Living in the DC area is nice because you’re close to a lot of interesting action. Yesterday, I visited the Court of Appeals for the Federal Circuit for oral arguments of the much-anticipated CLS v. Alice en banc case. Interesting arguments and questioning show that “abstract idea” is being over-used and how the expansion of the §101 patent ineligibility doctrine is bad for the patent system.
An early exchange illustrates how abstract ideas being over-used. Counsel for CLS (Mark Perry) kicked off the hearing by arguing that Alice patented an abstract idea. He argued that initially Alice’s patent applications included method claims that were rejected as “abstract ideas” under §101 until Alice amended the claims to recite a computer. Thus, Perry contended that the patented claims were nothing more than an abstract idea dressed up in machine claim clothing. But Judge Moore intervened as if on behalf of Alice, asking whether a claimed system in an asserted patent that recited a computer and specific hardware limitations qualified as an abstract idea. Perry answered very confidently that this system claim was nothing more than an abstract idea. Judge Moore could not believe it, pointing the Counsel not only to the specification that detailed the hardware, but to the flowcharts that detailed the steps to be performed. To Moore, if there was ever a valid software patent, this was it. But Perry responded that the claim was simply a method claim dressed up as a system claim to overcome 101. Moore rhetorically asked, “But don’t we look at the language of the claims?” Good question. Yes, claim language does matter people. Judge Moore’s next point brought up an example of the first calculator that solely performed addition functions after which someone else comes along and reconfigures the calculator to perform subtraction. If a first-of-its-kind machine or computer is not an abstract idea, why are improvements of it?
This exchange illustrates why it doesn’t make sense to characterize claims directed to computers as abstract ideas. No matter the generality of the steps the computer performs, if a claim claims a computer, then it is no longer an idea. Historically, the only type of claim that has been subject to the abstract idea exception has been method claims. See, e.g., Benson, Flook, Diehr, Bilski, and Mayo. This makes sense, especially in light of what an “idea” has long been understood as. An idea is a concept or a principle. You can’t touch it with your hands. Like a method, an idea is something that you hold in your mind. See e.g.,Tilghman v. Proctor, 102 U.S. 707 (1881) (“The line between a patentable “process” and an unpatentable “principle” is not always clear. Both are “[conceptions] of the mind, seen only by [their] effects when being executed or performed.”). If a claimed method is recited at such a high-level of generality, such as in Bilski or Mayo, then it is an abstract idea. But it makes little sense to categorize a claimed tangible machine, such as a computer, as an idea. Thus, generic computer claims should not be referred to as “abstract ideas” because it goes against the common usage of the word “idea.” If a judicial exception is going to exclude computer claims on the grounds of patent-ineligibility, another exception should be created, such as an “abstract computer” exception.
But such a new judicial exception is neither necessary nor desirable. The current system does a fine job of remedying abstract ideas from getting patented. CLS’s counsel argued that it would be a shame for someone to patent the abstract idea of a car that drives itself only to have Google, having spent a billion dollars on actually developing the car, get sued for infringing this abstract idea patent. However, under the current system, such a scenario is unlikely because §112 requires a sufficient disclosure for the claimed invention. Abstract ideas that use computers are also unlikely when an Examiner does the job because they are relatively easy to find prior art against. The Examiner has the right to construe claim language as broadly as reasonably possible consistent with the specification when assessing prior art. See MPEP §2111. And Examiners are pretty good at finding prior art, especially in their particular areas of technology. So if someone has really claimed something at a high-level of abstraction, it’s likely that an Examiner can find a disclosure that anticipates or would have rendered obvious that concept. CLS’s counsel even admitted that he had arguments for showing that Alice’s patent was invalid under §§102/103. Why not proceed with the already well-developed and relatively objective area of law?
Increasing the focus on §101 discourages a level playing field. A big disadvantage of expanding the §101 doctrine of patent eligibility instead of relying on well established patent code sections is that §101 is highly subjective, and other sections of the patent code can prevent abstract ideas from getting patented. Section 101 has become a lightning rod for anti-patent folk who quickly want a particular patent to go away. It’s scary to see judges experimenting with the §101 doctrine; it’s even scarier to think about patent examiners doing so.
