AIPLA Meetings with JPAAApril 9 and 12, 2013Michael P. Dunnam

Woodcock Washburn LLP

SUBJECT MATTER ELIGIBILITY UNDER 35 U.S.C. § 101 (POST-

BILSKI)

35 U.S.C. § 101 (Post-Bilski)

Bilski holdingAbstract Ideas pre-BilskiUSPTO GuidelinesComputer Software/Business Method Cases Post-BilskiPrometheus v. MayoCLS Bank – En Banc at Federal CircuitConclusions/Recommendations

© AIPLA 20132

Machine-or-Transformation Test

A claimed process is patent-eligible under § 101 if: It is tied to a particular machine or apparatus, or It transforms a particular article into a different state or thing Further, the use of a specific machine or transformation of an

article must impose meaningful limits on the claim's scope

© AIPLA 20133

Bilski Holding

The “machine-or-transformation” test is NOT the “exclusive” test.The fact that the Patent Act specifically provides for special defenses for patents that cover “a method of doing or conducting business” (35 U.S.C. §273(b)(1) & (a)(3)) confirms that “business method” patents cannot be per se unpatentable subject matter.

The Bilski claims were ‘attempts to patent abstract ideas’ - one of three specific exceptions to §101’s broad patent-eligibility principles under Benson-Flook-Diehr “guideposts”: laws of nature, physical phenomena, and abstract ideas.

The Federal Circuit may define the boundaries of abstract vs. non-abstract subject matter in the future - how patentability standards will develop was left as an open question.

© AIPLA 20134

Bilski Holding

Patents in area of business methods, financial services, computer software, the Internet, and life sciences are not categorically precluded.

However, a significant minority of the Supreme Court find that patents, particularly in the area of business methods, may be anti-competitive and undesirable.

The “machine-or-transformation” test remains a safe haven but is not the exclusive test. Focus is now on “abstractness” as opposed to “machine” or “transformation” under Benson-Flook-Diehr.

Applicants cannot claim too broadly a concept or idea but must draw claims to particular embodiments to avoid rejections for claiming an “abstract idea.”

What constitutes an “abstract idea” will develop as the case law develops.

© AIPLA 20135

Unpatentable Abstract Ideas Pre-Bilski

Method for converting signals in binary coded decimal form to binary form – Benson (S. Ct. 1972)

Method for adjusting an alarm limit – Flook (S. Ct. 1978)Method for conducting auctions – In re Schrader (Fed. Cir. 1994)Method of representing objects with bubbles along an axis – In re Warmerdam (Fed. Cir. 1994)

Method of arbitrating a dispute – In re Comiskey (Fed. Cir. 2007)Signal with an embedded digital watermark encoding according to a specified encoding process – In re Nuijten (Fed. Cir. 2007)

Method of marketing software – In re Ferguson (Fed. Cir. 2009)Method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price – Bilski (S. Ct. 2010)

© AIPLA 20136

Patentable Practical Applications of Abstract Ideas Pre-Bilski

Method determining when to open a rubber mold – Diehr (S. Ct. 1981)Method and apparatus for analyzing electrocardiograph signals – Arrhythmia Research Technology (Fed. Cir. 1992)

Smooth waveform rasterizer of an oscilloscope – Alappat (Fed. Cir. 1994)Data structures in a memory – In re Lowry (Fed. Cir. 1994)Transformation of data representing discrete dollar amounts by a machine through a series of mathematical calculations into a final share price – State Street Bank (Fed. Cir. 1998)

Method for generating message records (PIC indicator) indicating a carrier for differential billing – AT&T v. Excel (Fed. Cir. 1998)

© AIPLA 20137

USPTO Guidelines

USPTO noted that the Bilski claims were found to be “abstract” in the sense that there are no limitations as to the mechanism for entering into the transactions.

If the steps can be performed strictly in someone’s mind, by software alone, or by an unnamed mechanism, claim will be found to be abstract.

© AIPLA 20138

USPTO Guidelines

Method claims are patent-eligible unless disqualified as one of the exceptions: law of nature,

physical phenomena, or abstract idea

Examiner should determine if the claim viewed as a whole is disqualified as a claim to an abstract idea

Factors favoring patent-eligibility Satisfy machine-or-transformation test Provide evidence the abstract idea has been practically applied

© AIPLA 20139

USPTO Guidelines

If performance involves an application of a law of nature, even in the absence of a machine, apparatus, or transformation, consider:

the particularity or generality of the application v. broad, generic application (e.g., use of electromagnetism for transmitting signals at a distance vs. described embodiment for doing so)

application solely involving subjective determinations (e.g., ways to think about the law of nature)

if its involvement is extra-solution activity or field of use (extent the application imposes meaningful limits on execution of the method)

