Patent-Eligible Subject Matter: A Walk Through the Jurisprudential Morass of 101 Robert R. Sachs
Section 101: The Battle for the Future of Innovation Federal Circuit and Supreme Court Dealertrack v Huber Myspace v. GraphOn Fort Properties v. American Master Lease Prometheus v. Mayo AMP v. Myriad CLS Bank v. Alice Corp. Bancorp Services v. Sun Life Assurance PerkinElmer, Inc. v. Intema Ltd District Court Classen Immunotherapies v. Biogen CyberFone Sys v. Cellco Digitech v. BMW Financial SmartGene v. Advanced Biological Labs Sinclair-Allison. v. Fifth Avenue Physician Services Prompt Med. Sys v. Allscriptsmysis Healthcare Solutions OIP Techs. v. Amazon.com Nazomi Communs v. Samsung Telecomms in the media, Duhigg, Posner, Wired in the pundit-sphere Dozen-plus conferences 2
The Federal Circuit at War with Itself Positivists See 101 as descriptive of what is patentable Take claim language seriously, don t gloss the claim Accept that computers impose technical requirements Rader, Newman, O Malley, Plager, Lourie Normativists See 101 as descriptive of what ought to be patentable Strip jargon and gloss claim to plain English Ignore computers are mere implementations of ideas Mayer, Prost, Bryson, Dyk, Wallach, Reyna 3
And with a Normativist Supreme Court Mayo v. Prometheus Federal Circuit, 2009: Patentable Supreme Court, 2010: See, Bilski. Try again Federal Circuit, 2010: Ok, still patentable Supreme Court, 2012: Nope. AMP v. Myriad Federal Circuit, 2011: Sequenced DNA patentable Supreme Court, 2011: See, Mayo. Try again Federal Circuit, 2012: Ok, but still patentable Supreme Court, 2012: We ll see about that 4
Mayo v. Prometheus Assumes dosage-toxicity relationship is a law of nature Resurrecting Flook, dissects the claims in contravention of Diehr Follows KSR s What is Apparent is Obvious with the Enough is Enough Invented an inventive concept test out of Flook 5
LeRoy v. Tatham, 1852 O Reilly v. Morse, 1853 Corning v. Burden, 1853 Tilghman v. Proctor, 1880 The Telephone Cases, 1888 Mckay Radio v. Radio Corp., 1939 Funk Brothers Seed v. Kalo Inoculant, 1948 Gottschalk v. Benson, 1972 Parker v. Flook, 1978 Diamond v. Chakrabarty, 1980 Diamond v. Diehr, 1981 J.E.M. AG Supply v. Pioneer Hi-Bred, 2001 Bilski v. Kappos, 2010 Mayo v. Prometheus, 2012 6
O'Reilly v. Morse, 15 How. 62 (1853) Court s rules just one Morse s eight claims invalid: the use of the motive power of the electric or galvanic current, which I call electro-magnetism, however developed for marking or printing intelligible characters, signs, or letters, at any distances. Actual basis of decision was lack of enablement: In fine, he claims an exclusive right to use a manner and process which he has not described and indeed had not invented, and therefore could not describe when he obtained his patent. The court is of opinion that the claim is too broad, and not warranted by law. 56 US at 113. 7
O'Reilly v. Morse, 15 How. 62 (1853) But these claims were valid: "making use of the motive power of magnetism, when developed by the action of such current or currents... as means of operating or giving motion to machinery, which may be used to imprint signals upon paper or other suitable material, or to produce sounds in any desired manner, for the purpose of telegraphic communication at any distances. the system of signs, consisting of dots and spaces, and of dots, spaces, and horizontal lines, for numerals, letters, words, or sentences, substantially as herein set forth and illustrated, for telegraphic purposes. 8
The Telephone Cases, 126 US 1 (1888) It may be that electricity cannot be used at all for the transmission of speech except in the way Bell has discovered, and that therefore, practically, his patent gives him its exclusive use for that purpose; but that does not make his claim one for the use of electricity distinct from the particular process with which it is connected in his patent. It will, if true, show more clearly the great importance of his discovery, but it will not invalidate his patent. Preempting all use of electricity for speech transmission? Fine and dandy! Field of use limitation to transmission of speech? No problem! 9
Mackay Radio v. Radio Corp., 306 US 86 (1939) First case to link scientific truths with mathematical expressions While a scientific truth, or the mathematical expression of it, is not patentable invention, a novel and useful structure created with the aid of knowledge of scientific truth may be. 306 US at 94. Court was not troubled by merely applying a scientific truth in a claim: We assume, without deciding the point, that this advance was invention, even though it was achieved by the logical application of a known scientific law to a familiar type of antenna. Id. 10
Prometheus: Let s Start by Begging the Question Prometheus patents set forth laws of nature namely, relationships between concentrations of certain metabolites in the blood and the likelihood that a dosage of a thiopurine drug will prove ineffective or cause harm. Claim 1, for example, states that if the levels of 6 TG in the blood (of a patient who has taken a dose of a thiopurine drug) exceed about 400 pmol per 8x10 8 red blood cells, then the administered dose is likely to produce toxic side effects. This relationship is a fact not a law of nature. 11
