Posts Tagged ‘business methods’

Let’s Get Physical! Australian Patent Office Wrestles With Method Claims

Wednesday, November 17th, 2010

The Australian Patent Office appears to grappling with the requirement that a physical effect take place in order for a business method to be patentable.  This note sent by Bill Bennett of Pizzeys Patent and Trademark Attorneys raises interesting issues about the need for a “physical effect” as “the touchstone of patentability.”

The APO has issued a decision which has created uncertainty regarding the patentability of business methods.

Until recently, our advice to clients was that business methods were patentable in AU, provided that the claims were limited to execution of the business method in a computer environment.

The APO has now issued the Iowa Lottery decision in which the Deputy Commissioner of Patents concludes (at para 17) that:

I do not believe there is any authority in Australian law for the proposition that the mere identification of a physical effect is sufficient for patentability. (underlining added)

The decision can be viewed here: 
http://www.austlii.edu.au/au/cases/cth/APO/2010/25.html

The above reference to “physical effect” is a reference to the precedential decision of the Full Federal Court in the Grant case.  In 2006, the Full Federal Court concluded in the Grant case (at para 32) that:-

A physical effect in the sense of a concrete effect or phenomenon or manifestation or transformation is required. In NRDC, an artificial effect was physically created on the land. In Catuity and CCOM as in State Street and AT&T, there was a component that was physically affected or a change in state or information in a part of a machine. These can all be regarded as physical effects. (underlining added)

 

Thus, the Full Federal Court in Grant found that “physical effect” is the touchstone of patentability.  It is especially noteworthy that the Full Federal Court expressly referred with approval to cases where a business method was implemented in a computer environment such that performance of the method resulted in a “change of state or information” in a part of the computer.

We find it very difficult to reconcile the Deputy Commissioner’s statement in Iowa Lottery with the precedential statements of the Full Federal Court in Grant.  The apparent discord between the Deputy Commissioner’s view and legal precedent may ultimately only be clarified by further appeals to the Federal Court by patent applicants denied claims to business methods.

Until such time that the law is further clarified, our practical advice to applicants is to draft and claim inventions in the context of being a method of operating a computer (as opposed to being a business method which happens to be implemented in a computer).  Such description and claims should focus heavily on the changes in state or information which occur within the computer and should make these features central to the invention.  For cases which have already been filed in AU, we suggest re-drafting, within the limits of allowable amendments, to focus heavily on the changes in state or information that occur within the computer.

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Bilski Claims Fail As Attempt To Claim “Abstract Idea” – Future Of Business Method Patents Cloudy

Monday, June 28th, 2010

Today, the Supreme Court affirmed the rejection of Bilski’s claims. (Attached at end of posting.)  The 16 page Opinion of the Court was authored by Justice Kennedy, joined in full by Justices Thomas, Roberts, and Alito.  The opinion held that the Bilski claims were directed to an abstract idea, and thus were not directed to a method or process within the scope of the statute. However, in dicta, Kennedy et al. stated that the Fed. Cir.’s “machine or transformation” test was too restrictive, and that some business methods might be patentable subject matter.

Justice Stevens, joined by Ginsberg, Breyer, and Sotomayor, authored a 47 page concurrence arguing that s. 101 should be interpreted to categorically exclude patenting business methods. Justice Breyer wrote a brief concurrence, joined by Scalia, in an attempt to summarize points of agreement among the Justices: (a) Patentable subject matter does not include natural phenomena, mental processes, and abstract intellectual concepts, (b) The M or T test may not be the sole test but it is still of great value in resolving the patentability of processes, and (3) the Fed. Cir. should not revert to  the “useful, concrete and tangible” standard of State Street Bank.

Justice Scalia concurred but did not join in parts II-B-2 and II-C-2 of the Opinion of the Court. These sections are dicta, and posit that flexibility is necessary to consider proper application of the patent laws to new technologies (and both approving of Judge Bader’s dissent in Bilski and criticizing Justice Stevens opinion that software should have been ruled unpatentable), and that some business methods may well be  patentable processes under s. 101.

