrombogenic, thus meeting the claim language and infringing, all while arguing that its public statements used the term in a different sense from the patent and that its stents do not infringe.

The Federal Circuit had their own thoughts:

To determine the meaning of “non-thrombogenic,” we begin by considering the language of the claims.  See Phillips v. AWH Corp., 415 F.3d 1303, 1314 (Fed. Cir. 2005) (en banc).  The language of claim 1 requires that the non-thrombogenic topcoat material “provide[] . . . non-thrombogenicity” to the stent, but it does not require a comparison to any other stent, either bare metal or coated.  ’536 patent col.13 ll.22–26.  As the claims themselves provide no other insight into the meaning of “non-thrombogenic,” we turn to the specification in order to determine if it provides a clearer indication of the scope of “non-thrombogenic.”

“[C]laims must be read in view of the specification, of which they are a part.”  Phillips, 415 F.3d at 1315 (quotation marks omitted).  The abstract of the invention states that the “non-thrombogenic surface . . . is provided with sites . . . which aid in . . . reduc[ing] thrombogenic activity.”  ’536 patent abstract; see also id. at col.2 ll.36–46 (using heparin “to impart a non-thrombogenic surface to the material”).  Thus, we can discern that the non-thrombogenic material must reduce thrombogenic activity because of its particular properties.

Cordis argued that the ’536 patent invalid for obviousness.  According to Cordis, the Wolff patent alone renders the invention of claim 8 obvious since it shows a polymer stent made of a drug-eluting polymer with a barrier topcoat, and Wolff also refers to the stent and topcoat as separate “layers.”  Cordis also argued that Domb alone also rendered it obvious because Domb teaches every limitation except that the stent can be made of metal and have an open lattice.

Boston Scientific countered that KSR is irrelevant to this obviousness inquiry because Cordis urged no particular combination of references.  Also, had it been so obvious, Boston Scientific argues, Medtronic would have made the claimed invention.

Ultimately, the Court said the patent was dead:

We agree with Cordis that Wolff alone renders claim 8 of the ’536 patent obvious and therefore invalid.  Because we hold the claim obvious based on Wolff alone, we do not address Cordis’s arguments for obviousness based on Domb or any other reference.

As we have discussed above, claim 8 recites a metallic stent with an open lattice structure.  The stent includes an undercoat and a topcoat.  The undercoat contains a drug, and the topcoat is drug-free and non-thrombogenic.

Wolff also discloses a stent including an undercoat and a topcoat, where the undercoat contains a drug.  …  Wolff also discloses that the topcoat is drug-free, as layer 15 in figure 3B “may be a simple barrier which limits diffusion of drugs” and “could be as simple as a silicone or polyurethane.”  Wolff also discloses that the topcoat is non-thrombogenic.

Reversed.

Update:  Boston Scientific  and Medtronic agreed to settle two patent-infringement lawsuits over stents and put three others on hold. Boston Scientific  said it will continue to pursue patent-infringement claims against Abbott Labs.  It’s not personal, it’s just business.

Patents Go International

International patent filings under WIPO’s Patent Cooperation Treaty (PCT) grew by 2.4% in 2008, to nearly 164,000 1 applications. While the rate of growth was modest, as compared to an average 9.3% rate of growth in the previous three years, the total number of applications for 2008 represents the highest number of applications received under the PCT in a single year. Continued use of the PCT, a cornerstone of the international patent system, indicates that companies recognize the importance of sustained investment in research, development and innovation to remain competitive even within challenging economic conditions.

Lawyers Get Right-Sized

Since last October, the legal community has seen a steady down-sizing of sizeable law firms across the country.  According to an International Herald Tribune report, a number prominent national law firms have either laid-off employees or closed entirely. Since then, a variety of firms have also laid off hundreds of employees, according to an article in The Legal Intelligencer.  The American Lawyer and its sibling publications are providing ongoing coverage of law firm layoffs and related news at The Layoff List.   Will we now see more work sent to the (more affordable) Midwest?