The Board of Patent Appeals and Interferences takes into account a number of authorities when deciding appeals. First at the BPAI’s disposal are the higher courts of the Federal Circuit and Supreme Court. Then there are the rulemaking guidelines issued by the PTO. Then of course there’s the MPEP. I’ve been interested in the whether the Federal Circuit affects the BPAI in terms of the number of rejections the Board issues.
Appeals before the Board are initiated after an examiner rejects a claim at least twice. The applicant, rather than continuing to spend time arguing with the examiner, can elect to appeal to the Board where a panel of three judges will hear both arguments. The Board then has three options. It can reverse the rejection, it can affirm the rejection, or it can introduce a new rejection. Since Bilski v. Kappos has been decided, the Board has used § 101 to reverse 95 times, affirm 166 times, and introduce 65 new rejections. Up until today, the percent of new rejections to how many times the Board has acted is about 20%.
To see whether the Board is affected by Federal Circuit cases, I divided the time frames up into intervals roughly 6 months apart when big Federal Circuit cases were decided. Here are the Federal Circuit cases: Research Corp v. Microsoft, Ass’n for Molecular Pathology v. Myriad, and Ultramercial v. Hulu. At times, there were two Federal Circuit cases decided within a short period of time, which I just combined.
A little about the time frames. The first time period is from June 28, 2010 to December 9, 2010, starting with the Supreme Court case Bilski v. Kappos and ending with the first big Federal Circuit decision decided on the merits of § 101. In this time period, the Board introduced new rejections 22.4% of the time, higher than the overall average. This was likely a result of the recent Supreme Court case and the PTO publishing post-Bilski guidelines a month after Bilski. In addition to these factors, two Federal Circuit cases that did not receive that much attention mentioned § 101 subject matter patent-eligibility: Intervet v. Merial Ltd included a dissent with a 101 focus and Astrazeneca v. Apotex was mostly decided on other grounds, but did mention subject matter. Both cases used 101 to poke holes in the patent at issue and the effect may have been felt at the BPAI.
Research Corp v. Microsoft was a subject matter game changer in the sense that it broadened the Bilski analysis by saying that unless the invention was very obviously an abstract idea, the invention should be statutory subject matter. As noted on Ryan Alley’s blog, the case looked as if it would affect the BPAI’s decisions when followed by the BPAI. Prometheus v. Mayo was decided over a week later which was also favorable to patent-eligible subject matter, especially for diagnostic methods. This time period saw new rejections dip to 18.4%.
Next, AMP v. USPTO. The now-famous gene patenting case is familiar to most. While the take-home message from this Federal Circuit case is that the District Court was wrong in concludingi gene patents are not statutory subject matter, the method claims which were affirmed received far less attention. As noted on the Patents4Life blog post, the method claim analysis was very brief and the arguments not very well developed. Very shortly after AMP, the Federal Circuit decided Cybersource v. Retail Decisions. These two cases seemed to propel the BPAI forward with new rejections, cresting to 24.3%.
Ultramercial v. Hulu was another game changer. Like Research Corp, Ultramercial was another Judge Radar decision which seemed to broaden the 101 analysis from the earlier cases of AMP and Cybersource. This decision until the present has seen a dip in the number of new rejections at the BPAI to 16.7%.
In conclusion, it is interesting to see how the patent tides of change can be felt not only in the higher courts, but at the Board and the effect most likely trickles down to each examiner. I found that differences in rejections in the different time frames were interesting and expected, but not all the time frames were statistically significant at an acceptable confidence level.
All data was mined from the website http://www.bpai101.com/decisions. The word “affirmed” was searched in the outcome field for those decisions that were affirmed. The word “reversed” was searched for reversed decisions and the word “new” was searched for new rejections. Some cases performed multiple operations in one decisions, such as affirming one claim, reversing another or introducing a new rejection. In such cases of multiple operations, I included each operation separately. For instance, one decision could potentially yield a reversal, affirmation, and new rejection. Most decisions, however, had only one operation.
