PATENT, TRADEMARK & COPYRIGHT!

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1 A BNA s PATENT, TRADEMARK & COPYRIGHT! JOURNAL Reproduced with permission from BNA s Patent, Trademark & Copyright Journal, 79 PTCJ 79, 11/20/09, 11/20/2009. Copyright 2009 by The Bureau of National Affairs, Inc. ( ) PATENTS As the patent community anticipates a decision by the U.S. Supreme Court on subject matter patentability, recent rulings by the Federal Circuit and the Board of Patent Appeals and Interferences suggest strategies for preparing method patent applications that will survive the Federal Circuit s machine-or-transformation test. The Changing Landscape of Method Claims in the Wake of In re Bilski: What We Can Learn from Recent Decisions of Federal Courts and the Board of Patent Appeals BY ADRIANA SURINGA LUEDKE AND BRIDGET M. HAYDEN P ure business methods are out. Algorithms are out. Machines and data transformations are in. What does this all mean? While the patent community waits for the Supreme Court s decision in Bilski v. Kappos, No (U.S. argued Nov. 9, 2009) (79 PTCJ 33, 11/13/09), patent applicants seeking to write patentable claims are stuck with trying to conform to the lower courts most recent Adriana Suringa Luedke and Bridget M. Hayden are lawyers at Dorsey & Whitney, Minneapolis. Luedke can be reached at leudke.adriana@dorsey.com. Hayden can be reached at hayden.bridget@dorsey.com. rulings on software-based and other business method patent applications. On review before the high court is the en banc ruling by the U.S. Court of Appeals for the Federal Circuit 1 that, in order to be eligible for patent protection, an inventive method must either be tied to a machine or recite a transformation of an article. 2 This machine-ortransformation test replaced the Freeman-Walter- Abele 3 test and the useful, concrete and tangible 1 In re Bilski, 545 F.3d 943, 88 USPQ2d 1385 (Fed. Cir. 2008) (en banc) (77 PTCJ 4, 11/7/08). 2 The machine-or-transformation test is a two-branched inquiry; an applicant may show that a process claim satisfies 101 either by showing that his claim is tied to a particular machine, or by showing that his claim transforms an article. Id. at In re Freeman, 573 F.2d 1237, 197 USPQ 464 (C.C.P.A. 1978); In re Walter, 618 F.2d 758, 205 USPQ 397 (C.C.P.A. COPYRIGHT 2009 BY THE BUREAU OF NATIONAL AFFAIRS, INC. ISSN

2 2 result inquiry advocated in State Street, 4 each of which had been applied by the Federal Circuit and its predecessor court in various cases, and both of which have now been officially discarded. 5 In this article, we examine the 2008 decision of the Federal Circuit, federal district court decisions, and decisions of Patent and Trademark Office s Board of Patent Appeals and Interferences. Based upon the outcomes in these cases, we offer guidance as to what is patent-eligible under 35 U.S.C. 101, strategies for presenting methods in patent applications and claiming these methods, and possible fixes for applications drafted pre-bilski that must now withstand scrutiny under the new machine-or-transformation test. I. The Cases A number of recent federal court and board decisions have applied the patent eligibility test set forth in Bilski, with varying results. 1980); In re Abele, 684 F.2d 902, 214 USPQ 682 (C.C.P.A. 1982). 4 State Street Bank & Trust Co. v. Signature Financial Group, 149 F.3d 1368, 1370, 47 USPQ2d 1596 (Fed. Cir. 1998) (56 PTCJ 346, 7/30/98). 5 See id. at F.3d 1359 (Fed. Cir. 2009). 7 The court accepted the board s definition of paradigm to mean a pattern, example or model. Id. at Id. at Id. 10 Id. at Id WL , *5 (C.D. Cal. Jan. 22, 2009). A. Non-Software Business Methods Several cases have addressed (and rejected) claims directed to pure business methods. In In re Ferguson, 6 the Federal Circuit reviewed the board s rejection of claims directed to a method of marketing a product and a paradigm for marketing software as nonstatutory subject matter under Section The appellate court affirmed the board s rejection, concluding that the method claims were neither tied to a particular machine or apparatus nor did they transform a particular article into a different state or thing. 8 The court defined a machine broadly as a concrete thing, consisting of parts, or of certain devices or combinations of devices, which did not include the shared marketing force to which the method claims were tied. 9 The claims directed to a paradigm were nonstatutory because the claims did not fall within any of the four statutory categories (machines, manufactures, compositions of matter and processes). Concerning the two closest possible categories, the court concluded that the claimed paradigm was not a process, because no act or series of acts was required, and was not a manufacture, because it was not a tangible article resulting from a process of manufacture. 10 Concerning the recitation of a marketing company in the paradigm claims, the court concluded that the patent applicants did no more than provide an abstract idea a business model for an intangible marketing company. 11 In Fort Properties Inc. v. American Master Lease LLC, 12 the California district court held that claims reciting a series of transactions involving acquiring, aggregating, and selling real estate property and claims reciting a method of performing tax-deferred real estate property exchanges were not statutory under Section 101. Since no machine was recited, the only issue before the court was whether the claims met the transformation prong of the Bilski test. 13 The court held that the claims involve[d] only the transformation or manipulation of legal obligations and relationships that did not qualify under Bilski. 