Patent CLE Group Offers Loyalty Program

At a time when law firms and in-house legal departments are tightening their belts, Patent Resources Group (PRG) has introduced a new Loyalty Program to provide patent legal professionals the valuable Continuing Legal Education (CLE) credit they need to continue practicing. The new program offers exclusive pricing on any 2009 Advanced Courses for attendees of any one of Patent Resource Group’s 2008 Advanced Courses, Workshops, Seminars or Patent Bar Review courses. Additionally, attendees of any 2009 course will receive Loyalty Program pricing for any subsequent Advanced Courses in 2009, as well as in 2010.

Stimulus-Response

The Economic Strategy Institute (ESI) announces Smart Globalist, a new Web magazine providing daily coverage of news and analysis from around the world on globalization and related international affairs. In addition to syndicated content from newspapers, magazines, broadcast media, expert blogs, and academic journals, SmartGlobalist will also provide its own original articles and analysis. Readers will be able to cover the world of globalization from one easy to navigate page.  In this first issue, the lead editorial focuses on the need for a U.S. stimulus package to be balanced by even bigger stimulus in countries like Germany and China that have large export surpluses.

Let’s Make a Deal

Corporate mergers fell on economic hard times.  According to a survey by Thomson Reuters, the $2.9 trillion in worldwide announced mergers and acquisitions recorded during 2008 was down 29.6 percent from 2007.  Fourth quarter totals were down 32.6 percent from the previous quarter and 37.6 percent from the fourth quarter of 2007.  Have things changed?  Thomson reported that 1,194 transactions had been canceled during 2008.  On the other hand, we may start to see an increase in deals that are not optional, i.e., the sale of distressed assets and the acquisition of distressed companies. We could see an increase in foreign acquisitions of U.S. companies and assets.  Will it include law firms?  (via Law.com)

Will Lawyers Bike to Work?

You can now get a Bicycle Tax Credit (BTC) if you bike to work.  Passed as part of that $700 billion bailout plan, the BTC allows employers to reimburse employees up to $20 per month for bicycle-commuting related expenses; the employer can then claim a tax deduction for the reimbursements. The law went into effect on January 1, 2009.  The problem, of course, is not there there are not enough tax incentives but that there are too many barriers to bike commuting.  Like lack of safe pathways.  Only four tenths of 1 percent of Americans get to work on a bicycle. Seventy-seven percent drive — by themselves! The EPA blog asks why people are or aren’t biking to work, and safety concerns, distance, and smelliness(?) were the key barriers.  Of course, you could always try creating your own bike lane.  (via World of Work)

Do you know which companies the most profitable ones? Often, they’re not the best organized, the best run or even the best marketed. It turns out it is not about cutting costs, improving process efficiency and implement best practices – although those are all really noble endeavors.

The real driver of profitability is the competitive advantage offered by a company’s Intellectual Property (IP).  Today, intellectual property is the only real source of sustainable competitive advantage and profit, according to Mark Blaxill and Ralph Eckardt, authors of the upcoming The Invisible Edge: Taking Your Strategy to the Next Level Using Intellectual Property (Portfolio, March 2009).

Blaxill and Eckardt argue that most corporate leaders generally ignore or hand off responsibility for intellectual property – patents, trademarks and brands, copyrights and trade secrets – because IP isn’t readily visible or measurable with traditional business tools. Instead, they distract themselves with operational performance goals, which will not sustain competitiveness in the long run.

From the authors The Invisible Edge:

Why IP is so important: Only IP allows companies to own the innovations that allow them to differentiate their products and services, exclude competitors, attract customers and persuade them to pay a premium. By contrast, operational and financial “best practices” are easy to replicate and, therefore, don’t provide a long-term advantage.

Why there’s little correlation between operational discipline and long-term profitability: Operationally undisciplined companies can be extremely profitable – if they recognize and are disciplined about their intellectual property. (Look at the pharmaceutical industry: It’s famously undisciplined and spends enormously, but historically it has generated enormous profits – until recently when many blockbuster drugs began to lose their patent protection.)

Why the most strategic decisions leaders can make involve often-conflicting IP imperatives: Putting IP at the center of strategy means making critical choices about when and how to share and collaborate on intellectual assets; when and how to control them and make them proprietary; and how they can be simplified in order to change the basis of competition.

The sea change in corporate strategy: from “fast company” to “smart company”: Just as the “cheap company” of the past (the one that pulled costs out of products) gave way to the “fast company” (which accelerated time to market and improved processes), the “smart company” creates and manages the best suite of intellectual assets to achieve sustained competitive advantage. Strategy now focuses on transforming a business into a “company of ideas.”