I stumbled upon an interesting article (Can Beauregard Claims Show You The Money?) detailing the rise of the Beauregard claim. From its humble and shaky beginnings in 1995, the Beauregard claim had become a popular and successful style of claim for patent practitioners claiming inventions that involve computer programs. Last year, the claim seemed to have reached its zenith in, Finjan v. Secure Computing, 626 F.3d 1197 (Fed. Cir. 2010) where the Federal Circuit held that not only was it okay for a computer-readable medium with instructions on it to be enforced, but that the code needn’t even be active.
We fast forward to today, where the Federal Circuit decided Cybersource v. Retail Decisions. CyberSource brought suit against Retail Decisions, Inc., alleging infringement of its patent. Retail Decisions thereafter initiated an ex parte reexamination of the patent. The suit then resumed and the district court granted summary judgment for Retail Decisions of non-statutory subject matter. The CAFC affirmed the decision coming to its decision in an unprecedented way–that computer readable media with computer instructions should be treated as a process claim. Here is the analysis on why:
[P]rogramming a general purpose computer to perform an algorithm “creates a new machine, because a general purpose computer in effect becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from program software.” In re Alappat, 33 F.3d 1526, 1545 (Fed. Cir. 1994). 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. Thus, despite its Beauregard claim format, under Abele, we treat claim 2 as a process claim for patent-eligibility purposes.
Anyone else confused by this analysis? Can’t all software be performed in the human mind if you break it down to the code?
I don’t agree with Judge Dyk’s analysis. This section of the opinion was extremely complicated, more complicated than it should have been. Claiming computer programs is not simple. In fact, the Beauregard claim is a very unique claim that doesn’t fit very nicely into a 1952 class of subject matter. Software claims resemble method claims in the sense that a series of methods are performed. But in this case, a computer is performing the methods, not a human. And in the case of a Beauregard claim, even though each task that a computer performs is a process, that’s not what is being claimed. Looking at Cybersource’s claim should put things into perspective.
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;
[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.
This claim should not be examined as a method claim because it more closely resembles an article of manufacture. The preamble is man-made–a computer readable medium containing computer instructions. It is also a manufacture. Therefore, the case should be closed. Judge Dyk should have consulted Occam’s Razor that the simplest answer is most likely the correct answer in deciding this case.
I think that the struggle that the Federal Circuit is having is how to reject a patent when the judges don’t think that the complexity or inventiveness exceeds the basic level. However, just because what the machine does is abstract does not mean that a 101 analysis is in order. An article of manufacture was nonetheless created and 101 is thus satisfied. The Patent Act contains many other provisions that can be relied on to kick out the claim. That’s what we have 102, 103 and 112 for.
Today the Beauregard claim has experienced a setback. But after being around for more than 16 years, it seems unlikely that it has met its demise so abruptly.
The 2010 post-Bilski guidelines seek to provide a comprehensive analysis of determining if an invention is statutory subject matter. However, part of the problem of using these guidelines is that some terms are supercharged with more-than-meets-the-eye meaning. “Practically applied” is one such term, which I found four times in the Guidelines. While the concept that you can only patent an application of an idea is basic to patent law, I wanted to see how this exact term came into existence and the subsequent history of the term for US law. I found that when used with regards to subject matter patent-eligibility, there has been some definite developments. Initially, the term was used in conjunction with all the judicial exceptions to subject matter (e.g., abstract ideas, laws of nature, natural phenomena, mental steps). However, before State Street Bank v. Signature Financial Group, the term was infrequently used. Now, the term is much more frequently used, but with a focus more on laws of nature and abstract ideas.