14 Concerning the recitation of the creation of deedshares in some of the claims, the court found that the deedshares themselves were not physical objects, but only represented intangible legal ownership interests in property. 15 Therefore, the creation of deedshares was not sufficient to establish patent eligibility under Bilski. 16 In another case, the addition of a humanimplemented step to an otherwise obvious method was not sufficient to avoid invalidity of the claim. In King Pharmeuticals Inc. v. Eon Labs Inc., 17 the district court held invalid claims to a method of increasing the oral bioavailability of metaxalone because the claims were obvious over the prior art asserted by the accused infringer. Two dependent claims added a step of informing the patient of certain results, which the patentee argued was not obvious. The court rejected this argument, concluding that [b]ecause the food effect is an inherent property of the prior art and, therefore, unpatentable, then informing a patient of that inherent property is likewise unpatentable. 18 The court also commented that the added step of informing the patient did not meet the patent eligibility standard set forth in Bilski because the step did not require use of a machine or transform the metaxalone into a different state or thing. 19 Notably, this conclusion runs counter to the Supreme Court s instruction that claims are to be examined as a whole and not dissected into old and new elements and that are evaluated separately. 20 Recent board decisions have been consistent with the holdings of the federal courts. For example, in Ex parte Roberts, 21 the board found ineligible under Section 101 a method of creating a real estate investment instrument adapted for performing tax-deferred exchanges because the claim did not satisfy either the machine or transformation prong. 22 Similarly, in Ex parte Haworth, 23 a method for attempting to collect payments from customers having delinquent accounts concurrently with a partner that owns the delinquent accounts was found to be patent ineligible because the claim wording was broad in that 13 Id. at*4. 14 Id. 15 Id. 16 See Ex parte Roberts., at 4-5 (B.P.A.I. June 19, 2009) (holding a method of creating a real estate investment instrument adapted for performing tax-deferred exchanges patent ineligible as not passing the machine-ortransformation test) F. Supp.2d 501 (E.D.N.Y. 2009). 18 Id. at Id. at See Diamond v. Diehr, 450 U.S. 175, 188 (1981). 21 No (B.P.A.I. June 19, 2009). 22 Id. at No (B.P.A.I. July 30, 2009) COPYRIGHT 2009 BY THE BUREAU OF NATIONAL AFFAIRS, INC. PTCJ ISSN

3 3 it refers generally to extending an offer, receiving an acceptance, and paying a commission and did not invoke, recite or limit the method of implementation using any particular machine or apparatus. 24 B. Software Claims Not Expressly Tied to a Particular Machine Other cases have addressed software methods where the claim language was either not expressly tied to computer hardware components or the ties to computer components were somewhat ambiguous. In several cases, courts have rejected the recitation of generic computer components as sufficient to satisfy the machine prong of the Bilski test. A number of these decisions also addressed the transformation prong of the Bilski test. In Research Corporation Technology Inc. v. Microsoft Corp., 25 the district court considered the patent eligibility of method claims in six patents directed to methods of halftoning of gray scale images by using a pixel-by-pixel comparison of the image against a blue noise mask. Relying on the Federal Circuit s Bilski analysis as well as a decision of its predecessor court, In re Abele, 26 the judge concluded that a number of the claims met neither prong of the machine-ortransformation test set forth in Bilski. 27 Concerning the machine prong, the district court found that the pixel-by-pixel comparison recited in the claims did not require the use of a machine, but could instead be done on a sheet of paper using a pen. The comparison uses formulas and numbers to generate a binary value to determine the placement of a dot at a location. Formulas and numbers not tied to a particular machine cannot be patented, under the machine prong, even with a field-of-use limitation because they represent fundamental principles, and to do so would preempt the entire field. The patent claims... do not mandate the use of a machine to achieve their algorithmic and algebraic ends. Simply because a digital apparatus such as a computer, calculator, or the like could assist with this comparison does not render it patent eligible material. RCT s argument that a pixel by its nature is electronic and therefore necessitates a machine is a post solution argument and the Court rejects it. The claim construction specifies that the comparison is of a value to a mask (or set of values) to determine whether the dot is turned on at a specific location. This process does not require a particular machine. The Bilski test is clear: the process claims must be tied to a particular 24 Id. at See also, e.g., Ex parte Farnes, (B.P.A.I. June 2, 2009) (rejecting a method claim for developing a solution to a customer experience issue including steps of: identifying a target customer, defining a current customer experience, summarizing values and benefits to provide to the customer, and identifying metrics for measuring success ); Ex parte Salinkas, (B.P.A.I. May 18, 2009) (finding patent ineligible a method of launching a knowledge network involving selecting an executive sponsor, forming a core team of experts, and providing prelaunch education ) WL (D. Ariz. July 28, 2009) (78 PTCJ 432, 8/7/09) F.2d 902, 214 USPQ 682 (C.C.P.A. 1982) WL at *9. machine. Accordingly, the process claims... are not tied to a particular machine. 