Patent eligibility 101 tim hadlock

Patent Eligibility 101:Business Method Patents after Bilski

Cybersource, Hulu, and RFT

Timothy HadlockCorporate IP Counsel ForumNew York, NY May 16, 2012

Business Methods

• Software-based Inventions

• Medical Processes and Diagnostics

• Business Management

• Signal Processing

• Number of Amicus Briefs: 22

• Cited by: • Supreme Court – 3• Federal Circuit – 13• District Court - 17• Law Reviews - 137

Bilski Supreme Court Decisionby Numbers

Bilski Holding

“In disapproving an exclusive machine-or-transformation test, we by no means foreclose the Federal Circuit's development of other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text.”

Majority opinion, 130 S.Ct. at 3231

“As we've reported, the Supreme Court's decision in Bilski v. Kappos left many in the patent bar unsatisfied. Rather than resolving the hotly contested question of whether ‘business methods’ are patentable, the justices issued a narrow opinion. Those hoping for a more forceful ruling than Bilski got their wish on Tuesday, in the form of a unanimous Federal Circuit decision that could be used to invalidate both method patents and patents for related software.”

Excerpted from: Jan Wolfe, Greenberg Traurig Wins Key Method Patent Ruling at Federal Circuit,The American Lawyer (August 17, 2011)

CyberSource Corp. v. Retail Decisions Inc.2011 U.S. App. LEXIS 16871 (August 16, 2011)

CyberSource

Method Claim

3. A method for verifying the validity of a credit card transaction over the Internet comprising the steps of:

a) obtaining information about other transactions that have utilized an Internet address that is identified with the [ ] credit card transaction;

b) constructing a map of credit card numbers based upon the other transactions and;

c) utilizing the map of credit card numbers to determine if the credit card transaction is valid.

CyberSource

Manufacture Claim

2. A computer readable medium containing program instructions for detecting fraud in a credit card transaction between a consumer and a merchant over the Internet, wherein execution of the program instructions by one or more processors of a computer system causes the one or more processors to carry out the steps of:

a) obtaining credit card information relating to the transactions from the consumer; and

b) verifying the credit card information based upon values of plurality of parameters, in combination with information that identifies the consumer, and that may provide an indication whether the credit card transaction is fraudulent,

wherein each value among the plurality of parameters is weighted in the verifying step according to an importance, as determined by the merchant, of that value to the credit card transaction, so as to provide the merchant with a quantifiable indication of whether the credit card transaction is fraudulent,

wherein execution of the program instructions by one or more processors of a computer system causes that one or more processors to carry out the further steps of . . . ;

[repeats 3 steps of method claim].

CyberSource

Manufacture Claim (continued)

CyberSource

District Court Holding

Method Claim 3 – "an unpatentable mental process for collecting data and weighing values," which did "not become patentable by tossing in references to [I]nternet commerce."

Manufacture Claim 2 – "simply appending 'A computer readable media including program instructions . . .' to an otherwise non-statutory process claim is insufficient to make it statutory."

CyberSource

Analysis

Bilski “Test/Clue”

(1) it is tied to a particular machine or apparatus; or

(2) it transforms a particular article into a different state or thing."

CyberSource

Analysis (continued)

“ ‘We further held that, to satisfy the machine prong of the test, the use of a

machine "must impose meaningful limits on the claim's scope.’ ”

(slip op. at 7)

CyberSource


“"The Court's precedents provide three specific exceptions to §101's broad patent-eligibility principles: 'laws of nature, physical phenomena, and

abstract ideas.'"”

(slip op. at 8)

CyberSource


“We are not persuaded by the appellant's argument that the claimed method is tied to a particular machine because it "would not be necessary or possible without the Internet."

Appellant's Br. 42. Regardless of whether "the Internet" can be viewed as a machine, it is clear

that the Internet cannot perform the fraud detection steps of the claimed method.”

(slip op. at 10-11)

CyberSource


“Claim 3 does not limit its scope to any particular fraud detection algorithm, and no algorithms are disclosed in the '154 patent's

specification. Rather, the broad scope of claim 3 extends to essentially any method of detecting credit card fraud based on information relating

past transactions to a particular "Internet address," even methods that can be performed

in the human mind.”(slip op. at 16)

CyberSource


New rule:

“Methods which can be performed entirely in the human mind are unpatentable not because there is anything wrong with

claiming mental method steps as part of a process containing non-mental steps, but rather because computational methods which can be performed entirely in the human mind are the

types of methods that embody the "basic tools of scientific and technological work" that are free to all men and reserved

exclusively to none.”

(slip op. at 18)

CyberSource

Analysis – Manufacture Claim

“CyberSource argues that claim 2 is patent-eligible per se because it recites a "manufacture," rather than a "process," . . . cannot possibly fall

within any of the three patent-eligibility exceptions the Supreme Court has recognized for

"laws of nature, physical phenomena, [or] abstract ideas." Appellant's Br. 47-48 (quoting

Bilski, 130 S. Ct. at 3225). We disagree.”(slip op. at 21)

CyberSource

Analysis – Manufacture Claim

“it is clear from the emphasized text that claim 2 recites nothing more than a computer readable medium containing program instructions for

executing the method of claim 3.”

(slip op. at 20).