The leadership imperative for “smart companies”: IP specialists – including lawyers, engineers and scientists – should prepare to move themselves into and be fit to succeed in the senior ranks of business leadership. Said another way, to compete today, most CEOs need to learn how to use IP strategically.

The questions investors should ask: Did this company invent something important? Do they own it? How does the company manage and value IP (e.g., who is the chief IP officer and to whom does that person report)? What’s the company doing to expand its IP position?

Using examples from industries from Intel to Toyota, the authors guide the reader through the mechanisms that create wealth through innovation.  We learn how even something as mundane as the razor blade can entail decades of research culminating in Gillette’s Fusion and Fusion Power razors, which are covered in a blanket of more than thirty patents.  These cover everthing from a method of crimping the blade steel to the grip design.

The Invisible Edge is a good read for anyone working in an industry that may have forgotten where value is really generated.

The Invisible Edge: Taking Your Strategy to the Next Level Using Intellectual Property  is available for pre-order from Amazon.

PatentCluster, a free clustering based patent search engine, provides a different way to search patents.   PatentCluster was founded after observing that existing patent search engines did not make it easy to understand the context of the patent search results and did not articulate the “big picture” of the overall concept of the search.

Instead of giving the search user thousands of patent search results, PatentCluster search engine groups similar patents together into clusters. Clusters are meant to help you see your patent results by topic so you can zero in on exactly what you’re looking for or discover unexpected relationships between patents.

Using open source search and clustering algorithms to help discover diverse but relevant groups of semantically related patents, the clusters help you find results you may have missed or that were buried deep in the ranked list. You don’t waste time scrolling through page after page without a clear understanding of categories and relationships within the patent search results.

The site launched in January this year and is beta mode with a partial collection of the US patents. They plan to add the entire US issued and application patents in the coming months.  In a quick search of our own, our query for a particular drug turned up a single patent with no clusters (compared to 125 patents and applications found at the USPTO site) so you should plan to back up your search with using other methods.  Using the more generic term “enantiomers” produced 100 patents in 22 clusters.

Try your own search here.

The U.S. Chamber of Commerce’s Global Intellectual Property Center (GIPC) released its Intellectual Property Protection and Enforcement Manual, a publication designed to help businesses protect their consumers and brands. The manual features case studies on the proven strategies companies are implementing to protect their creative assets from criminal counterfeiting and piracy.

The Intellectual Property Protection and Enforcement Manual: A Practical and Legal Guide for Protecting Your Intellectual Property Rights highlights best practices being utilized by the world’s leading companies and associations, including ABRO Industries Inc., Altria Group, Bendix Commercial Vehicle Systems LLC, Epson America, Inc., Johnson & Johnson, Merck & Co. Inc., Microsoft, the National Basketball Association, NBC Universal, New Balance, Purdue Pharma LP, True Religion Brand Jeans, Unilever and Xerox.

The manual is available here.

The U.S. Chamber also noted that the U.S.-India Business Council (USIBC) is looking to the hit film, Slumdog Millionaire, to prompt authorities to recognize the importance of protecting intellectual property and to increase enforcement efforts against film and video pirates in India.  An earlier study commissioned by USIBC, as part of its Bollywood-Hollywood Initiative, found that India’s entertainment and media industry loses some 820,000 jobs and about US $4 billion (Rs. 160 billion) to piracy each year.

Some days, you have to ask yourself if certain patent applications are filed purely for having them rejected and, in doing so, attempting to move back the line of just what is patenable.  Such it seems with the application at hand in In re Stephen w. Comiskey (06-1286).The U.S. Court of Appeals for the Federal Circuit, sitting en banc, heard an appeal from the U.S. Patent and Trademark Office and vacated the earlier judgment in this case.  Stephen Comiskey appealed the earlier decision of the Board of Patent Appeals and Interferences affirming the examiner’s rejection of the patent application as obvious in view of the prior art and therefore unpatentable under 35 U.S.C. § 103.

The Federal Circuit decided not to go with the Board’s obviousness rejection of the independent claims under § 103 but instead held that Comiskey’s independent claims 1 and 32 and most of their dependent claims are unpatentable subject matter under 35 U.S.C. § 101.

