Bilski: Full CAFC to Reexamine the Scope of Subject Matter Patentability

In re Bilski (Fed. Cir. 2008 - en Banc)

Taking sua sponte action, the Federal Circuit has ordered an en banc rehearing of the In re Bilski case – asking the following five questions:

1. Whether claim 1 of the 08/833,892 patent application claims patent-eligible subject matter under 35 U.S.C. § 101?
2. What standard should govern in determining whether a process is patent-eligible subject matter under section 101?
3. Whether the claimed subject matter is not patent-eligible because it constitutes an abstract idea or mental process; when does a claim that contains both mental and physical steps create patent-eligible subject matter?
4. Whether a method or process must result in a physical transformation of an article or be tied to a machine to be patent-eligible subject matter under section 101? 
5. Whether it is appropriate to reconsider State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), and AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352 (Fed. Cir. 1999), in this case and, if so, whether those cases should be overruled in any respect?

The Patent Application and Patent Applicants: Bilski involves claims to a method of managing the risk of bad weather through commodities trading. The claims are not tied to any particular form of technology — thus, they do not require a computer or particular storage media. In some quarters, this process lacking a technological tie-in is termed a “mental method.” 

Bernie Bilski apparently was the CEO and owner of a small company called WeatherWise. At least some WeatherWise patents were purchased in 2007 by the “Pittsburgh Technology Licensing Corp”  According to court documents, PTL is a wholly owned subsidiary of WeatherWise holdings. (See WeatherWise v. WeatherBill).

Although we don’t have the text of the application yet, this case looks problematic because of serious obviousness problems and lack of specificity in the claims.  Thus, the court will have no sympathy for Bilski — making this the perfect test case for someone wanting to strink Section 101 coverage and eliminate business method patents.  Representative Claim 1 reads as follows:

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.

Procedure: This cases arises out of a rejection from the Patent Board of Appeals (BPAI). In its opinion, the Board asked for assistance from the CAFC in addressing Subject Matter Patentability of non-technological method claims: “The Federal Circuit cannot address rejections that it does not see. . . . It would be helpful if the Federal Circuit would address this question directly.” BPAI Decision. Bilski then apealed directly from the BPAI to the CAFC and oral arguments were held in October 2007.  Rather than issuing an opinion, the court convened and voted to rehear the case en banc.

Timing and Amicus: The parties (Bilski & PTO) have already fully briefed the case. Thus, the CAFC is only allowing one supplimental brief each to be filed simultaneously on March 6, 2008. Amicus briefs discussing the five questions are requested by the court and may be filed without specific permission. Amicus briefs will be due 30 days later and must otherwise comply with FRAP and FCR 29.  (Thanks Joe: Amicus should be due April 5th, but because that falls on a Saturday, they will be due April 7). The hearing is scheduled for May 8 at 2:00 pm.

Notes and Documents:

• This en banc decision comes on the heels of the CAFC’s denial of an en banc rehearing in Nujten. Obviously, some horsetraiding occurred here. This method of preemptive en banc hearing is an interesting tactic because it avoids the problem of judges being locked-into their prior opinion on the case. Thus, this is likely the only way that an en banc request will be unanimously affirmed.
• The CAFC requested briefs “addressing, inter alia, the issues set forth above.” In my mind, this leaves the door open for briefs addressing related issues that are not strictly within the five questions. In particular, it would be useful for briefs to address related issues found in Comiskey, Ferguson, & Lundgren.
• Bilski BPAI Decision [Patently-O Commentary] [StepBack’s Discussion]
• Patently-O: Discussing the Section 101 Squad of Cases.
• Bilski was, of course, part of Hal Wegner’s Top Ten for 2008.
• Briefs:
• AIPLA Amicus Brief in Original Filing (pre-en-banc). AIPLA suggests the following points: (1) Section 101 should be broadly construed; (2) An invention should be patentable if it offers a "practical application of a process with a useful result;" (3) Although relevant, no physical transformation is required to avoid being classified as an abstract idea; (4) Here, Bilski's method is patentable subject matter because it allows "commodity suppliers and consumers to engage in commodities transactions while minimizing the risks associated with fluctuations in demand for such commodities and providing investment opportunities for market participants" - an endeaver quite practical and useful.
• USPTO Position: In its opposition brief, the PTO argues that there are several Section 101 reasons to eliminate the Bilski application. First, according to the PTO, the claimed method does not qualify as a statutory “process.” Rather, statutory processes have always been associated with physical transformation or machine implementation — details missing from Bilski’s claims. In addition, the PTO argues that Bilski’s claim is an abstract idea because it is merely a “disembodied concept” that would preempt an entire field of commodities trading. Regarding State Street, the PTO would limit the the requirement of a “useful, concrete, and tangible result” to computer implemented inventions that employ a mathematical algorithm.
• Many of the briefs filed in the Supreme Court case of LabCorp v. Metabolite will be applicable here.

