US Supreme Court Decides in Bilski - Business Methods Still Patentable Subject Matter

The US Supreme Court today decided in Bilski et al. v. Kappos, that business method patents are eligible subject matter under Section 101 of the Patent Statute 35 USC.

Oral arguments were presented on this case in November of last year and the decision has been eagerly awaited by the Patent Bar and by many in the public.

The Court rejected the Federal Circuit's an exclusive machine or transformation test, but instead affirmed the Federal Circuit's decision based on the subject matter being an abstract idea.  The claimed subject matter involved a procedure for instructing buyers and sellers how to protect against the risk of price fluctuations in a discrete segment of economy.

The majority of the Court supported the following language:

"Today, the Court once again declines to impose limitations on the Patent Act that are inconsistent with the Act’s text. The patent application here can be rejected under our precedents on the unpatentability of abstract ideas. The Court, therefore, need not define further what constitutes a patentable “process,” beyond pointing to the definition of that term provided in §100(b) and looking to the guideposts in Benson, Flook, and Diehr.

"And nothing in today’s opinion should be read as endorsing interpretations of §101 that the Court of Appeals for the Federal Circuit has used in the past. See, e.g., State Street, 149 F. 3d, at 1373; AT&T Corp., 172 F. 3d, at 1357. It may be that the Court of Appeals thought it needed to make the machine-or-transformation test exclusive precisely because its case law had not adequately identified less extreme means of restricting business method patents, including (but not limited to) application of our opinions in Benson, Flook, and Diehr. In disapproving an exclusive machine-or-transformation test, we by no means foreclose the Federal Circuit’s development of other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text."


This case brings us back to the analysis provided in Benson, Flook and Diehr and it will be interesting to see how the invitation from the Supreme Court to the Federal Circuit to develop "limiting criteria" to evaluate patentable subject matter is treated in future Federal Circuit cases.

A copy of the Bilski opinion is located here.

Social Networking Patents Emerge from US Patent and Trademark Office (“USPTO”)

Amazon, Google and Facebook have each recently been granted US Patents for social networking related patents.  Each of the patents have issued in the wake of the important case of In re Bilske, 545 F.3d 943 (Fed. Cir. Oct. 30, 2008), cert. Granted sub nom. Bilski v. Doll, 129 S. Ct. 2735 (June 1, 2009) (No. 08-964), renamed Bilski v. Kappos, No. 08-964.  A decision on the Bilske case is expected sometime this spring. 

The issue in the Bilske case involves what test or set of criteria governs the determination of whether a claim to a process is patentable under 35 USC § 101.  Specifically, the questions now before the US Supreme Court are:

1.      1.   [w]hether 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’,” and

2.       2. “[w]hether the Federal Circuit's ‘machine-or-transformation’ test for patent eligibility…contradicts the clear Congressional intent that patents protect ‘method[s] of doing or conducting business.’ 35 U.S.C. § 273.” See Bilski v. Kappos, No. 08-964 (June 1, 2009) at  http://origin.www.supremecourtus.gov/qp/08-00964qp.pdf.

US Patent 7,606,725 (“the Amazon patent”) issued October 20, 2009 for a networked computer system that provides various services for assisting users in locating, and sharing information with other users.  The system provides a user interface through which users can establish contact relationships with other users. The system also provides functionality for users to identify contacts of their respective contacts. For example, in one embodiment, each respective user can conduct a search of contacts of the respective user. The search may be limited in scope to users that satisfy one or more particular search criteria, such as users that reside in a particular region or are affiliated with a particular group.

US Patent 7,668,832 (“the Google patent”) issued February 23, 2010 for a computer-implemented method of determining and using geolocation information to target advertisements, determine scoring and pricing information about the advertisements.

US Patent 7,669,123 (“the Facebook patent”) issued February 23, 2010 for generating news items regarding activities associated with a user of a social network environment and attaching an informational link associated with at least one of the activities, to at least one of the news items, as well as limiting access to the news items to a predetermined set of viewers and assigning an order to the news items. The method further may further include displaying the news items in the assigned order to at least one viewing user of the predetermined set of viewers and dynamically limiting the number of news items displayed.

The US Supreme Court decision could render the validity in doubt of many business method patents, including the Amazon, Google and Facebook patents.  

The US Patent and Trademark Office issued Interim PatentSubject Matter Eligibility Examination Instructions on August 24, 2009 after the CAFC Bilske decision.  In the examples provided, example claim 5 is determined to be eligible subject matter because comparing is performed using a microprocessor, whereas example claim 6 is not eligible subject matter even though it provides method steps that include sorting, ranking and comparing, but does not explicitly state using a microprocessor.  Based on this criteria, the Facebook patent may be at risk because the only reference to a computer is in the second paragraph, “storing the plurality of activities in a computer…”  The Amazon and Google patents by comparison, do satisfy the criteria by performing transformational processes by a computer.

Business method patents will be front and center soon after the US Supreme Court issues its ruling and there will be plenty at stake.

US Patent and Trademark Office (“USPTO”) issues guidelines for Computer Readable Media

The USPTO has suggested amending any claim that is drawn to a computer readable media that covers both transitory and non-transitory embodiments may be amended to narrow the claim to cover only statutory embodiments to avoid a rejection under 35 USC § 101 by adding the limitation “non transitory” to the claim.  The Notice isavailable here.

The suggestion follows the case of In Re Nuijten, 500 F.3d 1346 (Fed. Cir. 2007), in which signals were claimed that were watermarked.  That is, the original signals were manipulated so as to imbed the signal with additional data.  Because patent claims during examination at the USPTO are interpreted as broadly as possible, if claims are not limited to being non-transitory, the USPTO will reject them as being non-patentable subject matter.

The only situation where the suggested amendment could raise issues of new matter, is when the specification does not support a non-transitory embodiment because a signal per se is the only viable embodiment.

USPTO Issues Temporary Post-Bilski Test for Software Patents

On December 15, 2009, the USPTO designated the Ex Parte SRINIVAS GUTA and KAUSHAL KURAPATI opinion as precedential, whereby it provides interim examining guidance to Patent Examiners when determining whether a software or business method patent application is directed to eligible patentable subject matter.  A copy of the case is here.  The guidelines are provided in an effort to provide interim guidance until the US Supreme Court issues its decision in In re Bilski.

The Bilski case is pending review by the US Supreme Court and a decision is expected this Spring.  According to the Court of Appeals in Bilski, Bilski's method claim was patent-ineligible because it did not “transform any article to a different state or thing.”

The GUTA case provides the following two-prong test:

(1) Is the claim limited to a tangible practical application, in which the
mathematical algorithm is applied, that results in a real-world use
(e.g., “not a mere field-of-use label having no significance”)? and

(2) Is the claim limited so as to not encompass substantially all
practical applications of the mathematical algorithm either “in all
fields” of use of the algorithm or even in “only one field?”

If the machine (or article of manufacture) claim involves a mathematical
algorithm and fails either prong of our two-part inquiry, then the claim is not
directed to patent-eligible subject matter under § 101.

Clarification of the Bilski test and now the new USPTO test will be welcomed from the US Supreme Court.