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Re: Re: Re: Question for "in the know"[ Follow Ups ] [ Post Followup ] [ Patent Forum ] [ FAQ ] Posted by in the know on April 03, 2003 at 04:54:54: In Reply to: Re: Re: Question for "in the know" posted by Sprink on April 02, 2003 at 14:09:21:
My bad, the patent was invalidated in district court, but upheld later on in the process.
SUMMARY The '056 patent application initially contained six machine claims and six method claims. During prosecution the examiner contemplated a § 101 rejection for failure to claim statutory subject matter. However, upon cancellation of the six method claims, the examiner allowed the remaining six machine claims. State Street brought a declaratory judgment action asserting invalidity, unenforceability, and noninfringement, and then filed a motion for partial summary judgment of patent invalidity for failure to claim subject matter encompassed by § 101. The motion was granted because the district court concluded that the claimed subject matter fell into one of two alternative judicially-created exceptions to statutory subject matter, the "mathematical algorithm" exception or the "business method" exception. ISSUES & DISPOSITION 2. Whether the district court erred in holding that this transformation should be excluded from eligible subject matter because it falls under the business method exception to statutory subject matter. Disposition 2. Yes. Judge Rich for the Federal Circuit laid the "ill-conceived" business methods exception to rest. AUTHORITIES CITED Diamond v. Diehr, 450 U.S. 175 (1981). Through three cases involving mathematical algorithms, the Court of Customs and Patent Appeals (the predecessor to the present Court of Appeals for the Federal Circuit) articulated a test to determine patentability intended accommodate the implication of the Supreme Court rulings regarding the algorithm unpatentability doctrine. See In re Freeman, 573 F.2d 1237 (C.C.P.A. 1978); In re Walter, 618 F.2d 758 (C.C.P.A. 1980); In re Abele, 684 F.2d 902 (C.C.P.A. 1982). According to the Freeman-Walter-Abele test: "It is first determined whether a mathematical algorithm is recited directly or indirectly in the claim. If so, it is next determined whether the claimed invention as a whole is no more than the algorithm itself; that is, whether the claim is directed to a mathematical algorithm that is not applied to or limited by physical elements or process steps." Arrhythmia Research Technology, Inc. v. Corazonix Corp., 958 F.2d 1053, 1058 (Fed. Cir. 1992) (emphasis added). The Court of Appeals for the Federal Circuit in In re Alappat, 33 F.3d 1526 (Fed. Cir. 1994) substantially relaxed the physicality requirement of the Freeman-Walter-Abele test to include a programmed general-purpose computer as a patentable subject matter. "This is not a disembodied mathematical concept which may be characterized as an 'abstract idea,' but rather a specific machine to produce a useful, concrete, and tangible result." Id. at 1544 (emphasis added). On the other hand, the court in In re Warmerdam, 33 F.3d 1354 (Fed. Cir. 1994) was stricter and required claims involving computer data manipulation and data structure to be "more than the manipulation of abstract ideas," id. at 1360, in order to be patentable under § 101. The earliest known case on the unpatentability of business methods, often cited as establishing the so-called "business method exception" doctrine, is Hotel Security Checking Co. v. Lorraine Co., 160 F. 467 (2d Cir. 1908). There, the court held that systems of transacting business, such as a bookkeeping system to prevent embezzlement by waiters, were unpatentable. While many subsequent cases decided by the Federal Circuit have made references to the business method exceptions, they were all ultimately decided on other grounds. See, e.g., In re Howards, 394 F.2d 869, 872 (C.C.P.A. 1968) ("Our affirmance of this ground of rejection [based on lack of novelty] makes it unnecessary to consider the issue of whether a method of doing business is inherently unpatentable"); In re Schrader, 22 F.3d 290, 296 & n.14, 297-98 (Fed. Cir. 1994) (rejecting patentability on the basis of the mathematical algorithm exception, while making reference to the business method exception). Effect of State Street Bank on Current Law The utility requirement maintains that certain types of mathematical subject matter or algorithms, standing alone, represent nothing more than abstract ideas. Once this subject matter is reduced to some type of practical application, it becomes patentable. The standard for this practical application has been, and remains, the production of "a useful, concrete and tangible result." Alappat, 33 F.3d at 1544. The Federal Circuit in State Street holds that the production of "a final share price momentarily fixed for recording and reporting purposes and even accepted and relied upon by regulatory authorities and in subsequent trades, " State Street, 149 F.3d at 1373, is indeed the production of a useful, concrete and tangible result. The Federal Circuit held that once an invention passes the utility requirement, that invention becomes eligible under § 101. However, "Section 101 specifies that statutory subject matter must also satisfy the other 'conditions and requirements' of Title 35, including novelty, nonobviousness, and adequacy of disclosure and notice." Id. at 1372. In relying on utility, the Federal Circuit redefined the scope of eligible subject matter and hence broadened the meaning of the terms specified in § 101. The Federal Circuit also held that business methods are no longer an exception to statutory subject matter. Instead, business methods are subject to the same legal requirements for patentability as applied to any other process or method. Unanswered Questions Will a United States patent inventor holding a patent to a method of doing business be able to prevent a foreign business from making that method available in United States absent a license? How difficult will it be to satisfy the other patentability requirements (§§ 102, 103, and 112)? Would the six method claims in the '056 patent, withdrawn during the prosecution of the application, have passed the test for eligible subject matter? : I had no idea that patent was invalidated. It happened after the case, I'm assuming? When did that happen? Can you refer me to anything to read about that decision or is it all internal? : I quite expected the "canned response" you gave. I was just curious since you stated you were an insider what the real story was. I am dead set against these kinds of patents, so...well...anyway! :) : : : The specific patent above was invalidated due to an Examiner error. This happens, fact of life. : : : What's your view on how the USPTO is handling business method patents since State Street?
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