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[Isaac]

"We affirm the decision of the Board because we conclude that Applicants' claims are not directed to patent-eligible subject matter, and in doing so, we clarify the standards applicable in determining whether a claimed method constitutes a statutory "process" under § 101."

http://www.cafc.uscourts.gov/opinions/07-1130.pdf

[JimIvey]

Thanks for the post, Isaac.

I find this opinion troubling.  It's not because hedge fund management was found ineligible subject matter for patents; I'm still trying to grok eligibility of patent claims in which infringement may be determined by contract terms.  My issue is with some of the shortcuts and broad brush-strokes of the majority opinion that I thought were unnecessary and, dare I say, wrong.

At the foundation of the opinion is that the machine-or-transformation test is the test for 101, relying on (i) an interpretation of "clue" as meaning "dispositive test" and (ii) failure of the Supreme Court to repeat an earlier clarification when repeating the "clue" of machine-or-transformation.

In particular, once the Supreme Court added that "We do not hold that no process patent could ever qualify if it did not meet the requirements of our prior precedents."  In a subsequent opinion reaffirming the use of a machine-or-transformation test for 101 purposes, the Supreme Court did not repeat that caveat. 

That's it?!  That's all the Supreme Court has to do to reverse itself?!

Let me ask you this:  I loan you my car and warn you not to scratch it or harm it in any way.  You comply.  Next time, I loan you my car and don't warn you.  Are you now free to scratch and bang it up to your heart's content?  The Federal Circuit appears to think you are.

I'm also troubled by the dramatic change of dropping the Freeman-Walter-Abele test and stating that achieving a useful, concrete, and tangible result is inadequate for 101.  I don't think any of that was necessary to reach the result they did.  It looks as if the court was trying to "clean house" and get rid of rules that it thought might complicate analysis.  This opinion reminds me of Festo -- adapting the law using not a scalpel but a sledgehammer.

Here's the part that bothers me the most: 

The raw materials of many information-age processes, however, are electronic signals and electronically-manipulated data.  And some so-called business methods, such as that claimed in the present case, involve the manipulation of even more abstract constructs such as legal obligations, organizational relationships, and business risks.

The suggestion that electronic signals, embodied in the arrangement and/or movement of electrons in matter, are "abstract constructs" appears to be rooted in ignorance.  As I recall, such arrangement and movement of electrons was covered in my "physics" class(es).  Accordingly, I would be inclined to refer to such arrangement and movement of electrons as "physical."  To consider electronic signals to not be physical things more or less relegates all computer technology (and televisions for that matter) to the realm of magic or sorcery -- both of which are well-known exclusions to eligible subject matter under Section 101.

Business Methods

We further reject calls for categorical exclusions beyond those for fundamental principles already identified by the Supreme Court. We rejected just such an exclusion in State Street, noting that the so-called "business method exception" was unlawful and that business method claims (and indeed all process claims) are "subject to the same legal requirements for patentability as applied to any other process or method." 149 F.3d at 1375-76. We reaffirm this conclusion.

However, it's plausible (perhaps even likely) that State Street would have been decided differently under the new rule laid down by the Federal Circuit today.

Regards.

[JSonnabend]

First, let me say I haven't had a chance to get all the way through Bilski yet.

The suggestion that electronic signals, embodied in the arrangement and/or movement of electrons in matter, are "abstract constructs" appears to be rooted in ignorance.  As I recall, such arrangement and movement of electrons was covered in my "physics" class(es).

I agree, but merely taking an abstract method and glomming it on to a signal doesn't suddenly render the abstract method concrete.  If I communicate to you verbally the same information that a patent teaches is communicated via an electronic signal, the difference is insubstantial.  Both communications involve modulated signals, and the mere fact that the patent's embodiment is electronic doesn't change anything of substance, no?  In that sense, the "movement of electrons" isn't relevant, and the signal itself still is, for practical purposes, an "abstract construct".

- Jeff

[Isaac]

However, it's plausible (perhaps even likely) that State Street would have been decided differently under the new rule laid down by the Federal Circuit today.

I believe the result in State Street is safe.  First, the patent in State Street does not have any process claims.  (Well, except for claim 4 which incorrectly recites "the method according to claim 3", despite claim 3 reciting a data processing system).  Second, the claims in State Street are firmly tied to a machine.   Either might be enough to distinguish from in re Bilski.