Comments

[iwasthere]

Congress already approved business method patents under section 101 sub silento by providing a prior user defense to infringement of said business method patent by enactment of section 273. I agree with the comments above about pto doing its job. CAFC should not create the - I don't have to examine it- standard because i can assign a name. He paid his fee, examine his claims.

35 USCS § 273 (2001)

Defense to infringement based on earlier inventor

(a) Definitions. For purposes of this section-- (1) the terms "commercially used" and "commercial use" mean use of a method in the United States, so long as such use is in connection with an internal commercial use or an actual arm's-length sale or other arm"s-length commercial transfer of a useful end result, whether or not the subject matter at issue is accessible to or otherwise known to the public, except that the subject matter for which commercial marketing or use is subject to a premarketing regulatory review period during which the safety or efficacy of the subject matter is established, including any period specified in section 156(g), shall be deemed "commercially used" and in "commercial use" during such regulatory review period; (2) in the case of activities performed by a nonprofit research laboratory, or nonprofit entity such as a university, research center, or hospital, a use for which the public is the intended beneficiary shall be considered to be a use described in paragraph (1), except that the use-- (A) may be asserted as a defense under this section only for continued use by and in the laboratory or nonprofit entity; and (B) may not be asserted as a defense with respect to any subsequent commercialization or use outside such laboratory or nonprofit entity; (3) the term "method" means a method of doing or conducting business; and (4) the "effective filing date" of a patent is the earlier of the actual filing date of the application for the patent or the filing date of any earlier United States, foreign, or international application to which the subject matter at issue is entitled under section 119, 120, or 365 of this title.

(b) Defense to infringement. (1) In general. It shall be a defense to an action for infringement under section 271 of this title with respect to any subject matter that would otherwise infringe one or more claims for a method in the patent being asserted against a person, if such person had, acting in good faith, actually reduced the subject matter to practice at least 1 year before the effective filing date of such patent, and commercially used the subject matter before the effective filing date of such patent. (2) Exhaustion of right. The sale or other disposition of a useful end product produced by a patented method, by a person entitled to assert a defense under this section with respect to that useful end result shall exhaust the patent owner's rights under the patent to the extent such rights would have been exhausted had such sale or other disposition been made by the patent owner. (3) Limitations and qualifications of defense. The defense to infringement under this section is subject to the following: (A) Patent. A person may not assert the defense under this section unless the invention for which the defense is asserted is for a method. (B) Derivation. A person may not assert the defense under this section if the subject matter on which the defense is based was derived from the patentee or persons in privity with the patentee. (C) Not a general license. The defense asserted by a person under this section is not a general license under all claims of the patent at issue, but extends only to the specific subject matter claimed in the patent with respect to which the person can assert a defense under this chapter, except that the defense shall also extend to variations in the quantity or volume of use of the claimed subject matter, and to improvements in the claimed subject matter that do not infringe additional specifically claimed subject matter of the patent. (4) Burden of proof. A person asserting the defense under this section shall have the burden of establishing the defense by clear and convincing evidence. (5) Abandonment of use. A person who has abandoned commercial use of subject matter may not rely on activities performed before the date of such abandonment in establishing a defense under this section with respect to actions taken after the date of such abandonment. (6) Personal defense. The defense under this section may be asserted only by the person who performed the acts necessary to establish the defense and, except for any transfer to the patent owner, the right to assert the defense shall not be licensed or assigned or transferred to another person except as an ancillary and subordinate part of a good faith assignment or transfer for other reasons of the entire enterprise or line of business to which the defense relates. (7) Limitation on sites. A defense under this section, when acquired as part of a good faith assignment or transfer of an entire enterprise or line of business to which the defense relates, may only be asserted for uses at sites where the subject matter that would otherwise infringe one or more of the claims is in use before the later of the effective filing date of the patent or the date of the assignment or transfer of such enterprise or line of business. (8) Unsuccessful assertion of defense. If the defense under this section is pleaded by a person who is found to infringe the patent and who subsequently fails to demonstrate a reasonable basis for asserting the defense, the court shall find the case exceptional for the purpose of awarding attorney fees under section 285 of this title. (9) Invalidity. A patent shall not be deemed to be invalid under section 102 or 103 of this title solely because a defense is raised or established under this section.