28 The court also evaluated similar claims that recited the use of a comparator to perform the recited pixelby-pixel comparison and held that this recitation also did not mandate a machine. 29 While the court acknowledged that software was offered as one option, the court concluded that the claimed function of the comparator could also be performed in one s mind or on paper such that a machine was not required. The court further noted that, even though the comparator was defined as a device, the use of the term device is not synonymous with machine. 30 As a result, none of the claims at issue met the machine prong of the Bilski test. Concerning the transformation prong, the court relied in particular upon the Abele decision in expanding the requirements of this test by requiring that the claimed transformation process be both (1) limited to transformation of specific data, and 2) limited to a visual depiction representing specific objects or substances. 31 It then concluded that a number of the patent claims did not meet the second prong of this expanded test because the claims did not require any visual depiction or subsequent display even though the claimed method did transform specific image data. 32 The district court also found other claims patenteligible under Section 101 because these claims recited the use of the comparison data to produce a halftoned image. The court concluded that these claims dictate[d] a transformation of specific data, and [were] further limited to a visual depiction which represents specific objects. 33 Thus, the patent eligibility of the claims turned on whether the claims recited the use of the transformed data to generate a display. In DealerTrack Inc. v. Huber, 34 the district court granted a summary judgment of invalidity under 101 of patent claims directed to a computer aided method of managing a credit application reciting the following steps: [A] receiving credit application data from a remote application entry and display device; [B] selectively forwarding the credit application data to remote funding source terminal devices; 28 Id. at * The term comparator was construed by the court to be a device (or collection of operations, as in software) that compares an input number (called the operand) to a number prestored in the comparator (called the threshold) and produces as output a binary value (such as 0, zero) if the input is algebraically less than the threshold [the result of comparing an operand against a fixed threshold and setting an operand less than the threshold to one value and an operand greater than or equal to the threshold to another value], and produces the opposite binary value (such as 1, one) if the input is algebraically greater than or equal to the threshold. Id. at *17 (emphasis in original). 30 Id. at * Id. at *9. Notably, Bilski concluded that the Abele visual depiction was sufficient to establish transformation (545 F.3d at 963), while the Research Corporation court went further by making visual depiction required to establish transformation. 32 Id. at * Id. at * WL (C.D. Cal. July 7, 2009) (78 PTCJ 341, 7/17/09). PATENT, TRADEMARK & COPYRIGHT JOURNAL ISSN BNA

4 4 35 Id. at*4. 36 Id. at *3. The court relied upon the holdings in Ex parte Gutta, No at 5-6 (B.P.A.I. Jan. 15, 2009) (stating [t]he recitation in the preamble of [a] computerized method performed by a data processor adds nothing more than a general purpose computer that is associated with the steps of the process in an unspecified manner. ); Ex parte Nawathe, No , 2009 WL , *4 (B.P.A.I. Feb. 9, 2009) (finding the computerized recitation purports to a general purpose processor [], as opposed to a particular computer specifically programmed for executing the steps of the claimed method. ); and Ex parte Cornea-Hasegan, No at 9-10 (B.P.A.I. Jan. 13, 2009) (indicating the appellant does not dispute the recitation of a processor does not limit the process steps to any specific machine or apparatus. ). The court also cited Cybersource Corp. v. Retail Decisions Inc., (discussed below), in support of its interpretation of the required particular machine F. Supp. 2d 1068, 92 USPQ2d 1011 (N.D. Cal. 2009) (77 PTCJ 637, 4/10/09). 38 Id. at [C] forwarding funding decision data from at least one of the remote funding source terminal devices to the remote application entry and display device; [D] wherein the selectively forwarding the credit application data step further comprises: [E] sending at least a portion of a credit application to more than one of said remote funding sources substantially at the same time; [F] sending at least a portion of a credit application to more than one of said remote funding sources sequentially until a finding [sic ] source returns a positive funding decision; [G] sending... a credit application... after a predetermined time...; or; [H] sending the credit application from a first remote funding source to a second remote funding source... In concluding that the claim did not satisfy the Bilski machine-or-transformation test, the court held that the claimed central processor, remote application and display device, and remote funding source terminal device could be any device and did not constitute a particular machine within the meaning of Bilski. 