Comiskey’s patent application No. 09/461,742 claims a method and system for mandatory arbitration involving legal documents, such as wills or contracts.  That’s right, according to the application, the claimed “program . . . requires resolution by binding arbitration of any challenge or complaint concerning any unilateral document . . . [or] contractual document.”

Independent claim 1 recites a “method for mandatory arbitration resolution regarding one or more unilateral documents” involving the following steps:

First, the unilateral document and its author are enrolled.

Second, arbitration language is incorporated in the unilateral document requiring that any contested issue related to the document be presented to the pre-chosen arbitration program for binding arbitration.

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

Fourth, the method conducts arbitration resolution.

Fifth, the method provides “support to the arbitration.”

Finally, the method determines “an award or decision . . . [that] is final and binding.”

After Comiskey filed his patent application with the USPTO, the examiner rejected certain claims under 35 U.S.C. § 103(a) as unpatentable over Ginter, U.S. Patent No. 6,185,683, in view of Perry, U.S. Patent No. 5,241,466, and Walker, U.S. Patent No. 5,794,207.Ginter discloses an electronic system for securely delivering documents from the sender to the recipient through the electronic equivalent of a “personal document carrier” that can validate transactions as well as actively participate in the transaction by, among other things, providing arbitration.

Walker discloses an electronic system that allows buyers to submit binding purchase offers and sellers to create contracts by accepting a purchase offer on its terms.  It also teaches the inclusion of language in the purchase offers “requiring that both parties submit to binding arbitration of all disputes” and suggests that a “central controller . . . can support the arbitration process by providing an arbiter for each dispute.”

Perry discloses an electronic central depository for secure storage and rapid retrieval of unilateral documents such as wills.

Comiskey filed an amendment after final rejection on August 29, 2001, “to more distinctly claim and particularly point out” the aspects of his invention that he believed were novel, namely pre-enrolling the person in a mandatory arbitration system, including language in the document requiring submission of disputes to this pre-chosen system, and enabling a person to submit a dispute pertaining to the document to this pre-chosen system for binding arbitration.

After finally being rejected and appealed, the Board affirmed the examiner’s rejection, concluding that the combination of Ginter and Walker rendered this claim obvious.

Not happy to let this case go on something as mundane as an obviousness rejection, the Federal Circuit substituted its own rejection by concluding that many of the claims were “barred at the threshold by § 101” under Diamond v. Diehr:

It is well-established that “[t]he first door which must be opened on the difficult path to patentability is § 101.”  State St. Bank & Trust Co. v. Signature Fin. Group, Inc., 149 F.3d 1368, 1372 n.2 (Fed. Cir. 1998) (quoting In re Bergy, 596 F.2d 952, 960 (CCPA 1979)).  Only if the requirements of § 101 are satisfied is the inventor “allowed to pass through to” the other requirements for patentability, such as novelty under § 102 and, of pertinence to this case, non-obviousness under § 103.

It is well-established that “whether the asserted claims . . . are invalid for failure to claim statutory subject matter under 35 U.S.C. § 101, is a question of law which we review without deference.”  AT&T Corp. v. Excel Commc’ns, Inc., 172 F.3d 1352, 1355 (Fed. Cir. 1999).

Comiskey’s application may be viewed as falling within the general category of “business method” patents.  The Federal Circuit felt it necessary to lay out how things have changed:

At one time, “[t]hough seemingly within the category of process or method, a method of doing business [was] rejected as not being within the statutory classes.”  State St. Bank, 149 F.3d at 1377 (quoting MPEP § 706.03(a) (1994)).  In State Street Bank, we addressed the “business method” exception to statutory subject matter, and stated that “[w]e take this opportunity to lay this ill-conceived exception to rest.”  Id. at 1375.  State Street Bank involved “a data processing system for managing a financial services configuration of a portfolio established as a partnership,” and “[g]iven the complexity of the calculations, a computer or equivalent device [wa]s a virtual necessity to perform the task.”  Id. at 1371.  We held that this system was patentable, concluding that patentability does “not turn on whether the claimed subject matter does ‘business’ instead of something else.”  Id. at 1377.