Given its complexity, it is not surprising that it was released at the very end of the session. Justice Stevens clearly came close to assembling a majority that would ban business method patents outright (whatever a business method IS) but Justice Kennedy had three other votes that would not absolutely shut the door on this type of invention. When Justice Scalia concurred, Justice Kennedy had five votes to sink the Bilski claims as completely (and traditionally) outside of s. 101: “These claims attempt to patent the use of the abstract idea of hedging risk in the energy market and then instruct the use of well-known random analysis techniques to help establish some of the inputs into the equation.” Kennedy saw this as an easier case than Flook.

This is supposed to be a pharma/biotech blog, but there is little in the Court’s opinion referencing these areas of invention. In Section II-B-2, the section Scalia would not join, Kennedy wrote:

“Section 101 is a dynamic provision designed to encompass new and unforeseen inventions. [citing JEM Ag Supply v. Pioneer Hi-Bred, which held that plants can be the subject of utility patents.]…As numerous amicus briefs argue, the [M or T] test would create uncertainty as to the patentability of software, advanced diagnostic medicine techniques, and inventions based on linear programming, data compression and the manipulation of digital signals [citing BIO’s amicus brief].”

This is hopeful, but remember, Stevens, Breyer, and Souter dissented from the dismissal  of cert. in Metabolite Labs., and would have ruled that diagnostic methods that involve measuring levels of an analyte and then making a diagnosis are unpatentable laws of nature. So, while Bilski provides little guidance as to what business method claims would be within the ambit of patentable subject matter, we have even less guidance as to biotechnological inventions.  The Court will need to decide Prometheus v. Mayo to blaze a path toward patentability of “new and unforeseen inventions” in that area.

Bilski SC opinion 6-28-2010

For BIO’s response to this decision, click here.

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"LOOKS BAD FOR BUSINESS METHODS" — A note by Erwin J. Basinski

Tuesday, November 17th, 2009

The Bilski case before the US Supreme Court came up for oral argument on November 9. After a couple of reads, My initial impressions are:

1. Most of the questions from the Justices (primarily Scalia, Breyer, Roberts, Sotomeyor, Stevens, Kennedy, Ginsburg) seemed focused on a concern that a) if they upheld the machine or transformation test they would interfere gravely with existing software, biotech and other patents as well as kill all business method patents; and b) if they negated the machine or transformation test but only killed business method patents, how would that square with BM processes that DO have a valid machine element or DO have an acceptable transformation involved.

2. Malcomb Stewart, Esq., Deputy Solicitor General, spoke for the US Patent Office and said that they fully believed that the hedging claim of Bilski was basically an abstract process with no physicality, and that they would be happy if the court so ruled. Chief Justice Roberts asked why the court shouldn’t so rule and avoid the issue of whether the machine or transformation test is OK. Justice Sotomayor asked “How about if we say something as simple as patent law doesn’t cover business matters instead of what the Federal Circuit has begun to say, which is technology is tied to a machine or a transformation of the substance, but I have no idea what the limits of that ruling would impose in the computer world, in the biomedical world, all of the amicii who are talking about how it will destroy industries? If we are unsure about that, wouldn’t it be safer to say it doesn’t involve business methods?” [I am not sure what this really means.] But Solicitor Stewart responded that this wouldn’t work because of the State Street Bank case , pointing out that the innovation in State Street was a “machine” whereas the Bilski case relates to “processes”. This led to a long and confused discussion between Stewart and several of the Justices about machines made to be unique by a specific computer program, etc., etc. Justice Ginsburg reminded Mr. Stewart that the PTO had proposed the machine or transformation test to the Federal Circuit and was now saying this test should not be supported by the Supreme Court because of the ambiguities about “what is a ‘machine’? and what exactly is an acceptable transformation?” She quoted Justice Meyer in the Federal Circuit Bilski opinion as saying ” . . . it has a simplicity to it. It says, if its technology, then its within the realm of patent, and if its not technology, it isnt, if it is based on science or technology, and that seems to be what is used in other places [i.e. she means countries]? Mr. Stewart said focusing on whether technology is involved would not make the patent eligibility argument any easier, and moreover such a test would not allow a court to avoid the difficulties that it has identified with the machine-or-transformation test.

