The subject matter of what a patent may cover has been on shifting ground since at least as early as the 1972 Supreme Court opinion Gottschalk v. Benson, 409 U.S. 63 (1972), in which a process claim directed to a numerical algorithm was found to comprise unpatentable subject matter because "the patent would wholly pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself." Since the algorithm was a naturally occurring and preexisting artifact, a finding of patentable subject matter would be tantamount to allowing a patent on an abstract idea, contrary to long held precedent. Unpatentable subject matter was generally identified by the Supreme Court to include "laws of nature, natural phenomena and abstract ideas." Software method patents were found to be patentable if they were somehow associated with a physical machine or a CPU, or if the method could produce a concrete, useful and tangible result.
Additional guidance was found in the decision of Diamond v. Chakrabarty, 447 U.S. 303 (1980), in which a genetically modified living microorganism, an oil spill eating bacterium, was found patentable. Relying on the Committee Reports accompanying the 1952 Patent Act, the Chakrabarty decision noted that Congress intended statutory subject matter to "include anything under the sun that is made by man." The logical conclusion of this holding led to the patenting of a genetically modified mouse (the so-called "Harvard mouse").
The court in State Street Bank & Trust Company v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), held that any business method may be eligible for protection by a patent if it involves some practical application and "produces a useful, concrete and tangible result."
Long-anticipated decision in In re Bilski recently issued by the Court of Appeals for the Federal Circuit (CAFC) has clarified "the standards applicable in determining whether a claimed method constitutes a statutory 'process' under § 101" and further refined the holding in State Street. The importance of the Bilski decision was underscored by the court's own request (sua sponte without prompting of the parties) that the case be argued before all the judges of the CAFC. In addition, almost forty amicus curiae briefs were filed by attorneys on behalf of "friends of the court" representing the views on the issues of a broad cross-section of industry groups, legal professionals and academics.
The main claim in the Bilski patent application was drawn to a "method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price," and recited several method steps that were admittedly not limited by use in a calculating machine such as a computer. Rejecting all the claims, the Examiner stated 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 Examiner's rejection was affirmed by the Board of Patent Appeals and Interferences, and appealed to the CAFC by the Applicant.
In defining the scope of patent coverage for the business method claims in Bilski, the CAFC held that a process claim reciting machine or transformation limitations that "impose meaningful limits on the claim's scope" does not require that such limitations themselves be new or non-obvious. The meaning of "meaningful limits" is not the same as "non-obvious limits," and the subject matter requirement may be satisfied by machine or transformation limitations which may themselves be old or obvious. The threshold issue of §101 patent-eligibility having been met, novelty and non-obviousness of the claim as a whole may be satisfied by a novel and non-obvious algorithm in combination with the structural machine or transformation recitations. Thus, any intimation in the Supreme Court decision in the State Street case that found patentable an algorithm or business method that comprised only steps that could be performed mentally (without reference to any physical or transformative function on a physical manifestation) is no longer literally correct.
The drift of the Bilski decision is to render the Federal Circuit more in line with recent Supreme Court precedent. Although it may be easy to meet the requirement of a patent-eligible invention under Section 101, a claim having method steps may be deemed obvious under other section of the patent law, especially the obviousness provisions of 35 USC 103(a). It has been suggested that the next wave of business-method litigation will focus on defining the kind of computerized, structural and/or transformative steps required to meet the threshold of subject matter patentability requirement.
In dissent by several CAFC judges, the majority decision was asserted to have not gone far enough in restricting business-method patents. Given the wide-ranging interest in the case, a petition to the Supreme Court may be granted during this October term ending in June 2009.
Vol. 53, June 2010