While the first use of “practical application” was technically in Le Roy v. Tatham, 55 U.S. 156 (1853) (“The elements of the power exist; the invention is not in discovering them, but in applying them to useful objects. . . . In the case before us, the court instructed the jury that the invention did not consist “in the novelty of the machinery, but in bringing a newly discovered principle into practical application, by which a useful article of manufacture is produced, and wrought pipe made as distinguished from cast pipe.””), the concept started long before. A number of cases set the precedent that you can only patent an applied invention. See Lowell v. Lewis, 15 F.Cas.1018 (Cir. Ct. Mass 1817) (“It has been often decided, that a patent cannot be legally obtained for a mere philosophical or abstract theory; it can only be for such a theory reduced to practice in a particular structure or combination of parts.”); Evans v. Eaton, 16 US 454 (U.S. 1818)(“[A] patent may be for a new and useful art; but it must be practical, it must be applicable and referrable to something by which it may be proved to be useful; a mere abstract principle cannot be appropriated by patent.”); Earle v. Sawyer, 8 F. Cas. 254 (Cir. Ct. Mass 1825) (“The thing to be patented is not a mere elementary principle, or intellectual discovery, but a principle put in practice, and applied to some art, machine, manufacture, or composition of matter.”); Whitney v. Emmett, 29 F Cas 1074 (Circuit Ct. E.D. Penn. 1831) (“Nor is a discovery of some new principle, theory, elementary truth, or an improvement upon it, abstracted from its application, a new invention. But when such discovery is applied to any practical purpose . . . .”). After Le Roy v. Tatham, other notable cases solidified the concept. O’Reilly v. Morse, 56 U.S. 62 (1954) (holding that the use of magnetism as a motive power, without regard to the particular process with which it was connected in the patent, could not be claimed, but that its use in that connection could); In re Henry, 11 F. Cas. 1150 (Cir. Ct. DC 1856) (“A well-known principle or truth of natural science, as well as a newly-discovered one, is patentable to the first applicant of it in the useful arts . . . .”); Rubber-Tip Pencil Co. v. Howard, 87 U.S. (20 Wall.) 498, 507 (1874) (“idea of itself is not patentable, but a new device by which it may be made practically useful is”); Mackay Radio & Telegraph Co. v. Radio Corp. of America, 306 U.S. 86, 94, 40 USPQ 199, 202 (1939) (“While a scientific truth, or the mathematical expression of it, is not patentable invention, a novel and useful structure created with the aid of knowledge of scientific truth may be.”).
More recently, Funk Bros. Seed Co. v. Kalo Inoculant Co., 333 U.S. 127 (1948) dealt with a claim involving the natural phenomenon exception:
He who discovers a hitherto unknown phenomenon of nature has no claim to a monopoly of it which the law recognizes. If there is to be invention from such a discovery, it must come from the application of the law of nature to a new and useful end.”
The practical application language was reiterated in Gottschalk v. Benson. Benson’s limitation of his claims to a computer machine environment overcame the rejection bottomed on a “mental steps” theory. Because operation of a formula-solving computer constituted the only practical use of the involved algorithm, however, the Supreme Court deemed unpatentable what it considered claims to an algorithm performed in a computer, i.e., claims to the algorithm itself.
It is conceded that one may not patent an idea. But in practical effect that would be the result if the formula for converting BCD numerals to pure binary numerals were patented in this case. The mathematical formula involved here has no substantial practical application except in connection with a digital computer, which means that if the judgment below is affirmed, the patent would wholly pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself. (409 U.S. at 71-72, 93 S.Ct. at 257, 175 USPQ at 676.)
The practical application term was used in reference to the abstract idea exception. In sum, the Court held that you can patent an invention that has an abstract idea in it (or here mathematical algorithm) only when it is practically applied.
The practical application standard was later further expounded upon in the CCPA case of In re De Castelet, 562 F.2d 1236, 1240-41 (C.C.P.A. 1977):
That language is interpreted by the solicitor and the board as foreclosing patentability of the appealed claims because, as de Castelet admitted at oral argument, the only practical application of the involved algorithm (equations) is in the claimed method. But the notion that the “ nutshell” language makes a method nonstatutory whenever it involves mathematical equations having their only practical use in the method is neither impelled by the rationale of Benson nor supported by precedent.
