Posts Tagged ‘In re Bilski’

After Bilski: Another business method patent overturned

Wednesday, March 14th, 2012

A special thanks to Daniel Parrish for the following post:

The Federal Circuit recently rejected a patent held by American Master Lease LLC for methods of creating an investment structure to take advantage of an IRS tax-deferment exemption.  Fort Properties, Inc. v. American Master Lease LLC, No. 2009–1242, 2012 WL 603969 (Fed. Cir. Feb. 27, 2012).  The court ruled that the investment structure’s ties to the physical world such as deeds, contracts and real property, like the commodities and money in Bilski v. Kappos, did not transform the abstract method into a patentable process.  130 S.Ct. 3218.  Furthermore, the court ruled that adding a limitation requiring the use of a computer did not “play a significant part in permitting the claimed method to be performed,” citing the recent Dealertrack decision, recently reviewed in this blogDealertrack, Inc. v. Huber, Nos. 2009-1566, -1588, 2012 WL 164439, (Fed. Cir. Jan. 20, 2012).

For those following business method patents, being comfortable with some uncertainty regarding statutory subject matter is a prerequisite, yet the Supreme Court provided some insight in 2010, when we learned three things in Bilski:

[1] the test for whether a business method is statutory subject matter is not solely the “machine or transformation” test, wherein the method is either tied to a particular machine or transforms a particular article into a different state or thing.  This test is a “useful clue” in determining patentability.

[2] business methods are indeed statutory subject matter.  This is clear because 35 U.S.C. § 273(b)(1) provides a prior user defense for “method[s] of doing or conducting business.”  As a matter of statutory interpretation, declaring all business methods unpatentable would render the above provision useless.  Thus, there must be some category of business methods that are patentable.

[3] Methods of hedging risk of price changes in the energy commodities market are not patentable under 35 U.S.C. § 101, even when a specific mathematical formula has physical ties to the real world.

If some business methods that fail the “machine or transformation” test are still patentable, what is the correct test to apply?   The US Supreme Court has yet to provide this test, but a look at history may provide some insight.  The Fort Properties decision summarizes the seminal Supreme Court precedents drawing the line between patent eligible processes and abstract ideas.  These are graphically represented below:

Bilski v. Kappos, 130 S.Ct. 3218; Diamond v. Diehr, 450 U.S. 175 (1981); Parker v. Flook, 437 U.S. 584 (1978); and Gottschalk v. Benson, 409 U.S. 63 (1972).

The Fort Properties decision also outlines recent Federal Circuit decisions on patents involving methods and computer limitations.  These are graphically represented below:

Fort Properties, Inc. v. American Master Lease LLC, No. 2009–1242, 2012 WL 603969 (Fed. Cir. Feb. 27, 2012); Dealertrack, Inc. v. Huber, Nos. 2009-1566, -1588, 2012 WL 164439, (Fed. Cir. Jan. 20, 2012); Ultramercial, LLC v. Hulu, LLC, 657 F.3d 1323, 1328 (Fed. Cir. 2011); Cybersource Corp. v. Retail Decisions, Inc., 654 F.3d 1366, 1369 (Fed. Cir. 2011).

Although it is always difficult to predict what, if any, specific test the Supreme Court may enact, we can make a few generalizations.  Inventions in existing statutory categories that incorporate non-statutory subject matter as part of the invention are likely to still be patentable.  As business method patents are relatively new, we do not yet have “classic” business method patent categories.  We do know that business method patents must do more than recite a computer limitation.  A business method with ties to the “real world” must be significant to the invention, not merely using a computer to generate deedshares or to execute a calculation.  The more that the claimed invention requires a computer (as opposed to incidentally using a computer) the more likely it will qualify as statutory subject matter.

Further speculation is, well, just that.  Future cases may clarify matters or add to the uncertainty.  Here’s hoping for a more concrete statutory test for business method patents!

Research Corporation Technologies Inc. v. Microsoft Corp.: Sanity Returns to Section 101 Abstraction Analysis

Thursday, December 9th, 2010

Since the U.S. Supreme Court’s Bilski v. Kappos decision, there have been a raft of District Court and Board decisions that took the “abstract idea” exclusion for patentable subject matter past the point of absurdity.  Thankfully it did not take long for some sanity to return to the legal precedent on this all-important issue.   On December 8, a three judge panel (Judges Rader, Newman and Plager) of the U.S. Court of Appeals for the Federal Circuit ruled that, to be found unpatentable under the abstract idea exclusion from 35 U.S.C. §101, an invention’s abstractness must “exhibit itself so manifestly as to override the broad statutory categories” of patent eligibility.  Research Corporation Technologies Inc. v. Microsoft Corp., Fed. Cir., No. 2010-1037, 12/8/10.  RCT v. Microsoft Federal Circuit Decision

The patents in question, owned by Research Corporation Technologies Inc. (for a profile of this company’s patent holdings see:, involved digital imaging process claims.  The Federal Circuit found that these claims, which had been found unpatentable under Section 101 by the district court, are patentable subject matter because they claim “functional and palpable applications in the field of computer technology.”