CyberSource

Analysis – Manufacture Claim (cont’d)

New analysis rule for Beauregard Claims:

“Regardless of what statutory category ("process, machine, manufacture, or composition of matter," 35 U.S.C. § 101) a

claim's language is crafted to literally invoke, we look to the underlying invention for patent-eligibility purposes.

Here, it is clear that the invention underlying both claims 2 and 3 is a method for detecting credit card fraud, not a

manufacture for storing computer-readable information.”

(slip op. at 21-22)

CyberSource


New analysis rule: Compare to Abele

“Accordingly, the court placed "the burden ... on the applicant to demonstrate that the claims [were] truly drawn to [a]

specific apparatus distinct from other apparatus[es] capable of performing the

identical functions."(slip op. at 23)

CyberSource


New analysis rule: Compare to Abele

“CyberSource has not met its burden to demonstrate that claim 2 is "truly drawn to a specific" computer readable medium, rather than to the underlying method of credit card fraud detection. . . programming a general purpose

computer to perform an algorithm "creates a new machine, . . . But we have never suggested that simply reciting the

use of a computer to execute an algorithm that can be performed entirely in the human mind falls within the

Alappat rule.”

(slip op. at 23).

CyberSource


“it is clear that the invention underlying both claims 2 and 3 is a

method for detecting credit card fraud, not a manufacture for storing

computer-readable information.”

(slip op. at 22)

CyberSource


New Rule:

“In the present case, CyberSource has not met its burden to demonstrate that claim 2

is "truly drawn to a specific" computer readable medium, rather than to the

underlying method of credit card fraud detection.”

(slip op. at 23)

CyberSource


Re. Particular MachineSpecial Purpose Computer – In re Alappat:

“But we have never suggested that simply reciting the use of a computer to execute an algorithm that can be performed entirely in the human mind falls

within the Alappat rule.”

(slip. op. at 23).

CyberSource


Re. Particular Machine (cont.)

“to impart patent-eligibility to an otherwise unpatentable process under the theory that the

process is linked to a machine, the use of the machine "must impose meaningful limits on the claim's scope." . . . In other words, the machine "must play a significant part in permitting the

claimed method to be performed." . . .”(slip. op. at 24).

CyberSource


“That purely mental processes can be unpatentable, even when performed by a computer, was precisely the holding of the Supreme Court in Gottschalk v.

Benson.”

(slip op. at 28)

CyberSource


Practical Matter Test

“This is entirely unlike cases where, as a practical matter, the use of a computer is required to perform the claimed method.

For example, in SiRF Tech…”

(slip op. at 28)

CyberSource


Re.: Transformation

“We agree with the district court that the claimed process manipulates data to organize it in a logical

way such that additional fraud tests may be performed. The mere manipulation or

reorganization of data, however, does not satisfy the transformation prong. Thus, claim 2 fails to

meet the transformation test.”(slip. op. at 24).

RCT v. Microsoft (Fed. Cir. 2010)

Holding: Claims are directed to patentable subject matter

Technology: Digital image halftoning

“Section 101 does not permit a court to reject subject matter categorically because it finds that a claim is not worthy of a patent.”

“This court will not presume to define ‘abstract’ beyond the recognition that this disqualifying characteristic should exhibit itself so manifestly as to override the broad statutory categories of eligible subject matter and the statutory context that directs primary attention on the patentability criteria of the rest of the Patent Act.”

“Inventions with specific applications or improvements to technologies in the marketplace are not likely to be so abstract that they override the statutory language and framework of the Patent Act.”

Classen Immunotherapies v. Biogen(Fed. Cir 2011)

Technology: Method of Immunization

Majority Holding: Representative claims were patent eligible under section 101

Section 101 should only be used as a “coarse filter”

Judge Rader’s “Additional Views”

• Eligibility Restrictions have resulted in Claim Drafting Gamesmanship

• Focus Instead on the Substantive Conditions of Patentability: Sections 102, 103 and 112

Ultramercial v. Hulu (C.D. Cal. Aug. 13, 2010)

• “Method for allowing Internet users to view copyrighted material free of charge in exchange for watching certain advertisements.”

• Fails both prongs of Machine or Transformation test

• Use of Internet is not a tie to a specific machine (CyberSource)

• Any “transformation” of data is incidental and not a meaningful limitation

• Claim is directed to an Abstract Idea – using advertising to offset the cost of media to the viewers

• Oral Argument at the Federal Circuit was held in August 2011

• Judge Rader’s admonishes defendant for not using 102/103 to dispose of the case; finds nothing “abstract” about the claim.

DealerTrack v. Huber - C.D. Cal. (July 7, 2009)

• Technology: Computer-aided method of managing a credit application

• Holding: Claims ineligible - fail machine prong

• No “particular machines” claimed

• Claimed central processor “is nothing more than a general purpose computer that has been programmed in some unspecified manner.”

• SJ motion for invalidity granted.

• Federal Circuit Oral Argument held in May 2011

USPTO Efforts – 101 Guidance:Factors Weighing Towards Eligibility

• Recitation of a machine or transformation (either express or inherent).

• The claim is directed toward applying a law of nature.

• The claim is more than a mere statement of a concept.

USPTO Efforts – 101 Guidance:Factors Weighing Against Eligibility

1. No recitation of a machine or transformation (either express or inherent).

2. Insufficient recitation of a machine or transformation.

3. The claim is not directed to an application of a law of nature.

4. The claim is a mere statement of a general concept

Q and A