In re Lewis Ferguson, Darryl Costin and Scott C. Harris (CAFC 2007-1232) precedential

The patent Board bored:

As to method claims 1-23 and 36-68, the Board conceded that the claims nominally fell within one of the four categories of statutory subject matter--processes. But after detailed analysis, the Board concluded that Applicants' method claims were directed to an "abstract idea"--not patent-eligible subject matter. Id. at 9.

As to paradigm claims 24-35, the Board found that a "paradigm" does not clearly fall within any of the four enumerated categories of statutory subject matter.

The CAFC's instant litany on § 101 -

As this appeal turns on whether Applicants' invention as claimed meets the requirements set forth in § 101, we begin with the words of the statute:

Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefore, subject to the conditions and requirements of this title.

35 U.S.C. § 101.

The statute thus recites four categories of subject matter: processes, machines, manufactures, and compositions of matter. But even if a claim may be deemed to fit literally within one or more of the statutory categories, it may not be patent eligible. As the Supreme Court has repeatedly cautioned: "Phenomena of nature, though just discovered, mental processes, and abstract intellectual concepts are not patentable, as they are the basic tools of scientific and technological work." Gottschalk v. Benson, 409 U.S. 63, 67 (1972); see also Bilski, 545 F.3d at 952 (collecting cases).

As to Applicants' method claims, which at least nominally fall into the category of process claims, this court's recent decision in Bilski is dispositive. In Bilski, we resolved the question: "what test or set of criteria governs the determination by the Patent and Trademark Office ('PTO') or courts as to whether a claim to a process is patentable under § 101, or conversely, is drawn to unpatentable subject matter because it claims only a fundamental principle." Bilski, 545 F.3d at 952. We stated that the Supreme Court's machine-or-transformation test is the "definitive test to determine whether a process claim is tailored narrowly enough to encompass only a particular application of a fundamental principle rather than to pre-empt the principle itself." Id. at 954. As this court phrased the machine-or-transformation test in Bilski:

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.

Id. (emphasis in original) (citing Gottschalk, 409 U.S. at 70; Diamond v. Diehr, 450 U.S. 175, 192 (1981); Parker, 437 U.S. at 589 n.9; Cochrane v. Deener, 94 U.S. 780, 788 (1876)).

The method claims had no prong to hang on.

Applicants' method claims are not tied to any particular machine or apparatus. Although Applicants argue that the method claims are tied to the use of a shared marketing force, a marketing force is not a machine or apparatus.

Nor do Applicants' methods, as claimed, transform any article into a different state or thing. At best it can be said that Applicants' methods are directed to organizing business or legal relationships in the structuring of a sales force (or marketing company). But as this court stated in Bilski, "[p]urported 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." 545 F.3d at 963.

A reminder that "useful, concrete, and tangible result" is nothing of the sort for analyzing patentability.

The decisions of the Board and the briefing and argument on appeal include extensive discussion of a so-called "useful, concrete, and tangible result" test. To avoid confusion, we clarify here that in Bilski, this court considered whether this "test" is valid and useful and concluded that it is not.⁴ Specifically, we rejected the viability of the "useful, concrete, and tangible result" language of State Street Bank & Trust Co. v. Signature Financial Group, 149 F.3d 1373 (1998), as a test, because while such an inquiry "may in many instances provide useful indications of whether a claim is drawn to a fundamental principle or a practical application of such a principle," it inappropriately focuses on the result of the claimed invention rather than the invention itself. Bilski, 545 F.3d at 959.

⁴ In Bilski, this court also rejected the so-called Freeman-Walter-Abele test, the "technological arts" test, and the "physical steps" test. 545 F.3d at 959, 960, 960-61. Because these "tests" were not subjects of extensive argument in this case, we see no need to revisit them here.

But, in a significant footnote, the court, consistent with its Comisky rewrite, states that State Street has not been overturned with regard to the patentability of transforming data.

Contrary to the concurrence's assertion, we do not contend that this court has overturned State Street Bank & Trust Co. v. Signature Financial Group, 149 F.3d 1373 (1998), but merely note that the "useful, concrete and tangible result test" "is insufficient to determine whether a claim is patent-eligible under § 101," Bilski, 545 F.3d at 959, and "is inadequate," id. at 960 (reaffirming that "the machine-or-transformation test outlined by the Supreme Court is the proper test to apply" (emphasis added)), and that "those portions of our opinions in State Street and AT&T [Corp. v. Excel Commc'ns, Inc., 172 F.3d 1352 (Fed. Cir. 1999),] relying on a 'useful, concrete and tangible result' analysis should not longer be relied on," id. at 960 n.19.