Law of Nature: Working Definition True, at least within their regime of validity. By definition, there have never been repeatable contradicting observations. Universal. They appear to apply everywhere in the universe. (Davies, 1992:82) Simple. They are typically expressed in terms of a single mathematical equation. (Davies) Absolute. Nothing in the universe appears to affect them. (Davies, 1992:82) Stable. Unchanged since first discovered Omnipotent. Everything in the universe apparently must comply with them. (Davies, 1992:83) Generally conservative of quantity. (Feynman, 1965:59) Often expressions of existing symmetries of space and time. (Feynman) Typically theoretically reversible in time (if non-quantum), although time itself is irreversible. (Feynman) http://en.wikipedia.org/wiki/physical_law#description 12
The Most Important Patients in History 6 Patients Lead to a Law of Nature Prometheus U.S. Patent No 6,335,623 13
Parker v. Flook, 437 U.S. 584 (1978) Stevens believes all mathematical algorithms (MA) are scientific truths, and thus part of the prior art. Respondent's process is unpatentable under 101 not because it contains a mathematical algorithm as one component, but because, once that algorithm is assumed to be within the prior art, the application, considered as a whole, contains no patentable invention. Thus, dissect the claim, ignore the MA and judge what s left over. 14
Flook was a Flook in the Law The Court today says it does not turn its back on these well settled precedents, ante at 437 U. S. 594, but it strikes what seems to me an equally damaging blow at basic principles of patent law by importing into its inquiry under 35 U.S.C. 101 the criteria of novelty and inventiveness. Section 101 is concerned only with subject matter patentability. Whether a patent will actually issue depends upon the criteria of 102 and 103, which include novelty and inventiveness, among many others. It may well be that, under the criteria of 102 and 103, no patent should issue on the process claimed in this case, because of anticipation, abandonment, obviousness, or for some other reason. But, in my view, the claimed process clearly meets the standards of subject matter patentability of 101. J. Stewart, dissent in Parker v. Flook 15
Diamond v. Diehr, 450 U.S. 175 (1981) Repudiates Flook s dissection In determining the eligibility of respondents' claimed process for patent protection under 101, their claims must be considered as a whole. It is inappropriate to dissect the claims into old and new elements and then to ignore the presence of the old elements in the analysis. This is particularly true in a process claim, because a new combination of steps in a process may be patentable even though all the constituents of the combination were well known and in common use before the combination was made. The "novelty" of any element or steps in a process, or even of process itself, is of no relevance in determining whether the subject matter of a claim falls within the 101 categories of possibly patentable subject matter. 16
Prometheus Resurrects Claim Dissection To put the matter more succinctly, the claims inform a relevant audience about certain laws of nature; any additional steps consist of well understood, routine, conventional activity already engaged in by the scientific community; and those steps, when viewed as a whole, add nothing significant beyond the sum of their parts taken separately. These instructions add nothing specific to the laws of nature other than what is well understood, routine, conventional activity, previously engaged in by those in the field. Deciding something is well understood, routine, conventional activity already engaged in by the scientific community necessarily means deciding it s not novel 17
With Enough Smoke You Can Create a Fire What Breyer says about Diehr: It nowhere suggested [in Diehr] that all these steps, or at least the combination of those steps, were in context obvious, already in use, or purely conventional. These other steps apparently added to the formula something that in terms of patent law s objectives had significance they transformed the process into an inventive application of the formula. What Diehr Said In this case, it may later be determined that the respondents' process is not deserving of patent protection because it fails to satisfy the statutory conditions of novelty under 102 or nonobviousness under 103. A rejection on either of these grounds does not affect the determination that respondents' claims recited subject matter which was eligible for patent protection under 101. 18
Simply Stated Tests are not Really So Simple After All The Fiction of Apply the Law Still, as the Court has also made clear, to transform an unpatentable law of nature into a patent eligible of such a law, one must do more than simply state the law of nature while adding the words apply it. See, e.g., Benson, supra, at 71 72. But see, Mackay Radio, above Finding patent-eligible subject matter is like finding obscenity To put the matter more precisely, do the patent claims add enough to their statements of the correlations to allow the processes they describe to qualify as patent eligible processes that apply natural laws? 19