The Board Takes Bilski for a Test Drive and Runs Over Some Software Claims

Tuesday, September 28th, 2010

July and August have been busy months for the Board of Patent Appeals and Interferences.  Not including the Ex Parte Proudler and Ex Parte Birger cases I previously reported on, the BPAI has issued at least ten opinions in which software-related claims were rejected under Section 101 in view of Bilski.  These opinions, excerpts of which are provided below, present both understandable and puzzling Section 101 rejections.  A number of the rejections are understandable due to a lack of computer structure or electronic functionality in the claim to tie the software elements to a machine implementation. Of particular note, it appears that machine limitations in method claims are not enough per se to bring the claim into the machine sphere of the machine or transformation test, according to these Board decisions, despite the PTO’s Interim Guidance, which seems to indicate otherwise.


Abstract Ideas Stored as Physical Data: Real or Abstract?

Saturday, May 29th, 2010

Well, since the Supreme Court is making us all wait for its verdict on Bilski, I thought I would explore (but far from resolve) a notion that has always fascinated and puzzled me – the concept of abstract ideas represented by real data. In order to get oriented in reality for this discussion, and avoid being completely lost in metaphysical analysis, let me posit two different types of inventions involving data – one where the data represents a real entity, and one where the data represents an abstract entity.

The first invention is a method of processing an x-ray image by obtaining an x-ray image, converting the image to a machine usable digital representation, and then processing the digital representation to remove noise in the image.  This is generally the subject matter of the invention found patentable on appeal in In re Abele and Marshall (CCPA) 1982, 684 F.2d 902, 214 USPQ 682.  In this first posited example, one can argue the following are true:

 1) the x-ray is real (after all you can kill people with them);

2) the machine usable digital data therefore represents a real entity;

3) the machine usable data takes the form of real signals or physical quantities in that it can be stored (as a charge, magnetic orientation, physical material, etc..), moved, processed and even detected with a scientific instrument.

4) the “data,” as disembodied from its physical representation, has an abstract character, in that it only represents a real entity and only has meaning when a human mind correlates the data to the physical entity it represents.

Now, let’s posit another example.  In this example the invention is a process for storing and searching machine usable data representing pure ideas, like the idea of “justice.”  In this example, one can argue the following are true:

1) the ideas are not physically real – they are abstract;

2) the machine usable digital data represents an abstract entity – i.e., the notion of “justice”;

3) the machine usable data takes the form of real signals or physical quantities in that it can be stored, moved, processed and even detected with a scientific instrument;

4) the “data,” as disembodied from its physical representation, has an abstract character as well, in that it only represents the abstract entity and only has meaning when a human mind correlates the data to the abstract entity it represents.

If we agree on the above observations, then the following is also true:

1) machine usable digital data representing either real or abstract entities is real and not abstract.  This data simply has to be real in order to be manipulated by a computing system.

2) real data can represent either real or abstract entities.

3) real data can be created, stored, moved and processed by a computer.

4) an invention that processes real data is real and not abstract.

5) an invention that processes real data is not performing “mental steps” as the human brain cannot store or process real data.

Another level of this same inquiry is whether a limitation that specifies the type of type of data is entitled to be recognized for the purpose of distinguishing a claim from the prior art.  As established by In re Abele, if the data represents a real entity (or at least is explicitly obtained from measuring or sensing a real entity) then the limitation is given weight as if the real data was a proxy for a corresponding real (physical) entity.  On the other hand, if the machine usable data represents an abstract entity, and the data is considered a proxy for the abstract entity, then this element of the claim could be considered abstract and therefore not entitled to be recognized as part of the claimed combination for the purpose of distinguishing the claim.  Of course we know that most of the time these limitations are given credit, as thousands or perhaps even tens of thousands of patents now in force claim inventions with these types of limitations. 

So, what are some of the types of abstract entities represented by real data?  Here are a few:

  • language —  language has meaning only in the minds of man, and not according to any law of nature
  • currency systems  — a currency system is an abstraction straight out of the mind of man, rooted in a common agreement to keep financial score using the same medium of exchange
  • man-made laws – laws that exist only by decree of politicians or legislative bodies do not exist in nature
  • contract rights – rights that represent an agreement between parties are also abstract in the sense they do not exist in nature

Let me close this posting with the following question, and possibly the question that  the Supreme Court struggled with in Bilski:  If I represent these abstractions with real data, are these abstractions now real for the purpose of patent protection?  I will do my best to provide some insight to this question in one of my upcoming postings.  No doubt the Supreme Court will soon give us some of their insight on this question as well.