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A Madness to the Method? The Future
of Method Patents After Bilski
Brian S. Mudge
July 19, 2010
www.kenyon.com
Agenda
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Overview
History of Bilski case
Bilski v Kappos (S. Ct. June 28, 2010)
Lessons of Bilski
Practice Pointers
Overview of Bilski v Kappos
• Bilski involves claims directed to hedging risk in
the field of commodities trading.
– Business method claim
• Primary issue – 35 U.S.C. § 101
– Does the Machine or Transformation test control
the determination of whether a claim to a process
is patent-eligible under § 101?
• Computer-implemented and software method
claims, business methods and as well as
medical process claims are affected by this
issue
Overview - 35 U.S.C. § 101
• 35 U.S.C. § 101
– Whoever invents or discovers any new and useful
process, machine, manufacture, or composition of
matter, or any new and useful improvement thereof,
may obtain a patent therefor, subject to the conditions
and requirements of this title.
• 35 U.S.C. § 100(b) defines “process”
– The term "process" means process, art, or method,
and includes a new use of a known process,
machine, manufacture, composition of matter, or
material.
Overview - § 101 Jurisprudence
Patent-eligible Subject Matter under § 101
– Expansive view taken by Supreme Court
• Congress intended § 101 to extend to “anything under the sun that
is made by man.” Diamond v. Chakrabarty.
• Exceptions: laws of nature, physical phenomena, and abstract ideas
are not patentable. Gottschalk v. Benson; Parker v. Flook
– Since the 1970’s, § 101 case law developed a
variety of tests for patent eligibility of claims
reciting, directly or implicitly, the use of a
mathematical algorithm.
Overview - § 101 Jurisprudence
• The Freeman-Walter-Abele test (CCPA) recited a
two-step test to determine whether a claim is
statutory under § 101.
– Is a mathematical algorithm recited directly or indirectly in
the claim?
– If so, is the claimed invention as a whole no more than the
algorithm itself; that is, is the claim directed to a
mathematical algorithm that is not applied to or limited by
physical elements or process steps?
• If yes, such claims are nonstatutory.
Overview - § 101 Jurisprudence
• The Federal Circuit developed the “useful, concrete, and
tangible result” test
• In re Alappat (1994): a apparatus for converting vector
list data and smoothing a waveform display in an
oscilloscope was a specific machine that produced a
“useful, concrete, and tangible result”
• State Street Bank (1998): business method producing
“useful, concrete, and tangible result”
• AT&T v. Excel (1999): physical transformation not
required for method claims
Overview - § 101 Jurisprudence
• In re Comiskey (Fed. Cir. 2007)
– Claims directed to a method for mandatory arbitration
resolution (no machine required) were unpatentable
under § 101 because they only recited mental
processes to resolve a legal dispute
– Mental process combined with a machine,
manufacture or composition may be patentable
– Thus, other claims tied to computer or
communications apparatus were patent-eligible
• In re Nuijten (Fed. Cir. 2007)
– Claims to signals are not patent-eligible (not process,
etc.)
History of Bilski Case
• Bilski’s claims directed to method for hedging risk
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.
• Bilski’s claims not machine-implemented
Ex parte Bilski (BPAI)
• Ex parte Bilski (BPAI 2006): The Board held
Bilski’s claims were not statutory subject matter
under § 101:
– Bilski’s claims did not involve a patent-eligible
transformation
– Bilski’s claims preempt every possible way of
performing the steps of the claimed process, by
human or by any kind of machine
– Bilski’s claims did not produce a “useful, concrete,
and tangible result.”
In re Bilski (CAFC)
In re Bilski (Fed. Cir. 2008) (en banc)
– The Federal Circuit held that the “Machine or
Transformation” test is the definitive test to
determine whether a process claim is tailored
narrowly enough to encompass only a particular
application of a fundamental principle rather than
to preempt the principle itself.
In re Bilski (CAFC)
The “Machine or Transformation” test: a
claimed process is patent-eligible under
§101 if:
– It is tied to a particular machine or
apparatus or
– It transforms a particular article into a
different state or thing.