35 The court relied upon several board decisions to support its premise that claims reciting the use of general purpose processors or computers do not satisfy the test. 36 In Cybersource Corp. v. Retail Decisions Inc., 37 the district court held claims for a method for verifying the validity of a credit card transaction over the Internet and a computer readable medium containing program instructions for detecting fraud in a credit card transaction... over the Internet invalid under 101 based upon the court s interpretation of Bilski. Concerning the method claim, the court considered both the transformation and machine prongs of the Bilski test. In concluding that there was no transformation, the court focused on the intangibility of the manipulated data. According to the court, transformation is limited to transformation of a physical article or substance. Accordingly, the method claim did not qualify because the data representing credit cards did not represent tangible articles but instead an intangible series of rights and obligations existing between the account holder and the card issuer. 38 Concerning whether the claimed method was tied to a particular machine, the court assessed whether recitation of over the Internet suffices to tie a process claim to a particular machine and concluded that it was not. 39 First, the court concluded: The internet continues to exist despite the addition or subtraction of any particular piece of hardware. It may be supposed that the internet itself, rather than any underlying computer or set of computers, is the machine to which plaintiff refers. Yet the internet is an abstraction. If every computer user in the world unplugged from the internet, the internet would cease to exist, although every molecule of every machine remained in place. One can touch a computer or a network cable, but one cannot touch the internet. 40 Additionally, the court found that the recitation of the internet in this case merely constituted insignificant extra-solution activity and therefore did not qualify as a particular machine under Bilski. 41 [T]ossing in references to internet commerce was not sufficient to render a mental process for collecting data and weighing values patent-eligible. 42 Additionally, limiting the claim to use over the Internet was not a meaningful limitation, such that the claims broadly preempt the fundamental mental process of fraud detection using associations between credit cards. 43 Concerning the computer-readable medium claim, 44 notwithstanding the Federal Circuit s holding in In re Beauregard, 45 the district court concluded that there is at present no legal doctrine creating a special Beauregard claim that would exempt the claim from the analysis of Bilski. Moreover, [s]imply appending A computer readable media including program instructions to an otherwise non-statutory process claim is insufficient to make it statutory. 46 Consequently, this claim also failed the Bilski test. In at least one instance, the U.S. International Trade Commission has interpreted the machine prong of Bilski less stringently than did the district courts in the cases discussed above. In In the Matter of Certain Video Game Machines and Related Three-Dimensional Pointing Devices, 47 the accused infringer filed a motion for summary judgment alleging that the asserted claims impermissibly sought to patent a mathematical algorithm. According to the movant, the recitations of a 3D pointing device, handheld device, or free space pointing device were not sufficient to tie the claims to a particular machine, but served only to limit the fieldof-use of the claimed mathematical algorithm and [did] not otherwise impart patentability on the claimed mathematical algorithm. In denying the motion for summary judgment, the ITC first noted that, [w]hile the ultimate determination of whether the asserted claims are patentable under 101 is a question of law, the Federal Circuit has ac- 39 Id. at Id. 41 Id. 42 Id. 43 Id. at Claims having this format are called Beauregard claims and were found to not be barred by the traditional printed matter rule in In re Beauregard, 53 F.3d 1583, 1584, 35 USPQ2d 1383 (Fed. Cir. 1995). 45 Id F. Supp. 2d at WL (U.S.I.T.C. 2009) COPYRIGHT 2009 BY THE BUREAU OF NATIONAL AFFAIRS, INC. PTCJ ISSN