[BigGuy]

"What do I see? A lot of intellegent [sic] people trying their best to boil down something that requires judgment to a 'standard' that can be generically applied across the board. Hogwash."

Uh-oh. He's cracked the code.

[Publius]

6k - As you said, none of your cases have made it to BPAI let alone Fed. Cir. So, far from "owning" anyone, you are really just talking through your hat on all this stuff. Once you have a few of your brilliant rejections sustained by the real decision makers, then please do come back and give us some more lectures. Until then, why not pipe down and try to learn something.

[Malcolm Mooney]

"none of your cases have made it to BPAI let alone Fed. Cir."

Just out of curiosity -- when is the last time the CAFC reversed a finding of obviousness by the BPAI thus resulting in a valid patent with the CAFC's imprimatur?

[M. Slonecker]

http://www.cafc.uscourts.gov/opinions/06-1507.pdf

BTW, the CAFC does not play a role in prosecution where it declares the claims in an application valid. It merely addresses whether or not the PTO has sustained its burden based upon the references and other relevant information of record. Where the PTO fails, the matter is, of course, remanded for further action.

Admittedly, the decision in the above case is far from the norm. "Per Curiam - Affirmed" is usually the most the court says on appeals from the BPAI re 103 issues.

I ommitted a link to a 102 reversal (in which Judge Newman dissented) because it did not deal with obviousness.

[Malcolm Mooney]

Thanks Michael -- that's pretty close. I was going to guess that it had to be a biotech case. I assume the patent hasn't issued yet.

It seems in the post KSR world it would be possible for the CAFC to simply take a position opposite the BPAI purely on the basis of a different view of "common sense." What I was wondering if anything like that had happened before, e.g., where the BPAI said it was obvious to combine two refs and the CAFC said "no it's not, you lose."

[examiner#6k]

publuis- The only thing I owned was pds's sorry a argument. My rejections are typically more like show and tell in kindergarten, then having to evoke the underlying physics of the universe of which I have total control and omniscent knowledge of. Sadly, that's the true story about where thousands, millions, even billions of dollars go every year for this system. For all you inventors out there, watch out for what your attorney is trying to pass off to you as an "ind".

Though, you sure can bet I'm here to learn a thing or two. Hey, maybe you can tell me about how the requirement for reciting a result being acheived in a software patent is a bad thing? Pds seems to have failed horribly and trailed off into inane sniveling about how biased the system is against the horse manure he throws at it everyday.

Oh, and fyi, my cases being so clear that they DON'T go to the BPAI IS OWNING YOU (them).

Oh, and hey Fen-
"Examiners make tenuous 101 rejections to cover their behinds with "Quality" or because proper application of patent law demands the 101 rejection -- which is it?
(Ignoring your previous comments about PTO management directing examiners to NOT issue first action allowances ...) Have you read none of the innumerable posts explaining why MOST patent attorneys have "abysmally low" first action allowance rates??"

Examiners make the rejections we're instructed by the QASes to make, they tell us what's a proper type of rejection and what's not according to the legal setting in which we're opperating. We make token rejections to make the attorney clarify his position on the matter for the record so it's "set in stone". The legal system encourages us to do this, because the app is officially rejected until he comes back and clarifies his position, just like in the 103c exclusion situation. Same thing with a 102e that you have foreign priority to perfect in order to predate. Until you perfect it, you're officially rejected. Until you clarify what your nebulous claims are referring to, for the record, or at least that you're specifically using functional language to identify your parts then you're officially rejected, because it would be reasonable to assume in many cases you might not be.

Yeah, I've read a lot of those posts about low allowance rates. The best excuse I've seen to date is that you're ignorant sons of guns. But hey, that's by you guy's own admission, far be it from me to call you that.

Oh, and why do you think we're directed to not make first action allowances? You think the SPE's haven't been around long enough to know almost all of you are overclaiming on purpose? Is that what you're trying to tell me? I've only been here almost 2 years and I already know that, and that's by your own admission.

You'll excuse me again I have a turtle to compare to another turtle for someone right fast, and hey, they're paying.