Further, even were the State Street claims mechanically translated into method claims, the translated claims probably still meet the machine part of the machine-or-transformation test even though the tranformed data is abstract.

[JimIvey]

I agree, but merely taking an abstract method and glomming it on to a signal doesn't suddenly render the abstract method concrete.  If I communicate to you verbally the same information that a patent teaches is communicated via an electronic signal, the difference is insubstantial.  Both communications involve modulated signals, and the mere fact that the patent's embodiment is electronic doesn't change anything of substance, no?  In that sense, the "movement of electrons" isn't relevant, and the signal itself still is, for practical purposes, an "abstract construct".

Interesting point.  So, a loudspeaker pushing and pulling air molecules at a given frequency/amplitude pattern -- or doing some with one's vocal chords -- is not a physical process, doesn't not affect physical things?

Let me give an example along similar lines:  digitized signal resampling.  In effect, you're applying mathematical algorithms to samples of a signal having first sampling rate to create samples of a second signal with a second sampling rate.  Let's say for the sake of argument that the claims do not recite a machine for carrying out this transformation but the transformation is recited to be recorded on electronic media.

Is that a transformation of physical matter?  Consider the use of the same math to then reposition freeway barriers at a different spacing.  Is that any different?  Why or why not?

Suppose there IS a difference.  Is it a meaningful difference?  Why should this delineation be the one that separates the eligible from the ineligible, no matter how non-obvious?  If movement of electrons is not sufficiently "physical" to render a particular non-obvious technical innovation eligible for patent protection, what qualifies as sufficiently "physical?"  Does it have to be things that can be seen with the naked eye or otherwise sensed directly by people?

I'm still troubled by the suggestion that electrical signals are comparable to contractual terms and legals rights as they relate to the physical world. 

Our patent system was a significant part of our legal/economic environment that presided over our growth from a struggling agrarian economy to a (the?) leading industrial power.  Now, as we go through another revolution to an economy based on information and its processing, should we really root our legal/economic environment in the industrial age?  Should we really keep our patent system custom tailored for inventions like the horseless carriage?

Regards.

[JSonnabend]

I understand what you're saying, and in all fairness, I still haven't read the case (I'm stuck in depositions and depo prep all week). 

I think my problem is a 103 issue, as I think about it more.  Taking something obvious and then claiming it in terms of a "signal" is where I have issues, and I think that is by and large what the bulk of "business method" patents (at least computer based ones like we see from the likes of Amazon) are really all about. 

That isn't to say that all patents which include two structures signaling each other are per se obvious, of course.

How would you have ruled on the Bilski application?

- Jeff

[JimIvey]

I think my problem is a 103 issue, as I think about it more.

I think that's a huge source of confusion for many.  Most of the arguments I've heard against "business method" patents (still don't know those are) are based on obviousness.

When considering policy arguments for or against eligibility, you really ought to presuppose a hypothetical invention in the relevant technology that is truly non-obvious.

That's what troubles me about the close juxtaposition of electrical signals with legal rights as ethereal things; an invention embodied in electrical signals, no matter how non-obvious, is dangerous close to being excluded from the universe of protectable innovations.

On the other hand, an invention rooted in electrical signals will necessarily require a machine of some sort, so maybe it's much ado about nothing.

Perhaps one of the unintended consequences of this decision is that non-obvious mathematical algorithms are now patentable (until the Supreme Court smacks down the Federal Circuit on this issue) so long as the mathematical algorithm is tied to a machine in the claims.  In a sense, the Federal Circuit -- in trying to close a window -- may have left a door wide open.

How would you have ruled on the Bilski application?

I've said somewhere (perhaps not here) that this decision is really unnecessary.  I think the claims had serious vagueness and novel issues.  I don't have them in front of me, but ... ah, heck, I'll get them in front of me....

A method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price comprising the steps of:

• (a) initiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumers purchase said commodity at a fixed rate based upon historical averages, said fixed rate corresponding to a risk position of said consumer;
• (b) identifying market participants for said commodity having a counter-risk position to said consumers; and
• (c) initiating a series of transactions between said commodity provider and said market participants at a second fixed rate such that said series of market participant transactions balances the risk position of said series of consumer transactions

Now, in fairness to Bilski, I haven't read the spec.  But is that sufficiently concretely recited such that an accused infringer can reasonably understand the metes and bounds of the claim?  What are "consumption risk costs"?  I'm sure some MBA can offer me some business-speak definition, but can costs really be objectively determined to be "consumption risk" or something else?  I have the same issues with "risk position" and "counter-risk position".