Patentable subject matter under the 1952 Patent Act is extremely broad.  Given the breadth of the categories listed in § 101, it is not surprising that the legislative history of the 1952 Act noted that “Congress intended statutory subject matter to include anything under the sun that is made by man.”  Chakrabarty, 447 U.S. at 309.  On the other hand, the Supreme Court has made clear that this statement does “not . . . suggest that § 101 has no limits or that it embraces every discovery.”

“Abstract ideas” are one type of subject matter that the Supreme Court has consistently held fall beyond the broad reaches of patentable subject matter under § 101.  The prohibition against the patenting of abstract ideas has two distinct (though related) aspects.  First, when an abstract concept has no claimed practical application, it is not patentable.  The Supreme Court has held that “[a]n idea of itself is not patentable.”

Where a claim was for a method of converting binary-coded decimal numerals into pure binary numerals that was “not limited to any particular art or technology, to any particular apparatus or machinery, or to any particular end use,” the claim would therefore “wholly pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself,” the claim was unpatentable because its “practical effect” was to “patent an idea” in the abstract.

Second, the abstract concept may have a practical application.

Here, the Federal Circuit frames it as such:

The Supreme Court has reviewed process patents reciting algorithms or abstract concepts in claims directed to industrial processes.  In that context, the Supreme Court has held that a claim reciting an algorithm or abstract idea can state statutory subject matter only if, as employed in the process, it is embodied in, operates on, transforms, or otherwise involves another class of statutory subject matter, i.e., a machine, manufacture, or composition of matter.  35 U.S.C. § 101.

Thus, a claim that involves both a mental process and one of the other categories of statutory subject matter (i.e., a machine, manufacture, or composition) may be patentable under § 101.  See Diehr, 450 U.S. at 184 (holding a process that involved calculations using the “Arrhenius equation” patentable because the claim “involve[d] the transformation of an article, in this case raw, uncured synthetic rubber, into a different state or thing”).  For example, we have found processes involving mathematical algorithms used in computer technology patentable because they claimed practical applications and were tied to specific machines.

However, mental processes—or processes of human thinking—standing alone are not patentable even if they have practical application.  The Supreme Court has stated that “[p]henomena of nature, though just discovered, mental processes, and abstract intellectual concepts are not patentable, as they are the basic tools of scientific and technological work.”

So, what about Comiskey’s application?  It was deflated as the court held:

Comiskey has conceded that these claims do not require a machine, and these claims evidently do not describe a process of manufacture or a process for the alteration of a composition of matter.  Comiskey’s independent claims 1 and 32 claim the mental process of resolving a legal dispute between two parties by the decision of a human arbitrator.

Thus, like the claims that the Supreme Court found unpatentable in Benson and Flook and the claims found unpatentable in our own cases, Comiskey’s independent claims 1 and 32 seek to patent the use of human intelligence in and of itself.

For the record, the USPTO had stated that if the application came back to them, they would have smacked it with a  § 101 rejection.

What:  Santa Clara Computer and High Technology Law Journal’s 25th Annual Symposium

When: Friday, January 30, 2009

Where:  San Jose, Calif.

Program:

The 2009 Santa Clara Computer & High Technology Law Journal Symposium takes place in the heart of Silicon Valley, where innovation is happening every day. For years, the Journal has dedicated symposia to the exploration of key issues at the intersection of law and technology.

This year, the Santa Clara Computer & High Technology Law Journal Symposium will explore the current key players, issues and strategies shaping the structure of patent law.  There will be a panel on the ethics of inequitable conduct. Other topics include developments in non-practicing entity patent litigation and litigation before the ITC.

A dramatic rise in filings with the International Trade Commission for patent infringement suits, an increased prevalence of Non-Practicing Entities, and frequent use of inequitable conduct as a defense to patent infringement have significantly affected the evolution of patent law today.

The actors involved are greatly influencing substantive law, in both federal courts and the ITC, and are challenging the conceptions and attitudes of legislators, policymakers, and practitioners toward intellectual property, making this practice area a dynamic and exciting field. The 2009 Symposium will explore and examine these changes and their impact upon high technology law.

Lunch Keynote:  Honorable Randall R. Rader of the United States Court of Appeals for the Federal Circuit.

The symposium pamphlet is available for download here.