By: Stephen C. Glazier
On October 30, 2008, in an en banc decision, the U.S. Court of Appeals for the Federal Circuit handed down the In re Bilski decision. This was a much-awaited decision that addressed the question of what subject matter may be considered for patentability in software, financial services, business methods and telecom services. After citing the Supreme Court precedent in Gottschalk v. Benson, 409 U.S. 63 (1972), Parker v. Flook, 437 U.S. 584 (1978), and Diamond v. Diehr, 450 U.S. 175 (1981), the Federal Circuit, in stating the “definitive test” provided by the Supreme Court for determining whether a “process” may be considered for patentability under Section 101 of the Patent Statute, said that process is “surely patent-eligible if: 1) it is tied to a particular machine or apparatus, or 2) it transforms a particular article into a different state or thing.” This test is referred to as the “machine or transformation” test. (Patent eligibility under Section 101 is only the first hurdle to issuing a valid and enforceable patent. If a patent application claims patent eligible subject matter under Section 101, then the patent must still be novel under Section 102, and non-obvious under Section 103.)
The Bilski decision rejects other tests previously adopted by the Federal Circuit for potentially patentable subject matter under Section 101, specifically rejecting the test in State Street Bank & Trust Company v. Signature Financial Group, 149 F.3d 1368 (Fed. Cir. 1998), and AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352 (Fed. Cir. 1998), which states that the potentially patentable methods of software or business methods must “produce a useful concrete and tangible result.”
After stating the machine or transformation test, the court goes on to state that “certain considerations are applicable to analysis under either branch [of this test]. First, as illustrated in Benson, the use of a specific machine or transformation of an article must impose meaningful limits on the claim scope to impart patent-eligibility. Second, the involvement of the machine or transformation in the claim process must not merely be insignificant extra-solution activity.”
The court goes on to say that it may in the future further refine the machine or transformation test. In particular, it may further carve out special rules for patent eligibility where the machine in question is a “computer”; however, the court specifically leaves this further development of case law for possible future action. Specifically, the court says “issues specific to the machine implementation part of the test are not to be decided today. We leave to future cases the elaboration of the precise contours of machine implementation as well as the answers to particular questions such as whether and when recitation of a computer suffices to tie a process claim to a particular machine.” Further, the court says “we agree that future developments in the technology and the sciences may present difficult challenges to the machine or transformation test, such as the widespread use of computers and the advent of the Internet has become the challenge in the past decade.” The court further states “and we certainly do not rule out the possibility that this court may in the future refine or augment the test or how it is applied. At present, however, and certainly for the present case, we see no need for such a departure and reaffirm that the machine or the transformation test is properly applied as the governing test for determining patent eligibility of a process under Section 101.” The term “machine” is commonly used in the practice and includes computers and programmed apparatus.
The new Bilski test will be a problem for that small percentage of business method patents and patent applications that cannot be drafted to include any machine or physical transformation of matters; however, the no-technology, purely “mental step only” invention has never been a large percentage of the U.S. patent portfolio. And, apparently, all software embodied inventions may be drafted to be tied to a machine.
For existing patents and patent applications, Bilski might suggest an opportunity to audit current portfolios of interest for possible modification of pending claims in patent applications, and to audit issued patents to modify issued claims in issued patents, where reissues are possible to more precisely comply with the Bilski test.
Further, case law should be monitored for possible further refinements in the application of the Bilski test. Specific issues, such as possible modification of the machine requirement where the machine is a computer, should be watched for.
As for planning business patent strategies, we can expect, until any further case law development in this area, continued growth in the population of software and computerized business method patent applications and issued patents, and in related enforcement and transactions. However, as is always the case in the development of case law, we must keep alert for the next shoe to drop.
