Monday, July 5, 2010

PTO and Federal Circuit get ready to apply Bilski v. Kappos

In Bilski v. Kappos, the Supreme Court told us that the machine-or-transformation test is not an exclusive test for § 101, and that business methods are not categorically prohibited by § 101. But Bilski v. Kappos also reiterated that abstract ideas aren't patentable – without providing much guidance on what is and isn't "abstract." Also, more than 18 months after the Federal Circuit's decision in In re Bilski, we still don't have any guidance from a court of appeal about applying the machine-or-transformation test – in particular, what constitutes a "particular machine" and what actions are considered "transformations." The good news is that the PTO and the Federal Circuit are both gearing up to answer the questions left unanswered by Bilski v. Kappos.

How will Examiners apply Bilski? The PTO is already working on new Examination Guidelines for § 101. A PTO memo issued to Examiners immediately after Bilski v. Kappos gives us a preview of those guidelines. The memo incorporates both "machine-or-transformation" (MoT) and "abstract idea," as follows:
  • If a method passes the MoT test it is "likely" okay under § 101 absent a "clear indication" that it's directed to an abstract idea.
  • If a method fails the MoT test it should be rejected under § 101 absent a "clear indication" that it is not directed to an abstract idea.
What's next at the BPAI: I don't expect outcomes at the Board to change very much as a result of Bilski v. Kappos. Although the MoT test is no longer an exclusive test, Appellants with cases pending at the BPAI haven't had a chance to argue any other test. And while Bilski v. Kappos seemed to depart from In re Bilski by discussing "abstract ideas" outside of the MoT test, the BPAI is already considering "abstract idea" in many of its decisions. (See, e.g., Ex parte Benny, holding that a claim to "an information contract" is unpatentable as an abstract idea; Ex parte Vorchik, holding that claims to "software components / interfaces, software modules, [and] wizard application programs per se" are unpatentable as abstract ideas.)

Finally, Bilski v. Kappos is absolutely silent on the meaning of "particular machine" and "transformation." Therefore, the BPAI will probably act as before, and I expect to see more decisions holding that a general purpose computer isn't a particular machine (Ex parte Langemyr) and that a physical article must be transformed (see, e.g., Ex parte Avinash, a temporal change image is not an "article").

What's next at the Federal Circuit: The Federal Circuit has a number of cases already on its docket that involve § 101 issues. In applying Bilski v. Kappos in these cases, the Federal Circuit will almost certainly provide more guidance on the MoT and "abstract idea" tests.

Three district court decisions on biotech patents are up for review by the Federal Circuit. Two were vacated and remanded by the Supreme Court after Bilski v Kappos. Prometheus Laboratories, Inc. v. Mayo Collaborative Services involves a treatment method and Classen Immunotherapies, Inc. v. Biogen Idec. involves a diagnostic method. (See this post at Patent Docs for a summary of the § 101 issues in both cases.) The third, Association for Molecular Pathology et al. v. PTO, involves composition of matter claims directed to isolated DNA. (See this post at Parent Baristas for a summary of the case.)

The Federal Circuit's docket also includes six district court decisions which used the machine-or-transformation test from In re Bilski to invalidate claims in various computer software patents. I'll give a quick review of the § 101 issues in each case.

Fort Properties, Inc. v. American Master Lease, LLC, No. 8:07-cv-365, slip op. (C.D. Cal. Jan. 22, 2009), No. 2009-1242 (Fed. Cir. Jun. 11, 2009) involves claims to "a method of creating a real estate investment instrument." The claims do not recite a machine of any kind, and the district court found that, like Bilski, only legal obligations and relationships were transformed. Since these claims are somewhat similar to Bilski, the Federal Circuit review of this case may not be that interesting.

Two cases will give the Federal Circuit an opportunity to discuss the "particular machine" requirement. DealerTrack, Inc. v. Huber, No. 06-cv-2335, slip op. (C.D. Cal. Jul. 7, 2009), No. 2009-1566 and No. 2009-1588 (Fed. Cir. Oct. 27, 2009) involves various "computer aided method[s]" which recite computer hardware in the form of "entry and display device" and "terminal device." The patentee argued that the devices were particular machines because they were "specially programmed," but the court found that the patent did not describe the programming. Thus, the claimed devices read on any personal computer or terminal and so were not "particular machines." FuzzySharp Technologies. Inc. v. 3D Labs Inc., Ltd. No. C-07-5948 (N.D. Cal. Dec. 11, 2009), No. 2010-1160 (Fed. Cir. Mar. 25, 2010), involves several method claims which include "computer graphics" in the preamble. A subset of the method claims recite "performed in a computer." The district court found that "a computer" is not a particular machine, citing DealerTrack and various BPAI decisions.

The remaining cases all involve claims other than method claims, thus giving the Federal Circuit an opportunity to decide whether Bilski v. Kappos applies to non-method claims.

At issue in Every Penny Counts v. Bank of America, No. 2:07-cv-042, (M.D. Fla. May 27, 2009) is a system claim which includes elements such as a network, entry means, and identification entering means. The district court held that the system claim is really directed to "a process, not a machine." Although the claim was literally directed to a system, the court characterized the machine's involvement as insignificant extra-solution activity.

In Research Corporation Technologies, Inc. v. Microsoft Corp., No. 01-cv-658, slip op. (D. Ariz. Jul. 28, 2009), the district court found that all the claims failed the particular machine prong, including apparatus claims that include "a comparator for comparing." The court held that a comparator is not a "particular machine" because under the court's claim construction a comparator includes a "collection of operations that performs an algorithm," which is software per se.

Finally, in CyberSource Corp. v. Retail Decisions, Inc., No. 3:04-cv-03268, slip op. (N.D. Cal. Mar. 27, 2009) the district court held that a computer-readable medium claim is not exempt from the machine-or-transformation test. CyberSource also discussed the particular machine and transformation prongs in the context of a "method for verifying the validity of a credit card transaction over the Internet." The district court held that the claimed manipulation of credit card numbers did not amount to a transformation, and even if it did, a credit card number is not a physical object. As for the "particular machine" prong, no computer was recited and the court held that "the Internet" was a network of millions of individual machines (rather than a particular machine), and was furthermore an abstraction. ("One can touch a computer or a network cable, but one cannot touch 'the internet'.") 

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