5 5 knowledged that there may be cases in which the legal question as to patentable subject matter may turn on subsidiary factual issues (citation omitted). In construing the claims, the tribunal found that there was a genuine dispute as to whether the claimed devices represented a particular machine under the Bilski test and whether the claimed two-dimensional rotational transform was merely a mathematical calculation or instead meant changing the mathematical representation of a two-dimensional quantity from one frame of reference to a differently-oriented frame of reference as asserted by the patentee. Additionally, the dispute over the meaning of the claimed twodimensional rotational transform also raised a disputed issue as to whether this element recited a transformation that would qualify under the transformation prong of Bilski. Given these disputed issues, the ITC concluded that it was inappropriate to grant summary judgment as to the patent eligibility of the claims. A similar conclusion was reached in Versata Software Inc. v. Sun Microsystems Inc., 48 in which the district court denied the defendant s motion for summary judgment of invalidity under Section 101 based upon the Bilski court s refusal to adopt a broad exclusion over software or any other such category of subject matter beyond the exclusion of claims drawn to fundamental principles. 49 Less stringent machine prong analyses are also found at the board level. For example, in Ex parte Schrader, 50 the board held patent-eligible under Bilski the following claim: A method for obtaining feedback from consumers receiving an advertisement from an ad provided by an ad provider through an interactive channel, the method comprising the steps of: creating a feedback panel including at least one feedback response concerning said advertisement; and providing said feedback panel to said consumers, said feedback panel being activated by a consumer to provide said feedback response concerning said advertisement to said ad provider through said interactive channel. Here, the board found interactive channel to be part of an overall patent eligible system of apparatuses when viewed in the context of the specification, which included the Internet and World Wide Web, Interactive Television, and self service devices, such as Information Kiosks and Automated Teller Machines. 51 In another recent decision, Ex parte Forman, 52 the board found a computer-implemented feature selection method including a classifier eligible under Section 101 because it satisfied both the machine and transformation prong. Here, the classifier was recited in a dependent claim, in which its independent claim recited: A computer-implemented feature selection method for selecting a predetermined number of features for a set of binary partitions over a set of categories WL , *1 (E.D. Tex. March 31, 2009). 49 Citing Bilski, 545 F.3d at 959 n No (B.P.A.I. Aug. 31, 2009). 51 Id. at No (B.P.A.I. Aug. 17, 2009). given a dataset of feature vectors associated with the categories, the method comprising: for each binary partition under consideration, ranking features using two-category feature ranking; and while the predetermined number of features has not yet been selected: picking a binary partition p; selecting a feature based on the ranking for binary partition p; and adding the selected feature to an output list if not already present in the output list and removing the selected feature from further consideration for the binary partition p. Notably, while the independent claim failed the machine-or-transformation test, its dependent claim was eligible because it recited, further comprising using the selected features in training a classifier for classifying data into categories. In view of the specification, the board indicated that the classifier was a particular machine in that it performs a particular data classification function that is beyond mere general purpose computing. 53 The board also concluded that the claim transforms a particular article into a different state or thing, namely by transforming an untrained classifier into a trained classifier. 54 In Ex parte Casati, 55 the board reversed the examiner s Section 101 rejection of a method claim reciting: A method of analyzing data and making predictions, comprising: reading process execution data from logs for a business process; collecting the process execution data and storing the process execution data in a memory defining a warehouse; analyzing the process execution data; generating prediction models in response to the analyzing; and using the prediction models to predict an occurrence of an exception in the business process. In this case, giving consideration to the specification, which unequivocally describes the data warehouse as part of the overall system apparatus, and subsequent descriptions describe the memory/warehouse device in terms of machine executable functions, the board concluded that one of ordinary skill in the art would understand that the claimed storing of process execution data in a memory defining a warehouse constitutes patent-eligible subject matter under 101 because the memory/warehouse element ties the claims to a particular machine or apparatus. 56 Other recent board decisions have reached the opposite conclusion, finding seemingly computer- 53 Id. at Id. See also Ex parte Busche, No (B.P.A.I. May 28, 2009) (holding a process claim and a computer program product claim, each reciting training a machine, are directed to machines that have such structure as may be adapted by training. ) 55 No (B.P.A.I. July 31, 2009). 56 Id. at 7. See also Ex parte Dickerson, No at 16 (B.P.A.I. July 9, 2009) (holding claims that recite a computerized method which includes a step of outputting information from a computer... are tied to a particular machine or apparatus. ). PATENT, TRADEMARK & COPYRIGHT JOURNAL ISSN BNA