3. Chief Justice Roberts, and Justices Kennedy, Stevens, Breyer and Ginsburg found difficulty in Mr. Stewart’s argument that State Street was decided correctly and would be today because it was claimed as a machine and was deemed by the Federal Circuit (and agreed by the PTO) to be a computer changed into a new machine by the computer program involved. All of them felt that State Street’s claim was merely a business process programmed to run on a general purpose computer in which the focus should rightly be on the “process,” and seemed to imply that it should have been rejected as a business method process. Mr. Stewart argued it would pass the machine or transformation test. So Justice Breyer summed up by saying – well all of the hypothetical business methods we seem to have excluded from patentability sound like that could be patented if we simply programmed a computer to execute the process according to the PTO. [These Justices appear to be leaning towards denying the patentability of business methods whether or not a computer is used to execute the process.]

4. Mr. Stewart said that the PTO would be happy if the court would affirm the machine-or-transformation test without trying to define what a machine or transformation is [sounds like the Europeans and their happiness with no court trying to define what technology is].

A majority of the Justices seem to be against the patenting of business methods in general but some worry about the impact on the Internet and new and emerging technology, including medical diagnostic methods.

My guess is that the Supremes will rule somewhat as follows:

A Business Method defined as a process of abstract steps of doing something NOT tied to any technology is NOT patent eligible. Implementing the process on a general purpose computer, whether claimed as a machine or process, does not make the business method patent eligible.

The “machine-or-transformation” test for determining patent eligibility for a process is not affirmed, but some non-trivial physical steps or elements must be included in a claim for a process to be patent eligible.

The fact that Congress has recognized some business methods as patentable in section 273 regarding prior user defenses, seems to be a nettlesome issue for the court here but I suspect they may find some way around this.

The Bilski claim at issue will likely be deemed a business method having abstract steps not tied to any technology and is therefore deemed not to be eligible for a patent.

The Court might even overturn the State Street Bank case.

Erv Basinski

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TRANSMISSION OF INFORMATION IN EUROPE – PATENTABLE SUBJECT MATTER?

Tuesday, November 17th, 2009

By Paul Cole, Lucas & Co., UK

The UK counterpart of In re Ngai is Bayer’s (Meyer’s) Application [1984] R.P.C. 11. In that case a claim to a package containing a known drug together with instructions for a new use were not allowed because the inventive step set out in the claims resided in the information given in the instructions, which was mere presentation of information and accordingly not an invention under Section 1(2)(d) of the UK Patents Act, 1977. That decision was followed closely in time by the EPO Enlarged Appeal Board decision in G 0005/83 EISAI/Second Medical Indication which approved Swiss form use claims, and which has since been followed by the UK courts, see John Wyeth and Schering’s Application [1985] R.P.C. 545. After that time it was no longer necessary to pursue claims to a substance plus instructions for use.

Sir Isaac Newton is reputed to have lost some £20,000 in the South Sea Bubble which was a financial crisis of 1720 and said: “I can calculate the movement of stars, but not the madness of men.” One of the infamous companies launched in that year was ‘for carrying out an undertaking of great advantage, but nobody to know what it is.” The examples put forward by the Supreme Court in Bilski approach that level: a process for maximising wealth by buying low and selling high, a method of resisting a corporate takeover and a method of avoiding tax.

When asked about the patentability of a method of teaching antitrust law that keeps 80% of students awake, Mr. Michael Jakes for the petitioners averred that there have been a number of patents for teaching methods, and that such a method is indeed patentable if defined as a process. Justice Breyer responded: “Now, suppose I reject that view, hypothetically, and suppose I were to take the view that this is way too far, that that is not the purpose of the statute… Have you any suggestion for me?” Justice Sotomayor asked: “How about if we say something as simple as patent law doesn’t cover business matters …” Malcolm Stewart on behalf of the respondent found himself in difficulty in even defending State Street in the face of observations e.g. from Mr Justice Stevens: “I don’t understand why that isn’t just the application of a process, which is not itself patentable subject matter, to a particular machine that can use [that] process.”

As is well known, the EPC contains a prohibition on the patenting of business methods. The EPO Appeal Board has held in T 0931/95 that a computer programmed to carry out a business method is not caught by the prohibition, but that was a Pyrrhic victory because it went on to hold that claimed features of a non-technical nature should not be taken into account when evaluating inventive step, and the application was refused on that ground. It remains almost impossible in Europe to obtain grant of patents for inventions where novelty is confined to matters of business administration. It would appear that the position in the US may move at least partway towards that in Europe.

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