In addition, I think the claim has some novelty/obviousness issues.  I think people have hedged investments by mixing investments of adverse interests for a long time, haven't they?  Perhaps the novelty here is the two fixed rates.  I don't recall there being any rejections based on any of Sections 112, 102, and 103.  I think there ought to have been some (even if only the lame ones you get when the claim really recites non-obvious subject matter).

The trouble with this sort of patent application is similar to what some said of software patent applications in the late 80s/early 90s -- lack of a well-developed, searchable repository of prior art from which to draw.  Of course it doesn't help that the examining corps seems reluctant or ill-prepared to search much beyond publications of the USPTO.

In short, I don't know how I would have ruled -- it's hard to say without having reviewed the factual record completely and all the briefs.  However, my inclination would probably have been to find that the initiating of transactions was a sufficient transformation in the real world.  I wouldn't have discarded the Freeman-Walter-Abele test.  I would have left "business methods" out as the majority did. 

I haven't finished it, but at first glance, I probably would have joined Newman in dissent.

Regards.

[Bill Richards]

Being a chemical engineer, and having practiced in the petroleum industry for many years, let me offer the following hypo for your consideration and comment.  (I haven't done much computer software-related stuff.)
A mixture of numerous molecules having individual characteristics are fed into a distillation column.  Based upon a particular property, in this case, boiling point, the molecules are separated into streams (categories), or boiling ranges.  This makes the streams easier to work with and, importantly, more valuable that they would have been mixed with the entire feedstock.
Likewise with data, one feeds a mixture of numerous data elements into a computer program.  Based upon a particular property, the data elements are separated into categories.  These categories are more valuable than if the data elements were still in the total mixture.
Is this too simplistic?  It seems, in this hypo the obviousness issue would be clear.  The distinction between the two, at least in part, is that the molecules cannot be separated by hand, while, albiet inefficiently, the data probably could.

[JimIvey]

Interesting analogy.

Of course, the chemical process you describe appears to have no problems vis-a-vis Bilski.  A machine is required and matter is manipulated/transformed.

In the electronic data realm, I think it's wise to explicitly address the machine and/or the transformation of matter in the application itself.  For many applications, a computer is a practical necessity -- who would mind competing with someone resampling hours of CD-quality digital audio with no more than pencils and scratch-paper?  At the same time, I think I might start bolstering my specifications with a blurb about electronic data being embodied in the position and/or movement of electrons in a physical medium or in physical, reflective elements in the case of optical media ... or in propagation of light waves through a physical space or medium in the case of RF or fiber-optics.

Hmm....  are light waves considered "physical?"  I studied them in "physics".  And, I understand a wave can often be treated as matter and vice-versa.  I think there's a popular understanding that "physical" means "material" as in "composed of matter."  Or are light waves likely to be viewed by the Federal Circuit as akin to human souls between incarnations -- to abstract?

Regards.

[Mat1234567]

I am kind of new at patent law.  Having been a Chemical Engineer, Board Certified Trial Lawyer, I recently decided to move into patent law.  Doing my study, passing the PTO exam and trying to get up to speed, I am in the process of studying Bilski and KSR and other important decisions.

It seems to me the patent bar has really tried to stretch the envelope with disingenuous arguments analogies trying to make computer software and business methods processes under 101.

It is not really rocket science.  Has transformation of matter or real embodiments not been the focus of patent law, why bother even putting the term manufacture or composition of matter in 101?

Just say, whoever discovers something new and useful with real world value can apply for a patent and leave it at that.

May I suggest that some people who have been in the field a long having lots of income derived from patents tend to loose objectivity if not common sense.

[JimIvey]

It seems to me the patent bar has really tried to stretch the envelope with disingenuous arguments analogies trying to make computer software and business methods processes under 101.

What "envelope" is being stretched and in what way?

What is "computer software"?  Does it include firmware?  Does it include digital logic in an ASIC or FPGA?  Should configurations of ASICs and FPGAs be excluded from patent protection for the same reasons as "computer software"?  Why or why not?