– Either prong must:
• Impose meaningful limits on the claim’s scope to impart
patent-eligibility
• Not merely be insignificant extra-solution activity
In re Bilski (CAFC)
Validity of other § 101 tests:
– Freeman-Walter-Abele test –inadequate
– “Useful, concrete, and tangible result” test –
inadequate; not intended to supplant the machine-ortransformation test.
• Repudiates State Street and AT&T.
– No “Technological arts” test
– No categorical exclusions for business methods or
software
– Rejected requirement for “physical steps” or “physical
limitations”
In re Bilski (CAFC)
• Bilski’s claims (business method – hedging risk)
failed Machine or Transformation test:
– No machine recited
– Claim does not constitute a transformation of physical
object or representation of any physical object or
substance.
– Mere “transformation” or manipulation of legal
obligations, business risks or other abstractions
cannot meet test for this reason.
• Even though physical acts may be involved
In re Bilski (CAFC)
• Judge Rader’s dissent:
– Claim directed to abstract idea and therefore
unpatentable.
– § 101 should be read broadly and a patentability
inquiry should concentrate on questions of
novelty and utility, not subject matter.
Bilski v. Kappos (S.Ct. 2010)
Issues before Supreme Court:
• Whether patent-eligible processes must
satisfy the Machine or Transformation test
under § 101
• Whether business methods are excluded
category of patent-eligible subject matter
Bilski v. Kappos (S.Ct. 2010)
Supreme Court - answers:
• The Machine or Transformation test is not
the exclusive test for patent-eligibility
• There is no categorical exclusion for
business methods
Bilski v. Kappos (S.Ct. 2010)
Analysis - Machine or Transformation Test:
• Statute § 101 broadly describes subject matter
eligible for patenting
– 4 independent categories of patentable subject matter
-- processes, machines, manufactures, and
compositions of matter.
• Precedents - only 3 exceptions to broad
patentability principles:
– Laws of nature
– Abstract ideas
– Natural phenomena
Bilski v. Kappos (S.Ct. 2010)
Analysis - Machine or Transformation Test:
• An Exclusive Machine or Transformation test
inconsistent with broad statutory language and
Court’s precedents
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But test is “a useful and important clue, an
investigative tool”
Bilski v. Kappos (S.Ct. 2010)
Analysis – business methods:
• Court rejected broad conclusion that business
methods are unpatentable under §101
• Statutory definition of process – covering
methods – may include some business methods
• Prior user defense §273 contemplates
patentability of some business methods
Bilski v. Kappos (S.Ct. 2010)
Analysis – Bilski’s claims:
• Reviewed Benson, Flook and Diehr cases:
addressed whether claims involving
mathematical algorithms met the eligibility
requirements for processes under § 101
• In Benson, the claim was an unpatentable
abstract idea because it broadly covered a BCD
to binary algorithm
– Claim would preempt the only practical use of the
algorithm – on a computer
Bilski v. Kappos (S.Ct. 2010)
Analysis – Bilski’s claims:
• In Flook, the claimed method for updating alarm
limits was unpatentable because it recited little more
than a mathematical algorithm
– Limiting field of use in preamble did not make the claim patenteligible
– Insignificant postsolution activity did not make claim patenteligible
• In Diehr, the claimed process for curing synthetic
rubber using a mathematical formula on a computer
was patentable subject matter because it was an
application resulting in molded rubber products
– Claim did not preempt all uses of the mathematical formula
Bilski v. Kappos (S.Ct. 2010)
Analysis – Bilski’s claims:
• In light of Benson, Flook and Diehr cases,
Bilski’s claims 1 & 4 are directed to an abstract
idea – risk hedging – and not patentable
• Would preempt uses of the risk hedging
approach in all fields
Bilski v. Kappos (S.Ct. 2010)
Analysis – Bilski’s claims:
• Remaining claims providing broad examples of
hedging in commodities and energy markets do
no more than attempt to limit abstract idea to
field of use or add token postsolution activity