© AIPLA 201310

USPTO Guidelines

If a general concept (principle, theory, plan, or scheme) is involved in executing the steps (can be a clue that the claim is drawn to an abstract idea), consider:

extent use of the concept as expressed in the method would preempt its use in other fields (effectively grant a monopoly on the concept)

extent claim is so abstract and sweeping as to cover both known and unknown uses of the concept, performed on any existing or future-devised machinery, or even without any apparatus

claim would effectively cover all possible solutions to a particular problem

© AIPLA 201311

USPTO Guidelines

whether concept is disembodied or implemented in some tangible way (meaningful way) – not one field of use or token post-solution activity

the mechanism(s) by which steps are implemented – observable and verifiable not subjective or imperceptible

Examples of General Concepts Basic economic practices, theories; “how business should be conducted” Basic legal theories Mental activity Math Concepts; Teaching Concepts Interpersonal interactions; Human behavior

Machine-or-Transformation test remains de facto test in USPTO

© AIPLA 201312

Computer Software/Business Method Cases Post-Bilski

At first, District Courts still applied safe harbor of machine-or-transformation test:

Ultramercial v. Hulu (C.D. Cal. August 13, 2010) – method claims invalid as failing M or T test

Chamberlain Group v. Lear Corp. (N.D. Ill. November 24, 2010) – claims to physical device valid under M or T test

© AIPLA 201313

Computer Software/Business Method Cases Post-Bilski

Research Corporation Technologies v. Microsoft (Fed. Cir. Dec. 8, 2010)

In first post-Bilski appeal ruling at Federal Circuit under 35 U.S.C. 101, Chief Judge Rader noted that Supreme Court did not define abstractness before finding that:

To be found unpatentable under 35 U.S.C. 101, an invention’s abstractness must “exhibit itself so manifestly as to override the broad statutory categories of eligible subject matter”

© AIPLA 201314

Computer Software/Business Method Cases Post-Bilski

Research Corp. Technologies continued Claims represent “functional and palpable applications in the field of

computer technology” even though the identified technical elements were not in the claims

Bilski test characterized as “threshold test” – invention patentable unless claims fall under noted exception

“Concreteness” of the claims should be addressed under 35 U.S.C. 112, not 101

Inventions with “specific applications or improvements to technologies in the marketplace” are not likely to be so abstract as not to satisfy the Patent Act

Preemption of all uses of abstract idea not considered © AIPLA 201315

Computer Software/Business Method Cases Post-Bilski

101 Battles Within Federal Circuit CyberSource v. Retail Decisions (8/16/2011) – process claim for validating

credit card transaction over internet invalid (Bryson, Dyk, Prost) Ultramercial v. Hulu (9/15/2011) – process for monetizing copyrighted

products over internet is valid (Rader, Lourie, O’Malley), but Supreme Court remanded to Federal Circuit after Mayo v. Prometheus

Dealertrack v. Huber (1/20/2012) – process for processing credit applications over networks invalid (Linn, Plager, Dyk)

Fort Properties v. American Master (2/27/2012) – method for creating real estate investment instrument invalid (Prost, Schall, Moore)

CLS Bank v. Alice (7/9/2012) – method of exchanging obligations between parties is valid (Linn, O’Malley, Prost); Fed. Cir. reconsidering en banc

Bancorp v. Sun Life (7/26/2012) – methods of administering and tracking the value of life insurance policies invalid (Lourie, Prost, Wallach) © AIPLA 201316

Prometheus v. Mayo (S. Ct. March 20, 2012

Federal Circuit found claim to be patent eligible as involving administration of a drug, which transforms the body

Supreme Court reversed, claim is ineligible because claim amounts to statement of law of nature applied to a particular audience (patients who received the drug)

Significance to EE/CS practitioners is that Supreme Court stated that primary patentable subject matter analysis under 101 is one of parsing of the claim; after that is done consider claim as a whole

© AIPLA 201317

Prometheus v. Mayo continued

To determine whether claim “adds enough” to the law of nature, Prometheus decision calls for the following analysis: 1. Separate the claim into parts 2. Find the law of nature and set it aside 3. Take the other parts of the claim in turn and decide if any of

them represent an “inventive concept” or merely “insignificant” steps

Freeman/Walter/Abele test again? At some level, all inventions embody, use, or apply laws of nature, natural phenomena, or abstract ideas! Care must be taken to characterize invention as not broader than “practically applied” embodiments.

© AIPLA 201318

Application of Prometheus to Computer Cases

Smartgene v. Advanced Biological Labs., (D. D.C. 3/30/12 ) (10 days after Prometheus decision)

Claims to “system, method, and computer program for guiding the selection of therapeutic treatment regimens for complex disorders … by ranking available treatment regimens and providing advisory information” found invalid as abstract.