"In State Street, as is often forgotten, we addressed a claim drawn not to a process but to a machine." Bilski, 545 F.3d at 959 n.18 (emphasis in original); see also State Street, 149 F.3d at 1373 ("Today, we hold 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 . . . ." (internal quotation marks omitted) (emphasis added)). The claim at issue in State Street was thus drawn to a patent-eligible machine implementation of what may have otherwise been a non-patent-eligible abstract idea. Moreover, we note that in Bilski this court refused to extend or even to take a broad reading of the holding in State Street, holding that the language employed in State Street "was certainly never intended to supplant the Supreme Court's [machine-or-transformation] test" and that "those portions of our opinion[] in State Street . . . relying solely on a 'useful, concrete and tangible result' analysis should no longer be relied on." Bilski, 545 F.3d at 959-60 & n.19.

The paradigm claims had none, at least as to what a patent is. The applicants conceded that the claims went not to process, manufacture or composition of matter. Clearly, applicants had been listening to too much Pink Floyd ("Welcome to the Machine").

Applicants do assert, however, that "[a] company is a physical thing, and as such analogous to a machine." But the paradigm claims do not recite "a concrete thing, consisting of parts, or of certain devices and combination of devices," Nuijten, 500 F.3d at 1355, and as Applicants conceded during oral argument, "you cannot touch the company."

Indeed, it can be said that Applicants' paradigm claims are drawn quite literally to the "paradigmatic 'abstract idea.'"

That black-robed punster Judge Gajarsa. Nicely done.

The ever-eloquent Queen of Dissent, Her Highness Judge Newman, once again deigns to rain on her colleagues' parade -

My colleagues err in asserting that the "machine-or-transformation" test is that of the Supreme Court. See Gottschalk v. Benson, 409 U.S. 63, 71 (1972) ("We do not so hold."). And in their purported "clarification" of the Bilski decision, my colleagues suggest that Bilski overturned not only State Street Bank but also other precedent including that based on the Freeman-Walter-Abele test, the "technological arts" test, and the "physical steps" test. Maj. op. at 7 n.3. This sweeping rejection of precedent simply enlarges the taint on the thousands of patents that were granted on application of these tests. Indeed, this court in Bilski reaffirmed the holding of State Street Bank that the "'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.'" Bilski, 545 F.3d at 960 (quoting State Street Bank, 149 F.3d at 1375-76). Although the Bilski court held that the State Street Bank criterion of "useful, concrete and tangible result" does not provide patent-eligibility if the machine-or-transformation test is not met, the court recognized that the State Street Bank test was directed to processes performed by computer, thus meeting the Bilski test: "In State Street, as is often forgotten, we addressed a claim drawn not to a process but to a machine." Bilski, 545 F.3d at 959 n.18 (emphasis in original).

On the failure of the CAFC to paint within its own lines of abstraction -

[T]he court disposes of the Ferguson method on the ground that it is an "abstract idea," although it is definite and concrete and limited, and not at all abstract. The court resolves this dilemma by defining "abstract idea" as anything that does not meet the Bilski machine-or-transformation test. However, the Ferguson marketing method is not an abstraction, even in Bilski terms. The Ferguson method "does not pre-empt all uses of a fundamental principle in any field but is limited to a particular use, a specific application. Therefore, it is not drawn to the principle in the abstract". Bilski, 545 F.3d at 957.

The court's circular definition of "abstraction" as anything that is not patent-eligible under Bilski can impact the many new methods flowing from the new information technologies. These methods have enhanced human capabilities, blurring the traditional line between machine and human; their patentability warrants at least consideration in appropriate cases, not disposition in dictum.

The beauty of clarity in such a mind as the honorable Judge Newman -

This court's retreat into the methods of the past is unworthy of our responsibility to support innovation in the future. Major adjustment in established law should be based on changing industrial or intellectual or equitable needs - of which no evidence is before this court. The only need of which I am aware is that of the current harsh economic times, when the need is of enhanced incentives to innovation and investment in new things and new industries, not reduction in the existing incentives.