6 6 implemented methods ineligible under the Bilski test because the claims failed to tie the method steps to any concrete parts, devices, or combinations of devices. For example, in Ex parte Holtz, 57 the board found ineligible under Section 101 a method for comparing file tree descriptions because the claim obtains data (a file structure), compares data (file structures), generates a change log, and optimizes the change log without tying these steps to any concrete parts, devices, or combinations of devices and the file structures did not represent physical objects. Similarly, in Ex parte Gutta, 58 the board held ineligible under 101 a method for identifying one or more mean items for a plurality of items... having a symbolic value of a symbolic attribute, concluding that the claim computes a variance and selects a mean item without tying these steps to any concrete parts, devices, or combinations of devices and symbolic values are neither physical objects nor do they represent physical objects. 57 No at (B.P.A.I. Aug. 24, 2009). 58 No at (B.P.A.I. Aug. 10, 2009). 59 No (B.P.A.I. Aug. 5, 2009). 60 Id. at 10 (comparing In re Lowry, 32 F.3d 1579, , 32 USPQ2d 1031 (Fed. Cir. 1994) to In re Warmerdam, 33 F.3d 1354, , 31 USPQ2d 1754 (Fed. Cir. 1994)). 61 No at 10 (B.P.A.I. Sept. 14, 2009). 62 No (B.P.A.I. Jan. 13, 2009). C. Beauregard Claims In contrast to the district court s decision in Cybersource Corp., discussed supra, in a recent board decision, Ex parte Bodin, 59 a computer program product was found to be patent-eligible subject matter as being embodied in a computer readable medium. Here, the board considered whether the phrase recorded on the recording medium as it is recited in the body of the claims was the same as recorded on a computerreadable medium. Acknowledging the differences between a statutory claim to a data structure stored on a computer readable medium compared to a nonstatutory claim to a data structure that referred to ideas reflected in nonstatutory processes, the board stated: [w]hen functional descriptive material is recorded on some computer-readable medium, it becomes structurally and functionally interrelated to the medium and will be statutory in most cases since use of technology permits the function of the descriptive material to be realized. 60 Similarly, in Ex parte Azuma, 61 a claim to a computer program product... comprising: a computer usable medium was found to be directed to statutory subject matter under 101 because the language computer usable medium referred to tangible storage media, such as a server, floppy drive, main memory and hard disk as disclosed by appellant s specification, and did not implicate the use of a carrier wave. In an older decision, Ex parte Cornea-Hasegan, 62 however, the Board seemingly came to the opposite conclusion, holding that a claim reciting a computer readable media including program instructions which when executed by a processor cause the processor to perform a series of steps was not patent-eligible under Bilski. The board first determined that analysis of a manufacture claim and a process claim is the same under 101 such that the Bilski machine-ortransformation test applied to this type of claim. 63 Then, applying the Bilski test, the board concluded that the claim did not qualify. According to the board, the claim does not transform physical subject matter and is not tied to a particular machine.... Limiting the claims to computer readable media does not add any practical limitation to the scope of the claim. Such a fieldof-use limitation is insufficient to render an otherwise ineligible claim patent eligible. 64 II. The Current Scope of Patent Eligibility These recent cases establish that some types of methods are clearly patent-eligible under Section 101, others clearly are not eligible, and yet others may be depending on how they are described and claimed. A. What is Patentable First, the eligibility of system and apparatus claims is largely unaffected by the Bilski decision, with the caveat that such claims may be more closely scrutinized for compliance with Diamond v. Diehr and Gottschalk v. Benson, which prohibit patenting of a claim directed to laws of nature, natural phenomena, [or] abstract ideas. 65 Also, methods that are performed at least in part by a machine qualify for patent eligibility under Section 101. Thus, for example, some computer-implemented and software-related inventions remain patentable as long as they are properly described and claimed as being performed by a computer or computer components. The tie to a machine, however, cannot merely be implicit based upon the description and context of the application or general language in the preamble of the claim. Instead, the use of a machine to perform one or more of the claimed functions must be expressly described in the body of the claim so as to be a meaningful limitation on the claim. If a method claim can be read in such a way that all functions can be performed by a human, it will likely not pass the machine prong of the Bilski test. The Interim Examination Instructions for Evaluating Subject Matter Eligibility Under 35 U.S.C. 101 recently issued by the Patent and Trademark Office confirm that the recitation of a general purpose computer is sufficient to satisfy Section 101 where the general purpose computer is programmed to perform the process steps,... in effect, becom[ing] a special purpose computer. 66 Concerning data transformation, there seems to be agreement of the Federal Circuit and at least one district court that a method that is both limited to transformation of specific data and limited to a visual depiction representing specific objects or substances qualifies un- 63 Id. at Id. at Diamond v. Diehr, 450 U.S. 175, 185, 205 USPQ 488 (1980); Gottschalk v. Benson, 409 U.S. 63, 67, 175 USPQ 673 (1972). 66 Interim Examination Instructions for Evaluating Subject Matter Eligibility Under 35 U.S.C. 101, U.S. Patent and Trademark Office, Aug. 24, 2009, at 6 (78 PTCJ 530, 8/28/09). The authors recent experiences with examiners suggest that the examiners are following these instructions COPYRIGHT 2009 BY THE BUREAU OF NATIONAL AFFAIRS, INC. PTCJ ISSN