– But under Flook these do not render claims patenteligible
Bilski v. Kappos (S.Ct. 2010)
Breyer (concur.): 4 points of agreement among all
justices:
• Section 101 is broad, but not without limit. Phenomena of nature,
mental processes and abstract intellectual concepts are not
patentable, since allowing patents on such fundamental principles
would preempt the public’s access to basic tools of scientific and
technological work
• Machine or Transformation test has been used for over 100 years to
help determine what is a patentable process
• Although the M or T test is useful and important clue, it has never
been the sole test for patent-eligibility. Thus, while M or T test is an
important example of how a court can determine patentability under
§101, the CAFC erred by treating it as the exclusive test
• Though M or T is not exclusive test, does not mean that anything
that produces “useful, concrete and tangible result” (State Street) is
patent-eligible
Lessons of Bilski
• Statute broadly describes subject matter eligible
for patenting
• Only 3 exceptions to broad patentability
principles:
– Laws of nature
– Abstract ideas
– Natural phenomena
• Otherwise, limited guidance for deciding future
cases
• Look to Benson-Flook-Diehr line of cases
Lessons of Bilski
• Patent-eligible subject matter broader than
Industrial Age inventions meeting Machine or
Transformation test
• Leaves room for asserting patentability of
Information Age inventions that would not meet
Machine or Transformation test
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Machine or Transformation test may still be a key test (“a
useful and important clue, an investigative tool”)
– Court declines to endorse prior interpretations of §101
(State Street; AT&T)
Lessons of Bilski
Machine or Transformation test: permissive,
not exclusive
• What happens if you apply the M or T test? Bilski
does not say
• Does meeting test guarantee patent-eligibility?
• Benson: BCD-binary algorithm operated (in claim 8)
using a shift register, clearly part of a digital
computing apparatus, so the claim might very well
have met the M or T test
– But claim ruled not patentable
• Does failing the M or T test mean claim is not
patentable?
– not necessarily - since test not exclusive
Lessons of Bilski
Idea Preemption – the new battleground for
patent-eligible subject matter?
• Preemption is key factor in analysis of whether
method claim is directed to mere abstract idea
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Benson: Claim preempted only practical use of the
BCD to binary algorithm – on a computer
Diehr: Claim did not preempt all uses of the
mathematical formula
• Bilski: Claims preempted uses of risk hedging
approach
Lessons of Bilski
Software processes – open questions:
– How to address Idea Preemption?
– How to apply Machine or Transformation test?
Lessons of Bilski
Software processes – M or T test:
– What are the requirements to satisfy tying a process to a
particular machine?
• Recitation of a processor? Recitation of “computer-implemented method”?
• Recitation of the processor or machine in the preamble or the body of the
claim?
– Note: Alappat ruled that a general purpose computer becomes
in effect a specific machine once programmed to perform
specific functions per software instructions (cited favorably in
CAFC Bilski ruling)
– Transformation of physical object by a computer-controlled
method remains patentable (Diehr)
Lessons of Bilski
Electronic Signals – M or T test:
• Look to Abele (cited in CAFC Bilski ruling)?
– Unpatentable – process of graphically displaying variances of
data from average values
– Claim did not specify any particular type or nature of data
– Claim did not specify how or from where data was obtained or what the data
represented
– Patentable – electronic transformation of x-ray attenuation data
produced by a CAT scan into a visual depiction
– Data represented physical/tangible objects: structure of bones, organs and
body tissues.
– Transformation of raw data into particular visual depiction of physical object
sufficient.
– No transformation of underlying physical object represented by the data
necessary.
– Did not preempt all uses of a fundamental principle.
