US Court Decisions (8) Summary of In Re Bilski

1. Facts of In Re Bilski case.

The method claim at issue in In re Bilski recites, in part: A method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price comprising the steps of:

1.initiating a series of transactions between said commodity provider and consumers of said commodity;
2.identifying market participants for said commodity having a counter-risk position to said consumers; and
3.initiating a series of transactions between said commodity provider and said market participants.

The PTO Examiner rejected the claim under 35 USC 101 on the ground the claimed process was “not implemented on a specific apparatus,” and was “not directed to the technological arts.” The applicant appealed to the PTO BPAI. The BPAI affirmed the rejection, but on different grounds, holding that the transformation of “non-physical financial risks and legal liabilities” is not patent-eligible subject matter. The BPAI held that the claimed process was directed to an abstract idea, which is not eligible for patent protection. The BPAI further held that the claimed process did not produce a “useful, concrete and tangible result,” and thus was not patent-eligible subject matter. The applicant appealed to the U.S. Court of Appeals for the Federal Circuit. The appeal was originally argued before a 3-judge panel of the Federal Circuit on October 1, 2007. The Federal Circuit then ordered en banc (the entire court) review of the case to clarify the standards applicable in determining whether a claimed method constitutes patent-eligible subject matter under 35 USC 101.

2. Supreme Court precedent enunciated a "machine or transformation test".

The Federal Circuit noted that the Supreme Court in Diehr (1981) drew a distinction between process claims that pre-empt substantially all uses of a fundamental principle, which are not patent-eligible, and process claims that preempt only a particular application of that fundamental principle, which are patent-eligible. This, the Federal Circuit said, invites the question: how does one determine whether a given claim would pre-empt all uses of a fundamental principle? Turning to the Supreme Court decisions Benson (1972), Diehr (1981), and Flook (1978), the Federal Circuit said the Supreme Court had enunciated a definitive test to answer this question: A claimed process is surely patent-eligible under 101 if:

1.it is tied to a particular machine or apparatus, or
2.it transforms a particular article into a different state or thing.

The Federal Circuit called this test the “machine-or-transformation test,” and said it is the sole test for determining whether a claimed process is patent-eligible under 35 USC 101. However, the Federal Circuit noted that it may in the future refine or augment the test or how it is applied, and that the Supreme Court may ultimately decide to alter or perhaps even set aside the test to accommodate emerging technologies.

3. The use of a machine or the transformation of an article must impose "meaningful limits" on claim scope.

Citing Benson (1972), the Federal Circuit said that the use of a specific machine or transformation of an article must impose meaningful limits on the claim’s scope to impart patent-eligibility.

4. Mere "insignificant extra-solution activity" is not enough.

The Federal Circuit said that mere “insignificant extra-solution activity” is not enough to convert a claim that is not patent-eligible into a claim that is patent-eligible. An example of post-solution activity is where a claim recites a mathematical formula such as the Pythagorean theorem, followed by a step indicating that the formula, when solved, could be usefully applied to existing surveying techniques. In such example, the post-solution surveying step would not render the claim on the mathematical formula patent-eligible. The Federal Circuit said this reasoning is equally applicable to any insignificant extra-solution activity regardless of where and when it appears in the claimed process. Thus, adding a pre-solution data-gathering step to a claim reciting an algorithm, without specifying how the data is gathered, is insufficient to make the claim patent-eligible. Likewise, adding a simple recordation step in the middle of a claim reciting a mathematical optimization algorithm, without specifying the particular manner of recording (e.g. on paper, on a computer), is insufficient to make the claim patent-eligible.

5. Mere "field-of-use limitations" are not enough.

Mere “field-of-use limitations” are also not enough to convert a claim that is not patent-eligible into a claim that is patent-eligible. A field-of-use limitation is a limitation that limits the scope of a claim to a particular field of use or technological environment. Referring again to the Supreme Court’s Diehr (1981) decision, the Federal Circuit said that because field-of-use limitations do not limit a claim to a particular application of a fundamental principle, they cannot convert a claim that is not patent-eligible into a claim that is patent-eligible. The Federal Circuit reasoned, “Pre-emption of all uses of a fundamental principle in all fields and pre-emption of all uses of the principle in only one field both indicate that the claim is not limited to a particular application of the principle.” (underlined emphasis added).

6. What constitutes "machine implementation," and whether a "computer" is sufficient, will be left to future case law.

The applicant admitted that the language of claim 1 does not limit any process step to any specific machine or apparatus. For this reason, the Federal Circuit said it will leave to future cases the elaboration of the precise contours of “machine implementation.” The Federal Circuit also said that in the present case it will leave unanswered the question of whether or when recitation of a computer suffices to tie a process claim to a particular machine.

7. What constitutes "transforms an article into a different state or thing" depends mainly on the "article" that is transformed.

The Federal Circuit examined some of its past case law to provide insight into the transformation part of machine-or-transfromation test. The court sought to clarify “what sorts of things constitute ‘articles’ such that their transformation is sufficient to impart patent-eligibility.” The court said it is self-evident that “a process for a chemical or physical transformation of physical objects or substances is patent-eligible subject matter.” However, the Federal Circuit said it will take a “measured approach” in cases where the article to be transformed is an electronic signal, data, or an abstract construct such as a legal obligation, an organizational relationship, or a business risk.

8. Several prior tests are inadequate and should no longer be relied on.

The Federal Circuit evaluated whether several prior tests for determining patent-eligibility are valid and useful. The Freeman-Walter-Abele test requires (1) determining whether the claim recites an “algorithm” within the meaning of Benson, then (2) determining whether that algorithm is “applied in any manner to physical elements or process steps.” The court’s prior State Street and Alappat cases applied a “useful, concrete and tangible result” test, which holds that “the transformation of data, representing discrete dollar amounts, by a machine through a series of mathematical calculations into a final share price, constitutes a [patent-eligible invention] because it produces ‘a useful, concrete and tangible result’c” The court said the Freeman-Walter-Abele test, and the State Street and Alappat “useful, concrete and tangible result” test, are both inadequate tests. The portions of these cases, or other cases, that rely solely on these tests should no longer be relied on. The court also rejected the “technological arts” test on the basis that it has never been adopted by the Supreme Court or the Federal Circuit, and the meaning of “technological arts” is both ambiguous and ever-changing.

9. Applicant's process claim is not patent-eligible.

The Federal Circuit applied the machine-or-transformation test to applicant’s process claim and found the claim was not patent-eligible. With respect to the first part of the test, the applicant admitted that the claim did not meet the machine implementation part of the test. With respect to the second part of the test, the Federal Circuit held that applicant’s process claim did not transform any article to a different state or thing. The Federal Circuit reasoned that 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. Thus, claim 1 does not involve the transformation of any physical object or substance, or the transformation of an electronic signal representative of any physical object or substance. The Federal Circuit concluded that applicant’s claimed process met neither first nor second part of the machine-or-transformation test, and thus was not drawn to patent-eligible subject matter.