7 7 der Section Thus, claims analogous to those in In re Abele 68 in which data clearly represented physical and tangible objects, namely the structure of bones, organs, and other body tissues [so as to recite] the transformation of that raw data into a particular visual depiction of a physical object on a display are patenteligible under Bilski. 69 B. What is Not Patentable Bilski has had a significant impact in eliminating patent protection for inventions that are performed entirely by humans or can be interpreted as such if read broadly. This includes claims that describe processes for creating or manipulating legal and financial documents and relationships. In this area in particular, many pending applications filed prior to Bilski are no longer patent-eligible, and many issued patents are no longer valid. This retroactive impact of the Bilski decision is troubling, given the investment in these patents and applications, which have now been rendered essentially worthless despite the suggestion in the Federal Circuit s earlier State Street decision, now overruled, that such claims qualified for patent protection. Inventions that do not fit within the four statutory categories are also not patent-eligible. The Federal Circuit and the board have rejected claims directed to a signal, a paradigm, a user interface and a correlator on the basis that these items did not qualify as a machine, manufacture, composition of matter or process under There is also an increasing focus on the tangibility of the claimed invention in that, to qualify as a machine or manufacture under Section 101, an invention must be tangible. 71 C. The Gray Area Remaining areas of uncertainty concerning the scope of Section 101 include (1) what qualifies under Bilski as a transformation of an article or data, (2) whether claims to computer programs (Beauregard claims) qualify, and (3) whether internal computer processing functionality not tied to a specific application or tangible result qualify. Concerning data transformation, other than Abelestyle claims discussed above, what qualifies as a data or article transformation remains unclear. Claims that have been held not to meet the transformation prong include claims directed to the creation or manipulation of data representing an intangible series of rights and obligations (e.g., credit card data) and claims directed to the transformation or manipulation of legal obligations and relationships. Beyond these specific examples, it is difficult to predict what will or will not qualify as a data or article transformation under Bilski. 67 In re Bilski, 545 F.3d at 963; Research Corporation Technologies, 2009 WL at *9. 68 The claimed process involved graphically displaying variances of data from average values wherein the data was X-ray attenuation data produced in a two dimensional field by a computed tomography scanner. See In re Bilski, 545 F.3d at In re Bilski, 545 F.3d at In re Nuijten 500 F.3d 1346, 1357, 84 USPQ2d 1495 (Fed. Cir. 2007) (74 PTCJ 631, 9/28/07) (signal); In re Ferguson, 558 F.3d 1359, 1366, 90 USPQ2d 1035 (Fed. Cir. 2009) (77 PTCJ 489, 3/13/09) (paradigm); Ex parte Daughtrey, No (B.P.A.I. Apr. 8, 2009) (user interface); Ex parte Labadie, No (B.P.A.I. May 6, 2009) (correlator). 71 E.g., Nuijten, 500 F.3d at Concerning claims directed to computer program products, one district court has held that appending A computer readable media including program instructions to an otherwise non-statutory process claim is insufficient to make it statutory. 72 The board has also held ineligible claims to a computer readable media. 73 The board has, however, also upheld the eligibility of a computer program product as being embodied in a computer readable medium. 74 Given these inconsistent decisions, the patent eligibility of claims in this format remains uncertain. Concerning claims directed to generalized computer processing functions, several Board decisions suggest that, absent a tie to a concrete real-world application, such claims are likely to be deemed an algorithm under Benson and therefore held to be non-statutory. 75 Any recitation of a specific field of use for the claimed process or use of the outcome of such processes are also more likely to be found field-of-use or postsolution activity limitations insufficient to render the claim patent-eligible. Thus, the more tied a claimed process is to tangible results or particular applications (not just fields of use), the more likely it is to qualify under Section 101. III. Presenting and Claiming Methods in Patent Applications Several strategies for describing and claiming methods or processes in patent applications may avoid or minimize potential Section 101 problems. First, the description provided in a patent application should include well-defined steps or functions associated with method or process. For example, when the claims include initiating method steps, a description of well-defined physical steps or functions for initiating should be provided, and a concrete item, machine, device, or component that is responsible for the initiating function should be identified. For claiming identifying method steps, provide specific parameters for making the identification, such as according to a specified measurement. 