Inventing an Inventive Concept Test Breyer says: Supreme Court precedents insist that a process that focuses upon the use of a natural law also contain other elements or a combination of elements, sometimes referred to as an inventive concept, sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the natural law itself. Flook, supra, at 594 Flook did not use inventive concept as a test, but instead as a label to identify what the inventor considered to be the invention. Proper analysis, therefore, must start with an understanding of what the inventor claims to have discovered -- or, phrased somewhat differently -- what he considers his inventive concept to be. Stevens in Dissent in Diamond v. Diehr. 20
Prometheus Method and Madness Method Beg the question by identifying inventive concept Dissect the claim into facts and steps Label all facts in the claim as laws of nature or abstract ideas. Disregard. Without evidence or claim construction, determine whether the steps are conventional. Decide without any standard whether what s left is enough (use italics because that s meaningful). Madness If it looks like the claim was drafted by a patent attorney, assume that it was a drafting effort designed to monopolize the law of nature [abstract idea] itself. Apply MoT test: if the claim fails, go with it. If it passes, ignore it. Characterize steps as merely applying the law, regardless of what the claim actually says. Cite 19 th century English cases, when plain old American ones contradict what you re saying. 21
Upshot of Prometheus Prometheus was specifically about Laws of Nature, but the Method and Madness approach has been generalized to any type of claim and subject matter. The details of a particular technology are not of interest to the Court. Enables early attacks on patents in litigation, even so far as a motion to dismiss for failure to state a claim! See, OIP Technologies v. Amazon, 2012 U.S. Dist. LEXIS 129396 22
Patentable Subject Matter in Software Inventions Dealertrack v Huber Method for real time car loan application to multiple lenders Claim specifically required data entry and remote terminal devices, and included eight specific steps of which devices operated on which data Linn reduced claim to its simplest form : receiving data from one source (step A), selectively forwarding the data (step B, performed according to step D), and forwarding reply data to the first source (step C). Given this gloss, court decides the claim imposes no meaningful limits What s really going on? 1. A computer aided method of managing a credit application, the method comprising the steps of: receiving credit application data from a remote application entry and display device; selectively forwarding the credit application data to remote funding source terminal devices; forwarding funding decision data from at least one of the remote funding source terminal devices to the remote application entry and display device; wherein the selectively forwarding the credit application data step further comprises: sending at least a portion of a credit application to more than one of said remote funding sources substantially at the same time; sending at least a portion of a credit application to more than one of said remote funding sources sequentially until a finding source returns a positive funding decision; sending at least a portion of a credit application to a first one of said remote funding sources, and then, after a predetermined time, sending to at least one other remote funding source, until one of the finding sources returns a positive funding decision or until all funding sources have been exhausted; or; sending the credit application from a first remote funding source to a second remote finding source if the first funding source declines to approve the credit application. 23
Patentable Subject Matter in Software Inventions 24
CLS Bank v. Alice Corp and Bancorp v. Sun Life Both patents relate to systems for risk management CLS: Alice s patents cover using shadow records to reconcile transactions between counter-parties. Bancorp: Bancorp s patent covers administering employee life insurance polices Similar representative claims, no recitation of computer elements 25
CLS Bank v. Alice Corp and Bancorp v. Sun Life Alice Patent 5,970,749 33. A method of exchanging obligations as between parties, each party holding a credit record and a debit record with an exchange institution, the credit records and debit records for exchange of predetermined obligations, the method comprising the steps of: creating a shadow credit record and a shadow debit record for each stakeholder party to be held independently by a supervisory institution from the exchange institutions; (obtaining from each exchange institution a start-ofday balance for each shadow credit record and shadow debit record; for every transaction resulting in an exchange obligation, the supervisory institution adjusting each respective party's shadow credit record or shadow debit record, allowing only these transactions that do not result in the value of the shadow debit record being less than the value of the shadow credit record at any time, each said adjustment taking place in chronological order; and at the end-of-day, the supervisory institution instructing ones of the exchange institutions to exchange credits or debits to the credit record and debit record of the respective parties in accordance with the adjustments of the said permitted transactions, the credits and debits being irrevocable, time invariant obligations placed on the exchange institutions. Bancorp Patent 5,926,792 9. A method for managing a life insurance policy on behalf of a policy holder, the method comprising the steps of: generating a life insurance policy including a stable value protected investment with an initial value based on a value of underlying securities; calculating fee units for members of a management group which manage the life insurance policy; calculating surrender value protected investment credits for the life insurance policy; determining an investment value and a value of the underlying securities for the current day; calculating a policy value and a policy unit value for the current day; storing the policy unit value for the current day; and one of the steps of: removing the fee units for members of the management group which manage the life insurance policy, and accumulating fee units on behalf of the management group. 26