Are the reasons for excluding computer software from patent protection, no matter how non-obvious the computer software might be, applicable to any other technologies?  Which ones?  Are there comparable reasons for excluding other technologies from patent protection?  Should we have an ad hoc, technology-by-technology, debate regarding applicability of patent law for each and every technology?  How would that work?  If not, why do it for software?

What are "business methods processes"?  Please don't use "business" in the definition -- that would be circular and useless.

For what it's worth, the Supreme Court's thoughts on the matter are very clear -- "everything under the sun made by man" passes muster for utility and moves on to novelty and obviousness queries.  Of course, we shouldn't take "under the sun" too literally.  I think extra-planetary probes and such are included in eligible subject matter for patents.

May I suggest that some people who have been in the field a long having lots of income derived from patents tend to loose objectivity if not common sense.

Ah, there's "common sense" again.  My thoughts on that phrase are well-documented herein.

Regards.

[ababab]

Mr. Ivey,

Ah feel your pain!  Especially about electrons and signals and light and physics and clues.

To fine-tune the critique of Bilski just a little, I really don't think the section you quoted is the problem:

The raw materials of many information-age processes, however, are electronic signals and electronically-manipulated data.  And some so-called business methods, such as that claimed in the present case, involve the manipulation of even more abstract constructs such as legal obligations, organizational relationships, and business risks.

The way I read Bilski (and I admit it appears a bit ambiguous on this point), the language just quoted is not anti-patentee, it is mostly pro-patentee.  The old raw materials were rubber to be vulcanized, iron to be galvanized, etc., etc.  The modern-age raw materials include signals and data.  Surely to many folks we can agree these are a bit "more abstract" than rubber and steel, while still physical.  And then the questionable "even more abstract constructs" arise, such as obligations, relationships, and risks.  Those are the patent applications that are in trouble under Bilski.  Not the signal- or data-processing applicants, who can still demonstrate "transformation" of these modern "raw materials."

The part that troubles me most in the Bilski opinion is this wide open barn door:

Purported transformations or manipulations simply of public or private legal obligations or relationships, business risks, or other such abstractions cannot meet the test because they are not physical objects or substances, and they are not representative of physical objects or substances.

Say what?!  Now we're getting beyond "physics" and "physical" into "objects or substances," and things "representative of physical objects or substances."  It is this aspect of the Bilski-clue-becomes-law test that I find baffling.  What, exactly, is the difference between representing physical objects or substances on the one hand, and producing a useful, concrete, tangible result on the other hand?  I can play some mental games to come up with examples that suit me, perhaps, but IMO the Fed. Cir. has been less than clear about what it thinks this distinction really means.  What THAT means, unfortunately, is years more uncertainty, expense, chilling effects, and litigation for innovators.

[dablueman]

It seems to me the patent bar has really tried to stretch the envelope with disingenuous arguments analogies trying to make computer software and business methods processes under 101.

It's a fundamental theory of computer science that every piece of software can be made into a dedicated machine, and therefore not needing to be a business method/process for 101 purposes. It's called a universal turing machine, named after Alan Turing (go google it).

I've always been surprised that patent practitioners/attorneys who do computer sciences apps don't seem to apply this. If I were to draft a software patent app I would do so as Turing machine that performs xyz functions. That way the patent office wouldn't complain as much on 101 grounds.

[JimIvey]

Well said, dablueman!  I've been making that point for years, but you said it much better -- the distinction between software and hardware is simply an implementation choice.  But, people who haven't studied computer science often give you what Hillary Clinton once referred to as the "talking dog stare" -- as if you were a dog that just spoke -- when you tell them that.

Your point about describing all software inventions as physical Turing machines is interesting.  Many years ago (before I practiced), software applications were sometimes written like that -- using analog electrical logic (so I was told) and then mentioning at the end that it could also be implemented as software executing in a digital processor.

I wouldn't go so far as to write all software applications as Turing machines now.  First, you still have to mention software (and much about it) to comply with the "best mode" requirement.  Second, it's simply not necessary (in the US anyway). 

Regards.

[ababab]

dablueman & JimIvey,

Help me out here.  If you wrote a software app. claiming the equivalent Turing machine, wouldn't your competitor avoid infringement simply by implementing in software rather than hardware?  Doesn't that render the patent worthless?

Or maybe "equivalent" really would have some teeth in such an instance.  Assuming, of course, you created no px hx estoppel along the way!