Lessons of Bilski
Business Methods – category survives
• Supreme court: Some business methods may
be patent-eligible, as contemplated by prior user
defense (§ 273)
• But § 273 “does not suggest broad patentability
of such claimed inventions”
• Stevens concurrence – business methods
unpatentable subject matter
• Court’s rejection of Bilski’s claims may signal
that claims to business methods are particularly
susceptible to attack as mere abstract ideas
Lessons of Bilski
Impact on Medical Process claims - Supreme
court vacated/remanded these 2 cases:
• Classen Immunotherapies, Inc. v. Biogen Idec
– Prior ruling - process for determining the
effectiveness of an immunization schedule was
unpatentable under Section 101 (no transformation)
• Mayo Collaborative Services v. Prometheus
Laboratories, Inc.
– Prior ruling - methods for calibrating the proper
dosage of thiopurine drugs held patentable, because
the claimed step of administering a drug involved a
transformation of the human body in response as well
as changes to the drug’s metabolites
Classen v. Biogen: Claim 1
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1. A method of determining whether an immunization
schedule affects the incidence or severity of a chronic
immune-mediated disorder in a treatment group of
mammals, relative to a control group of mammals, which
comprises:
• immunizing mammals in the treatment group of
mammals with one or more doses of one or more
immunogens, according to said immunization schedule,
and
• comparing the incidence, prevalence, frequency or
severity of said chronic immune-mediated disorder or the
level of a marker of such a disorder, in the treatment
group, with that in the control group.
Prometheus v. Mayo: Claim 1
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1. A method of optimizing therapeutic efficacy for treatment
of an immune-mediated gastrointestinal disorder, comprising:
(a) administering a drug providing 6-thioguanine to a subject
having said immune-mediated gastrointestinal disorder; and
(b) determining the level of 6-thioguanine in said subject
having said immune-mediated gastrointestinal disorder,
wherein the level of 6-thioguanine less than about 230 pmol
per 8.times.10.sup.8 red blood cells indicates a need to
increase the amount of said drug subsequently administered
to said subject and
wherein the level of 6-thioguanine greater than about 400
pmol per 8.times.10.sup.8 red blood cells indicates a need to
decrease the amount of said drug subsequently administered
to said subject.
PTO Reaction to Bilski
• PTO issued memo to examiners on day Bilski
opinion issued
• Examiners instructed to examine method claims
for compliance with § 101, using the Machine or
Transformation test as a presumptive tool
– If the claimed method meets the Machine or
Transformation test, it is likely patent-eligible under
Section 101 “unless there is a clear indication that the
method is directed to an abstract idea.”
– If the claimed method does not meet the Machine or
Transformation test, the examiner should issue a rejection
under section 101 “unless there is a clear indication that
the method is not directed to an abstract idea.”
PTO Reaction to Bilski
• Thus, the Machine or Transformation test will
remain, at least in the near term, as a test for
patent-eligibility of processes during examination
• For any claim not meeting the Machine or
Transformation test, the PTO will presume
(except in rare cases) it is an abstract idea,
putting the burden on applicants to establish
patentability
• PTO is reviewing the Bilski decision and will
develop further guidance on subject matter
eligibility under Section 101
Practice Pointers
• Drafting/prosecuting applications minimize preemption:
– Define idea(s) for solving the problem broadly
– Focus claims on practical application (not
preempting broadly stated idea)
– Apply arguments/evidence (expert?) to show
claim does not preempt all use of idea
Practice Pointers
• Drafting/prosecuting applications – use
Machine or Transformation test as guide
(to improve chances of allowance)
– Claims – include method claims tied to
particular machine implementations or
emphasize results of transformation of
physical object or data representing physical
objects and articles
– Include written description support for
machine implementation or transformation
Practice Pointers
• Issued patents
– Evaluate method claims in issued patents to
determine idea preemption or compliance with
Machine or Transformation test
– Consider filing reissue application to address
potential § 101 issues with method claims
Practice Pointers
• Defensively
– Consider § 101 defense – is asserted claim
nonstatutory?
– Define “idea” narrowly - look for opportunities
to challenge claims that preempt an idea or
fail Machine or Transformation test
– Introduce evidence supporting idea
preemption arguments (expert?)