CLS Bank v. Alice Corp and Bancorp v. Sun Life Both panels rely on the same precedents, and ultimately the meaningful limitations test of SiRF Technologies CLS: a meaningful limit exists when the computer elements do more than function solely as the obvious mechanism for permitting a solution to be achieved more quickly by the use the computer for performing calculations. Bancorp: the computer must facilitat[e] the process in a way that a person making calculations or computations could not, and thus using a computer only for its most basic function, the performance of repetitive calculations does not make impose a meaningful limitation. 27
CLS Bank v. Alice Corp and Bancorp v. Sun Life The difference in disclosure enabled the panels to support their different frameworks of analysis Alice s Patent 70 figures, including 33 flow charts which focus on computer steps and data files, and 30 screen displays showing the results of the computations. The 65-column specification describes the trading system by extensive and consistent reference to the computer implementation of how individual data records are accessed, read, and updated throughout the claimed process. Real technological description Bancorp s Patent Superficial disclosure in which computer is used, but no implementation is described. Flowcharts are clearly of what a human does, not computer. The fax half of the fax/modem 8 additionally is used to send confirmations to plan participants when they make trades between funds or between the Defined Contribution and Defined Benefit plans. The modem half of the fax/modem 8 sends and receives information from plan sponsors and participants' remote computers, by using an installed bulletin board service (BBS) program which runs on the computer system 2. Lourie relied on claim differentiation (claim 4 recites a computer, claim 1 does not) to find claim 1 not limited to computer, as was Alice s claim. 28
Alice Bancorp JANUARY 17, 2013 29
CLS Bank v. Alice Corp: En Banc Oral Argument Court asked for test for abstract ideas but none was offered by either party. On the attack: Reyna, Wallach, Prost, Dyk CLS: Alice's invention is nothing more than the idea of clearing currency exchanges, and that "adding on" a computer does not make that patent eligible. USPTO: Once you figure out what the patent claim says, you "go deeper" (???) and see if the computer is inextricably linked to the invention. But then admitted that the claim language is all that matters. Alice: The invention is not the idea of currency trading but a specific way doing it and there are other ways. 30
CLS Bank v. Alice Corp: En Banc Oral Argument Handicapping: Could it be a 5-5 split? For CLS: Dyk, Renna, Wallach, Prost (panel dissent) For Alice: O Malley, Rader, Newman, Linn Swing Vote: Lourie (author of Bancorp decision), going for Alice we explained that the asserted claims in CLS were patent eligible because it [wa]s difficult to conclude that the computer limitations... d[id] not play a significant part in the performance of the invention or that the claims [we]re not limited to a very specific application of the [inventive] concept, id. at *12 31
Quality of Patent Disclosure Matters Federal District courts appear to be strongly influenced by the heft of the patent disclosure Compare: Prompt Med. Sys v. Allscriptsmysis Healthcare Solutions 2012 U.S. Dist. LEXIS 30694 (ED TX, Feb. 2012): 13 detailed flowcharts, detailed appendices with CPT codes, and program code Motion Summary Judgment Denied. Sinclair-Allison. V. Fifth Avenue Physician Services, 2012 U.S. Dist. LEXIS 179138 (WD OK, Dec. 2012). No figures, 3 columns of disclosure Motion to dismiss granted, non-patentable subject matter. 32
Emerging Principles of PSM: Litigation and Prosecution Courts are applying multiple tests: MOT, inventive concept, abstract idea, preemption, meaningful limitations Whether the court boils down the claim depends on both judicial philosophy and quality of disclosure Claim construction not required for 101, but can critically impact outcome Use of general purpose computer for making calculations insufficient does not impose meaningful limitations, and are not specific machines under MOT If you can show ways of designing around some element of the claim, then this element should be considered a meaningful limitation and the claim does not pre-empt disproportionally. Some district courts willing to dismiss infringement complaint based on 101 invalidity! USPTO is looking for ways to reduce scope of software claims through Section 112(f) analysis. Real patent-eligible claims need real patent-eligible disclosure. 33