[Malcolm Mooney]

"We make token rejections to make the attorney clarify his position on the matter for the record so it's "set in stone". The legal system encourages us to do this, because the app is officially rejected until he comes back and clarifies his position, just like in the 103c exclusion situation."

I'm sure you see by now, ex#6k, that your arguments are as persuasive to a certain crowd as the arguments of scientists are to creationists. Some applicants have simply got dat ole time religion when it comes to patents. They believe that once THEY are convinced they've invented something it's the examiner's duty to stamp the papers, collect the fees, and grant the claims. Interference with the grant is the legal equivalent of hanging a man for saluting the American flag without a trial.

You can explain yourself up down and sideways to some of these folks but they'll never get it because, guldarnit, they KNOW they deserve a patent "by rights" ("it's in the Constitution!!!!"). All your statements to the contrary will therefore be dismissed, ignored, or twisted in an attempt to make you seem silly or malevolent or both.

That said: I don't want discourage you from attempting to keep it real, as it were.

[Just an ordinary inventor(TM)]

Malcolm,

“Interference with the grant is the legal equivalent of hanging a man for saluting the American flag without a trial.”

Huh?, wondering what the "guldarnit" [great word] does that eman?, if anything at all.

[MaxDrei]

Observing, from outside USA, the intense, hot, little world of prosecution at the USPTO, and following threads like the one about the J-hook gap patent, it is a comfort to read contributions from those who retain a cool wider view of real world issues. Prominent amongst this group is one Malcolm Mooney (whoever he is). Long may he continue to post and, incidentally, keep us all mightily amused.

[Jim H.]

Do I infringe the disputed claim of the patent if I

(1) initiate the stated series of transactions face-to-face, or over the telephone or the web,

(2) identify market participants by looking in a reference book, on the web, or asking a friend, and

(3) initiate the stated series of transactions face-to-face, or over the telephone or the web WITHOUT MORE?

If I personally follow these steps of manual labor, can I be sued for infringement if Bilski finds out? It appears I can be because of the breadth of the claim is not limited.

How is this activity "marked" to put me on notice that my manual labor is infringing an "invention"?

[Jim H.]

In my previous post, please limit my question to using the telephone for each step. That is, I initiate the transactions of the first element by placing a phone call to one of my brokers, I identify the participants by placing a second phone call to another broker, and I initiate the transactions of the third element by placing a phone call to a third broker.

I have infringed the claim of the "invention," correct

[M. Slonecker]

Jim H.,

It is not possible to answer your question in that the application and its associated file wrapper are not available for review.

Moreover, there is nothing in the BPAI opinion that even hints as to what the above items contain. Other that replicating the applicants' claim 1, the opinion makes no further reference to their application.

[Jim H.]

M. Slonecker,

Thank you for your reasoned response. But to take it a bit further...

Isn't the vagueness of the Claim 1 (i.e., can infringe the same steps by making phone calls) the reason for the 101 rejection?

I submit that had Bilski narrowed or limited the claim by adding terms such as "automatically" to "initiating" and "database" from which the "identifying" is accomplished (or some other examples of narrowing or limiting terms to the claims which I assume are disclosed) that it would pass 101 muster as patentable subject matter.

Assuming the application disclosed an automated initialization and database for the identification elements, would you agree that added limitations would make the claim pass 101 muster?

[Malcolm Mooney]

"Assuming the application disclosed an automated initialization and database for the identification elements, would you agree that added limitations would make the claim pass 101 muster?"

Only if all of the details (i.e., the software code) of the initialization and database were recited in the claim and were found non-obvious.

But lo and behold, if that were to happen this remarkable "invention" would suddenly be deemed worthless. Go figure.

[Jim H.]

Malcolm Mooney,

I agree with you about the worth of the invention, and I would suspect some serious 102 and 103 concerns are present, but at least it would pass 101 as patentable (albiet, worthless) subject matter, agree?

[M. Slonecker]

Jim H,

If the issue of what falls within and without 101 was an easy matter I rather doubt the BPAI would have taken the time to craft a 71 page opinion. In fact, its opinion makes it only too clear its wishes that 101 was not even a part of what the USPTO must do regarding the processing of applications.

Bilski is a rambling, and oftentimes inconsistent, explication of what the BPAI thinks 101 covers. As it states, however, it cannot be sure with any degree of certainty. Hence, in my opinion Bilski is being presented to the CAFC as a strawman to try and get some sort of meaningful guidance. Whether such guidance is forthcoming is a matter of conjecture, but if history teaches us anything the likelihood that meaningful guidance will result is almost certainly remote.

