In re BilskiIn re Bilski

Federal Circuit (2008) (en banc)

Decided: October 30, 2008

A very SMALL decision on A very SMALL decision on

a very BIG issue!a very BIG issue!

Claim 1A 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.

Claim 1: Layman Example

MINE:

Sensitive to lower coal prices

Power Plant:

Sensitive to rising coal prices

TRADERS:

Buy/Sell at fixed cost

Procedural Posture

• Examiner rejected the claims under § 101(no analysis under §102 or 103)

• BPAI– Affirmed the Rejection– Found that claims were “broad enough to read

on performing the steps without any machine or apparatus”

• Federal Circuit – Affirms § 101 rejection

Issue Presented

“what the term ‘process’ in §101 means, and how to determine whether a given claim [] is a ‘new and useful process.’”

Holding

Adopts the machine or transformation test for judging the eligibility of a process for patent protection.

“Therefore, although invited to do so by several amici, we decline to adopt a broad exclusion over software or any other such category of subject matter beyond the exclusion of claims drawn to fundamental principles set forth by the Supreme Court.”

Machine or Transformation Test

A claimed process is surely patent-eligible

subject matter under § 101 if:

(1) it is tied to a particular machine or apparatus, or

(2) it transforms a particular article into a different state or thing.

Slip op. at 10.

(reasoned from Benson case – SCOTUS)

Quasi-Holding?

A patentable process is like pornography:

we cannot define it, but

we know it when we see it!*

*not the words of the CFAC

So what is a “particular machine”?

Prong 1: Machine

A particular machine is . . .

Prong 1: Machine

"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 or when recitation of a computer suffices to tie a process claim to a particular machine."

So what is a satisfactory

“transformation”?

Prong 2: Transformation

• Must transform a type of “article”

• “must be central to the purpose of the claimed process”

• must “impose meaningful limits on the claim's scope”

• cannot “be insignificant extra-solution activity”

Court’s Logical Analysis

1.  We know that natural principles aren't patentable.2.  We know it is difficult to determine what is and what is

not a natural principle.3.  The SCOTUS told us that there are two ways to tell if

something is not a natural principle:– A. If it is tied to a machine or– B. If it transforms the subject matter

4.  Therefore, the only way for a process to be patent eligible is to be tied to a machine or tranform subject matter.

5.  In order to make sure all principles are excluded, insignificant post-solution machines or transformations don't count.

Where The Judges Came Down

Judge Newman’s Dissent

Judge Rader’s Dissent

Scope of § 101Broad Narrow

Majority + conc.

Judge Mayer’s Dissent

So How Will the PTO Treat This?

Ex parte Langemyr (post Bilski argument)– “method executed in a computer apparatus”– Process “does not require any physical output

into the real world.” (fails under prong 2)– “the limitation that the method is ‘executed in

a computer apparatus’ does not tie the method to a ‘particular machine.’” (fails prong 1)

– BPAI states that the general applicability to all computers caused it to fail

Treatment by the PTO (cont.)

Ex parte Wasynczuk– “computer-implemented” process– Broadest claim invalid - “the sole structural limitation

recited is the ‘computer-implemented system’ of the preamble”

– Dependent claim where one step is performed by first “computer” and second step is performed by second “computer” IS ALLOWED!

– two “physical computing devices” operating together “is ‘a particular apparatus’ to which the process is tied”

Talking Points

• What is sufficient to qualify as a “particular machine”?

• Is data physical such that its transformation should qualify?

• How should software claims be drafted moving forward?