101 is threshold inquiry for patent validity Dissected each step of claim: first step is routine, second step is routine, third

step could be performed in doctor’s mind, fourth step is routine…claims track abstract mental process of doctor treating patient

Computing device claims also invalid as not directed to “particular” machine, including no “special programming code,” or “specific algorithms” – computer does not play “significant part” in permitting the claimed method to be performed © AIPLA 201319

CLS Bank

Federal Circuit applied Prometheus to computer-related inventions for first time and reversed, in 2-1 decision, district court’s invalidation of process, system, and CRM claims for lack of patentable subject matter.

Court picked up catchphrase from Research Corp. case that the abstractness of a claim must be “manifestly evident” when taking “all of the claim recitations into consideration.” The Court further held:

“Unless the single most reasonable understanding is that a claim is directed to nothing more than a fundamental truth or disembodied concept, with no limitations in the claim attaching that idea to a specific application, it is inappropriate to hold that the claim is directed to a patent ineligible “abstract idea” under 35 U.S.C. 101.”

Dissent very upset that majority did not follow Prometheus holding.© AIPLA 201320

CLS Bank

Where majority did not follow Supreme Court in Prometheus: District courts do not need to examine section 101 first. Courts must determine if claims are directed to nothing more than a

fundamental truth or disembodied concept without any limitation in the claims tying that idea to a specific application (practical application); claim dissection is “inappropriate” and “impermissible.”

The form of claim is irrelevant – a computer implementation cannot render an otherwise abstract idea patent eligible.

Claim construction is important – overgeneralized claims are more likely to be abstract.

Specification should be reviewed to understand how claims are applied in computer context; then determine whether computer limitations play a significant part in the performance of the invention or are applied to a very specific application of the concept. © AIPLA 201321

CLS Bank – En Banc at Federal Circuit

On October 9, 2012, Federal Circuit granted petition for rehearing en banc in CLS Bank and vacated court’s opinion of July 9, 2012.

Federal Circuit invited views of USPTO as amicus curiae and USPTO filed amicus curiae brief on December 14, 2012.

Oral argument was February 8, 2013.We await decision of en banc Federal Circuit.

© AIPLA 201322

CLS Bank – En Banc at Federal Circuit

Issues on appeal: A. What test should the court adopt to determine whether a

computer-implemented invention is a patent ineligible “abstract idea”; and when, if ever, does the presence of a computer in a claim lend patent eligibility to an otherwise patent-ineligible idea?

B. In assessing patent eligibility under 35 U.S.C. §101 of a computer-implemented invention, should it matter whether the invention is claimed as a method, system, or storage medium; and should such claims at times be considered equivalent for §101 purposes?

© AIPLA 201323

CLS Bank – En Banc at Federal Circuit

CLS Bank (alleged infringer) Test is that claims predicated on abstract ideas require “inventive

concept,” which requires that a computer be “integral” and “specialized for the claimed invention.”

Claims are ineligible because claim limitations are either abstract or well known—no inventive concept.  Any computer involvement is trivial and general.

System claims fare no better than the methods because system elements are just trivial recitation of general components.

© AIPLA 201324

CLS Bank – En Banc at Federal Circuit

Alice (patentee) Test is whether the additional claim limitations over and above the

abstract idea are significant (rather than token), i.e., does the computer play a meaningful role.

Claims are eligible because the “point of the invention” is to gain the advantages of computer implementation (speed, real time execution, reduced risk, accuracy, reliability).

System claims (but not CRM) are additionally eligible because they are inherently concrete and tangible, and that is all it takes, consistent with still en banc law in Alappat.

© AIPLA 201325

CLS Bank – En Banc at Federal Circuit

USPTO The test is a totality of the circumstances type of analysis, focusing

on the claim as a whole, with numerous factors drawn from the case law; like a KSR type of approach.

Claims may or may not be eligible, case warrants a remand for claim construction, which is very important.  “Paraphrasing is no substitute for claim construction.”

System claims do not deserve special treatment, although it may be a factor taken as a whole.

© AIPLA 201326

CLS Bank Themes at Oral Argument

Preemption: The Court, especially those leaning against eligibility, was very

interested in the scope of the claims and whether they would preempt all ways of performing what the claims purport to accomplish. 

Exchange with Court underscored the importance of winning the fight over what the abstract idea is in the first place - if the abstract idea goes the whole length of the claim, then claim is invalid. 

Alice has to convince 6 judges that the idea is at a higher level of generality, and the claim is a specific implementation. 

Judges Reyna and Wallach both suggested this was a problem for them - which is why some think the method claims are in trouble.

© AIPLA 201327

CLS Bank Themes at Oral Argument

The “test”: Court questioned the “sufficiently integrated with a computer” concept from

cases where claims found patent eligible as opposed to the “inventive concept” from cases where claims found ineligible

For Judges Dyk and Lourie, the computer was simply a calculator that just runs the abstract idea.  