BTW, Bilski does push the envelope in that the claims apparently are in no way tied to any specific apparatus. It can be done over the telephone, via a computer connection, smoke signals, Navy signal flags, exchange of paper, etc. Hence it does provide a vehicle to explore just what the heck is meant by the term "process" under 101.

I encourage you to read the BPAI decision, and do note some of the examples used by the BPAI describing "processes" that just might now be pending before the USPTO. I smile to think someone might actually be trying to secure a patent on a way to make someone fumble a football.

Let me tell you what I do hope. I do not believe our economic system is well served by viewing 101 as an exclusionary law. I honestly do believe it should be inclusionary since we can hardly forsee at this point in time just what lies around the corner as real world problems waiting for real world solutions. I much prefer to err on the side of opening the 101 portal even as to questionable matters, and to then utilize 102, 103 and 112 appropriately.

[Malcolm Mooney]

"at least it would pass 101 as patentable (albiet, worthless) subject matter, agree?"

Yes, in the situation as I described it, I believe it would (and that's assuming the law regarding the patentability of software does not change).

[Tim Rue]

ironicslip - Steven Wolfram in his book "A new kind of science" does not find the solution for which he was seeking. But he does suggest its probably something simple. And I know it is.

Business methods and software share in common the use of building upon abstract ideas. Money itself is an abstraction of "value" in trade.

[Dale]

Below is the first claim from a patented business method titled Method Of Expediting Insurance Claims. Professional comments on its validity are appreciated. The invention claimed is:

1. A method of processing an insurance claim related to property damage on a property and casualty insurance policy, except personal automobile and commercial automobile, as defined by the NAIC Uniform Property and Casualty Product Coding Matrix, such method comprising the steps of: storing in memory plural sets of keywords, wherein each set of keywords is associated with at least one policy type and wherein the keywords in said plural sets of keywords are descriptive of property and causes of property damage; receiving a claim from an insured for a loss to property, but not automobile property, and not a health care claim through an Internet connection, wherein the received claim contains a description of loss for determining a who, what, and why about how the loss occurred; determining a policy type from said received claim; identifying an insurance criteria based on said determined policy type, for evaluating the loss, wherein said insurance criteria is based upon insuring agreements, exclusions, coverage limits and terms and conditions selected from the group consisting of all risk of loss, named perils, accident to object, supplemental coverage, consequential loss, coverage extensions, exclusions, limitations and property not covered or limited; retrieving from said memory a predetermined set of keywords that are associated with said determined policy type and with said identified insurance criteria; matching said retrieved set of keywords with words contained within the description of loss of said received claim; assigning the claim to an adjuster when any matched words of said matching step meets a predetermined criteria; and paying the claim without assigning the claim to an adjuster when said matching step does not meet the predetermined criteria.

[MaxDrei]

Issued you say Dale? I wonder when. Before the days of "reject, reject, reject" I'll be bound. The European Patent Convention of 1973, in Article 52, prescribes that "methods,,,for doing business" shall not be regarded as inventions. Dale, I welcome your claim. Now I can see why the European Founding Fathers included that provision in their version of 35 USC 101.

[pds]

FYI

The above claim is from US Patent No. 7,203,654, which was issued on April 10, 2007.

Without reading the specification or the prior art, I would guess that the novel aspect of it is:

"assigning the claim to an adjuster when any matched words of said matching step meets a predetermined criteria; and paying the claim without assigning the claim to an adjuster when said matching step does not meet the predetermined criteria."

Again, only guessing, what may have made this claim patentable is the step of paying a claim without using an adjuster upon the satisfaction of a particular criteria.

Unlike Bilski, this claim definitely recites the use of technology ... something that will typically prevent a 101 rejection from being issued at the USPTO. If the technology aspect of this claim was removed, the steps could probably still be performed by hand, but it wouldn't be cost efficient to do so.

BTW: just nit picking, I don't like the phrase "through an Internet connection." I would have preferred "through a network connection."

[John Birke]

The en banc decision is in.

http://www.finnegan.com/files/Publication/0b480dc8-f78c-4747-9abd-8ced99587d0a/Presentation/PublicationAttachment/ed19c2f4-3683-4e3f-89f4-8e05deef4ada/07-1130%2010-30-2008.pdf