This court, in In re Benson, 441 F.2d 682 (1971), recognized that the only practical use of Benson’s method was in conjunction with a computer, but stated why that fact would not support a “mental steps” rejection:
Realistically, the process of claim 13 has no practical use other than the more effective operation and utilization of a machine known as a digital computer. It seems beyond question that the machines the computers are in the technological field, are a part of one of our best-known technologies, and are in the “useful arts” rather than the “liberal arts” as are all other types of “business machines,” regardless of the uses to which their users may put them. How can it be said that a process having no practical value other than enhancing the internal operation of those machines is not likewise in the technological or useful arts? (Emphasis in original. 441 F.2d at 688)
In re De Castelet, 562 F.2d 1236, 1241 (C.C.P.A. 1977). Here practical application is used with regards to abstract ideas, mathematical algorithms, and mental steps.
Then in Diamond v. Diehr, the practical application doctrine was used to uphold the machine the invention that contained an abstract idea. Diehr, 450 U.S. at 187, 209 USPQ at 8 (“application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection.”).
The term practical application continued to be sparsely used until State Street Bank v. Signature Financial Group, which significantly strengthened the doctrine.
In Diehr, the Court explained that certain types of mathematical subject matter, standing alone, represent nothing more than abstract ideas until reduced to some type of practical application, i.e., “a useful, concrete and tangible result.” Alappat, 33 F.3d at 1544, 31 USPQ2d at 1557.
Unpatentable mathematical algorithms are identifiable by showing they are merely abstract ideas constituting disembodied concepts or truths that are not “useful.” From a practical standpoint, this means that to be patentable an algorithm must be applied in a “useful” way. In Alappat, we held that data, transformed by a machine through a series of mathematical calculations to produce a smooth waveform display on a rasterizer monitor, constituted a practical application of an abstract idea (a mathematical algorithm, formula, or calculation), because it produced “a useful, concrete and tangible result”-the smooth waveform.
Similarly, in Arrhythmia Research Technology Inc. v. Corazonix Corp., 958 F.2d 1053, 22 USPQ2d 1033 (Fed.Cir.1992), we held that the transformation of electrocardiograph signals from a patient’s heartbeat by a machine through a series of mathematical calculations constituted a practical application of an abstract idea (a mathematical algorithm, formula, or calculation), because it corresponded to a useful, concrete or tangible thing-the condition of a patient’s heart.
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 practical application of a mathematical algorithm, formula, or calculation, because it produces “a useful, concrete and tangible result”
-a final share price momentarily fixed for recording and reporting purposes and even accepted and relied upon by regulatory authorities and in subsequent trades.
State St. Bank & Trust Co. v. Signature Fin. Group, Inc, 149 F.3d 1368, 1373 (Fed. Cir. 1998).
State Street set the practical application doctrine in motion at the BPAI. Prior to 1998, there were no references to practical application regarding subject matter. Since then, there has been 98 decisions. The PTO’s 2005 subject matter guidelines were laced with the term practical application. It is likely that these guidelines steered the Board into further defining the practical application standard. Some recent BPAI decisions are notable in developing the practical application standard.
In In re Gutta, 93 U.S.P.Q.2d 1025, 2009 WL 2563524 (B.P.A.I. 2009), the Board applied the “real world use” test and the “substantially all practical applications” test to the claims at issue. With regard to the real world use test, claim 14 failed to recite any tangible practical application in which the mathematical algorithm is applied that results in a real-world use.
14. A system for identifying one or more mean items for a plurality of items, J, each of the items having at least one symbolic attribute having a symbolic value, the system comprising:
a memory for storing computer readable code; and
a processor operatively coupled to the memory, the processor configured to:
compute a variance of the symbolic values of the plurality of items relative to each of the items; and
select the at least one mean item having a symbolic value that minimizes the variance.
In re Gutta, at *1.
