USPTO Releases New Business Method Guidelines: Requires “physical transformation” or “concrete and tangible result”

In the wake of the Lundgren case, the USPTO has released a set of interim examination guidelines for determining subject matter eligibility of patent applications. (Link).  The guidelines will be used by examiners “in determining, on a case-by-case basis, whether a claimed invention falls within a judicial exception to statutory subject matter (i.e., is nothing more than an abstract idea, law of nature, or natural phenomenon), or whether it is a practical application of a judicial exception to statutory subject matter.”

The crux of the new guidelines is that an invention falls within the scope of 35 U.S.C. 101 “if the claimed invention physically transforms an article or physical object to a different state or thing, or if the claimed invention otherwise produces a useful, concrete, and tangible result.”  The application itself should enable one of ordinary skill in the art to understand the utility of the invention.

101 Categories: The first step in determining utility of a claim is to figure out whether the claim is directed toward at least one of the enumerated subject matter categories — process, machine, manufacture or composition of matter.

Judicial Exceptions: Then, the examiner should determine whether the claim is directed to a law of nature, natural phenomena or abstract idea (mathematical formula fits here too). The PTO proposes that the way to avoid these exceptions is for the claims to be directed to a practical application of a § 101 judicial exception. As the Supreme Court held in Diehr, inclusion of a law of nature in a claim does not preclude it from patentability so long as there is a claimed application of that law.

“[i]t is now commonplace that an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection.” Diehr

Application of an Exception: The PTO has proposed two ways to determine whether the claim includes an appropriate application of a § 101 judicial exception:

1. The claimed invention “transforms” an article or physical object to a different state or thing.
2. The claimed invention otherwise produces a useful, concrete and tangible result, based on the factors discussed below.

Physical Transform: Unfortunately, the guidelines provide little help to determine the meaning of “transforms an article or physical object to a different state.”  (E.g., what is the difference between an “article” and “physical object.”)

Useful, Concrete, and Tangible Result: Even without any “physical transformation,” a claim can be eligible for patenting so long is there is a “useful, concrete, and tangible result.”

If the claim is directed to a practical application of the § 101 judicial exception producing a result tied to the physical world that does not preempt the judicial exception, then the claim meets the statutory requirement of 35 U.S.C. § 101. If the examiner does not find such a practical application, the examiner has determined that the claim is nonstatutory.

Useful — must be (i) specific, (ii) substantial and (iii) credible and specifically recited in the claim.

Tangible — must be some “real-world result.” (Tangible is the antonym of abstract.)

Concrete — must have a result that “can be substantially repeatable or the process must substantially produce the same result again.”(Concrete is antonym of unrepeatable or unpredictable.)

Preemption: Finally, the examiner must determine whether the claim would, in reality, preempt the use of a law of nature or abstract idea. 

One may not patent a process that comprises every “substantial practical application” of an abstract idea, because such a patent “in practical effect would be a patent on the [abstract idea] itself. Benson

If an examiner determines that the claimed invention preempts a § 101 judicial exception, the examiner must identify the abstraction, law of nature, or natural phenomenon and explain why the claim covers every substantial practical application thereof.

Burden of Proof: The PTO bears the burden of presenting a prima facie 101 rejection, and if the record as a whole suggests that it is more likely than not that the claimed invention includes a practical application, the examiner should not reject the claim.

However, once the the examiner identifies and explains in the record the basis for why a claim is for an abstract idea with no practical application, then the burden shifts to the applicant.  

Thanks to Professor Thomas for his heads-up tip on this change.