Judge Reyna questioned whether the abstract idea is identified as whatever you can do in your head or perhaps on paper (e.g., double entry bookkeeping).  

Dyk-Lourie-Reyna group noted that the method claims do not explicitly include computer limitations – a real problem for these judges.

No one argued for “dissection” of claims as outlined in Prometheus!!

© AIPLA 201328

CLS Bank Themes at Oral Argument

System claims:  Judge Moore, with support from Judge Linn, expressed great concern that

the parties were not treating the claims individually and suggested that the system claim is unquestionably patentable subject matter due to the disclosed and claimed computer hardware. 

Judge Moore asked one can take an eligible invention and simply add functionality causing the invention to become ineligible? 

Judge Dyk and Judge Lourie, especially, left no doubt that they viewed the system claims as mere claim drafting tricks and to be treated the same as the method claims.

The Court will have to face the question of whether Prometheus overturned Alappat or at least made the special purpose machine analysis of Alappat no longer useful.

© AIPLA 201329

CLS Bank Themes at Oral Argument

Claim construction :  Judge O’Malley continued voicing her concern that section 101

needs to be done after claim construction.  This is consistent with the government’s view that the terms in this

case need to be construed before the 101 determination can be made. 

The Court will not likely make a definite rule on this, but a majority of judges likely agree that claim construction should be done when necessary.

© AIPLA 201330

CLS Bank Themes at Oral Argument

Presumption of validity:  There was some discussion of whether patents should receive a

presumption of validity on section 101 issues - USPTO and Alice agree yes, but CLS Bank says no, because the vast majority of patents in force currently were not examined for 101 under current law, plus no Supreme Court case has ever applied the presumption to 101. 

Alice’s counsel made the point that, if one is to believe that section 101 is a defense under section 282, then the presumption must arise. 

The Court will likely agree with the government that the presumption of validity applies. 

© AIPLA 201331

CLS Bank Predictions

Staunchly pro-eligibility (4): Rader, Linn (wrote panel majority), O’Malley (joined panel majority),

Newman

Staunchly anti-eligibility (3): Dyk, Prost (wrote the panel dissent), Lourie

Unknown (4): Moore (likely to say certain system claims are eligible but certain others are not) Reyna (has joined anti-eligibility opinions, expressed doubt on the preemption point at oral

argument) Wallach (comes from a non-patent background which at least stereotypically puts him in the

ineligible group) Taranto (new judge – likely vote for ineligibility)

© AIPLA 201332

CLS Bank Predictions

Predicted Totals: Method claims ineligible 7-4.  Computer-readable medium claims ineligible 7-4 (Alice

accepted that CRM claims would be treated same as method claims and no judge at oral argument made a distinction).

System claims ineligible 6-5; however, possible that Judges Reyna, Wallach, and Prost could be convinced to allow system claim.  If all change sides, system claims could be eligible 8-3.

© AIPLA 201333

CLS Bank Predictions

Predicted answers to questions: A. Test: Court will adopt the “computer adds enough” approach based

on Prometheus and supported by Alice and USPTO.  USPTO’s factors for consideration may make it into the opinion.   

B. Type of claim: Form of claim matters. Method and CRM claims have difficult path to eligibility; system claims more likely eligible but not automatically.  Some judges will view system claims favorably while others will consider the form of claim irrelevant.  A system has to be real hardware (“practical application”) and not just “means” for performing “abstract” function – breadth of claim matters.

© AIPLA 201334

Conclusions/Recommendations

Machine-or-transformation test prevails in USPTO.However, the machine or transformation test may not satisfy the court if the invention is viewed as a broad, general disembodied (abstract) concept that is not implemented and claimed in connection with a particular embodiment or practical application.

Invention must claim embodiment of idea – not idea itself.Characterize relatively narrow embodiment of broad idea in specification; preferably show that prior art addresses same broad idea.

If “machine” is a computer, then computer limitations must play a significant part in the performance of the invention or be applied to a very specific application of the concept.

© AIPLA 201335

Conclusions/Recommendations

Reciting a “computer” in the claims may satisfy the USPTO but it will not satisfy a district court if the computer does not tie the invention to a particular practical application.

Courts remain concerned about “preemption” of an idea that may foreclose innovation; breadth of claim important.

If claim steps may be performed in someone’s mind, by software alone, or by unnamed mechanism, process is disembodied and too abstract.

Emphasize underlying technology elements or algorithms implemented by a computer.

Beware: Supreme Court will soon decide AMP v. Myriad (relating to patent eligibility of certain method claims and composition claims on isolated human DNA) which may broadly impact computer cases© AIPLA 2013

36

SUBJECT MATTER ELIGIBILITY UNDER 35 U.S.C. § 101 (POST-BILSKI)

DOMO ARIGATO GOZAIMASU

Michael P. Dunnam

Woodcock Washburn LLP© AIPLA 201337