Most recently in Ex Parte Ruby, in addition to practical application, the standard included “real-world-use”:
When we consider these claims as a whole, we find nothing in the language of claims 1 and 17 to support Appellants’ presumption that because “the result is tangible plus the fact that the result is useful (e.g., in the context of video compression) and concrete (e.g., repeatable),” that this suffices “to establish that the claims relate to a practical application of the formula and not to the formula itself.” (Reply Br. 13, ¶2).
To the contrary, we find that merely storing the result of a mathematical operation in a register is insufficient to establish a tangible practical application having real-world use. See Gutta, 93 USPQ2d at 1026-27. Because the information contained in Appellants’ “result register” is not positively recited as being used to perform any function, we find that tangibly transforming the state of Appellants’ “result register” (claims 1 and 17) by storing the result of the combined compare and tally mathematical operations does not perform any tangible practical application that results in a real-world use. Moreover, while Appellants strenuously argue that the result is useful, e.g., in the context of video compression, we find representative claims 1 and 17 are each silent regarding any video compression. (Reply Br. 13, ¶2).
Ex Parte Lee, APL 2009-003697, 2010 WL 363234 (B.P.A.I. Jan. 29, 2010).
In Ex Parte Talbot, APL 2008-004894, 2010 WL 2157832 (B.P.A.I. May 27, 2010), appellants argued that the claims need not be limited to a particular application, only that a practical application be tied to the claims by way of the specification. Appellants stated the specification noted the decision network is tied to security applications and retail sales tracking. (App. Br. 6) Appellants then asserted the claims recite memory or means for storing, a processing unit or means for processing, or a computer readable medium, stating these limitations clearly constitute patentable subject matter. The Board rejected these arguments and used the Gutta rule that a “claim must be limited to a tangible practical application, in which the mathematical algorithm is applied, that results in a real-world use and be limited so as to not encompass substantially all practical applications of the mathematical algorithm.” Id. at *3.
In Ex Parte Yazaki Corp., APL 2009-007532, 2010 WL 3072975 (B.P.A.I. Aug. 4, 2010), the applicant argued that the path plan had a practical application in its use for producing a wire harness. The Board rejected that argument by stating that “even if the step of “outputting the path plan” were interpreted as requiring the production of the plan on a tangible medium, that production constitutes nothing more than mere insignificant post solution activity. Such activity does not transform an unpatentable principle into a patentable process.” Id. at *3.
Most recently, in Ex Parte Sun, 2009-008503, 2011 WL 1211177 (B.P.A.I. Mar. 30, 2011), the applicant argued that claim 1 was directed to practical applications such as assisting a doctor’s investigation to a patient’s situation or a federal agent evaluating a possible terrorist attack. App. Br. 31.1 The Board rejected this by stating that the claims were not directed to anything more than an abstract idea. Id. at *5.
The most recent guidelines from the USPTO require that the invention either subscribe to the machine-or-transformation test, which requires a particular machine or transformation of a particular state or thing. To clarify what this means, these guidelines refer to the 2009 guidelines, where reference to practical application is used. The practical application focus of the 2009 guidelines is directed to abstract ideas that do not satisfy the machine or transformation test. “This ensures that the machine or transformation imposes real world limits on the claimed method by limiting the claim scope to a particular practical application.” The 2010 guidelines use practical application in reference to both abstract ideas and laws of nature:
Factors that weigh in favor of patent-eligibility satisfy the criteria of the machine-or-transformation test or provide evidence that the abstract idea has been practically applied. 75 F.R. 143, 43925 (July 27, 2010).
Law of nature
Factors weighing toward eligibility:
The claim is directed toward applying a law of nature.
Law of nature is practically applied.
Practical application is a term easy to say, harder to apply to an invention. This seems especially true as innovation these days is not always easily distinguishable from an abstract idea. While initially used as a standard fairly infrequently before State Street in the case law, the test has shown a recent surge in popularity because of the focus that the USPTO subject matter guidelines have placed on it. Most recently, this focus has been on the two subject matter exclusions abstract ideas and laws of nature.