76 Where data is involved, the source and type of data should be specified. Also, drawings should be provided that depict the concrete item, device, component or combination thereof, and each method or process step or function should be linked expressly to at least one item, device or component in the drawings that performs the step or function. Broadening language indicating that other components may also be used to perform the function may also be included to avoid an unduly narrow interpretation of the claims. The claims should affirmatively claim the device, machine or component performing each step or function. For computer or software-related inventions, the description should specify that the software functionality 72 Cybersource Corp., 620 F. Supp. 2d at Cornea-Hasegan, No Ex parte Bodin, No (B.P.A.I. Aug. 5, 2009). 75 E.g., Ex parte Greene, No (B.P.A.I. Apr. 24, 2009); Daughtrey, No ; Ex parte Arning, No (B.P.A.I. Mar. 30, 2009); Cybersource Corp., 620 F. Supp.2d at 1080 (concerning claim 2). 76 See Brief of American Bar Association as Amicus Curiae Supporting Respondent, Bilski v. Kappos, No , ABA Amicus Br. at (U.S. amicus brief filed Oct. 2, 2009) (78 PTCJ 692, 10/9/09). PATENT, TRADEMARK & COPYRIGHT JOURNAL ISSN BNA

8 8 is performed by a computer or computer components. Specificity as to the type of computer component performing each function may be helpful in establishing eligibility under the Bilski test. IV. Fixing Pre-Bilski Applications to Meet the New 101 Requirements For patent applications filed prior to the Bilski decision, it can be challenging to meet the new requirements for patent eligibility, particularly when no machine or transformations were expressly described in the application. In some cases, there may be sufficient explicit description of a machine, e.g., a computer, such that the machine can be added into the body of the claims. For example, patent applications for computer-related inventions sometimes contain a generic description of computers that are used to perform the claimed method, and such a generic description may be sufficient to impart patent eligibility to the claims when the general-purpose computer is programmed to become a special-purpose computer. For patent applications lacking in an explicit description of any machine, however, the application may incorporate by reference patents or publications that can be used to bolster the specification and provide support for the requisite claim amendments. When an application incorporates by reference a U.S. patent or published U.S. patent application, any description from the incorporated references, whether or not the subject matter is essential to support the claims, may be imported into the specification. This option may enable importation of the requisite description of a machine, which can then also be recited in the claims. 77 When the document incorporated by reference is not a U.S. 77 Manual of Patent Examining Procedure, Eighth Ed., Rev. 7/2008, at (P); see also 37 C.F.R patent or published application, the option of importing subject matter into the specification is limited to nonessential subject matter. In other words, the specification can only be amended to disclose a machine for performing process steps as long as one skilled in the art would recognize from the original disclosure that the process is implemented by a machine. The key in making this type of amendment is avoiding (or overcoming) a rejection under 35 U.S.C. 112, para. 1, for lack of written description. If incorporation by reference is not an option, a patent applicant may submit evidence, such as a declaration by the inventor or a duly qualified technical expert, demonstrating that one skilled in the art would understand the disclosed method to be one performed by a machine. Unlike attorney argument, which can be disregarded, such evidence must be considered by the examiner. One other option is to reformat the claims. Since Bilski ostensibly does not apply to system and apparatus claims, in some instances it may be possible for an applicant to convert his method claims into system claims to avoid application of the Bilski test. This strategy, however, is unlikely to succeed where the patent specification does not describe such a system for implementing the method and therefore does not provide the requisite disclosure of the claimed invention under Section 112, para. 1. V. The Future The future of the Bilski machine-or-transformation test now rests with the Supreme Court. Regardless of the outcome of the appeal, however, it is clear that the scope of statutory subject matter under Section 101 has been narrowed. The Supreme Court now has a chance to clarify what has been excluded; it may even reject or modify the Bilski machine-or-transformation test. How this will affect the development and protection of current and future technologies remains to be seen COPYRIGHT 2009 BY THE BUREAU OF NATIONAL AFFAIRS, INC. PTCJ ISSN