On October 30, 2008, the U.S. Court of Appeals for the Federal Circuit issued its highly anticipated en banc decision in In re Bilski, ruling that the determination whether a claimed method constitutes patent-eligible subject matter requires an analysis under a “machine-or-transformation test.” In doing so, the court discarded as “insufficient” their previous standard for determining patent-eligibility that hinged on whether a claimed method produces “a useful, concrete and tangible result.” In reaching its ruling, the Bilski court reexamined the U.S. Supreme Court’s case law as well as its own precedent concerning subject matter eligibility under the statute, i.e., what constitutes patentable subject matter under 35 U.S.C. § 101. In establishing the machine-or-transformation test, the majority in the 9–3 decision attempted to base its conclusions in the Supreme Court’s precedents. Specifically, the Bilski court held that the machine-or-transformation test requires a two-branched inquiry in which an Applicant may show that a process claim satisfies § 101 either by showing that the claimed process (i) is tied to particular machine or (ii) transforms an article. By applying the machine-ortransformation test, the Bilski court rejected as unpatentable subject matter relating to a method for hedging risks in commodities trading.
While some may hail the Bilski decision as having a significant impact on so-called “business method patents” or “software patents,” it is important to note that the court rejected any tests based on such broadly worded categorical exclusions. Rather, the court specifically stated that the test to use is whether the claimed method or process satisfies the machine-ortransformation test. Thus, the most successful patent applicants operating in the post-Bilski world will be those describing and claiming their inventive processes in a manner that best meets the machine-or-transformation test.
The Patent Application at Issue
The patent application at issue was directed to a method for managing the consumption risk cost of a commodity sold by a commodity provider at a fixed price. Claim 1 reads:
A method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price comprising the steps of:
(a) initiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumers purchase said commodity at a fixed rate based upon historical averages, said fixed rate corresponding to a risk position of said consumer;
(b) identifying market participants for said commodity having a counter-risk position to said consumers; and
(c) initiating a series of transactions between said commodity provider and said market participants at a second fixed rate such that said series of market participant transactions.
During the examination phase, the examiner rejected all of the claims as not directed to patenteligible subject matter under § 101. The Board of Patent Appeals and Interference sustained the examiner’s rejections. The Applicant then appealed to the U.S. Court of Appeals for the Federal Circuit.
The Supreme Court’s Establishment of the Machine-Or- Transformation Test
In determining whether the claimed risk management process constituted eligible subject matter, the court began by noting that the Supreme Court has previously held that one cannot patent “fundamental principles,” i.e., laws of nature, natural phenomena or abstract ideas. The key consideration enunciated by the Court is that one cannot wholly preempt use of such fundamental principles through a patent claim, whereas an application of a fundamental principle may be permitted. Relying on the Supreme Court’s 1972 decision in Gottschalk v. Benson, the Bilski court stated that 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 preempt the principle itself [is to determine] if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.” Interestingly, the Bilski court, in establishing that this machine-or-transformation test was the exclusive test for patentability, relied strongly on the Supreme Court’s phrasing of this principle in Benson: “Transformation and reduction of an article ‘to a different state or thing’ is the clue to the patentability of a process claim that does not include particular machines.” (Emphasis added.) Noting the equivocal support in Benson for the assertion that the machine-or-transformation test is the exclusive test, the Bilski court noted that the Court’s subsequent Diamond v. Diehr opinion was not equivocal in this regard, and therefore inferred that the Court intended to establish the machine-ortransformation test as the exclusive test.
Importantly, in establishing the exclusivity of the machine-ortransformation test, the court very clearly established that previous tests were no longer viable. Beginning with the so-called Freeman-Walter-Abele test (i.e., determine whether the claim recites an “algorithm” within the meaning of Benson, and then determine whether that algorithm is “applied in any manner to physical elements or process steps”), the court noted that it ran afoul of the instruction against dissecting claims when determining subject matter eligibility, and was therefore inadequate. Likewise, the court instructed against reliance on the “useful, concrete and tangible result” test established in its famous State Street opinion. Further still, in relatively summary fashion, the court dismissed any notion that the so-called “technological arts” test was viable given the ambiguity of what is sufficiently “technological,” and also rejected establishment of any categorical exclusions (e.g., against “business methods” or “software”). Finally, the court used this opportunity to clarify its holding in its recent In re Comiskey decision, in which claims directed to a process for mandatory arbitration of disputes were held unpatentable under § 101. The Comiskey court concluded that the claims at issue were drawn to a “mental process” of arbitrating disputes, and that claims to such an application of only human intelligence to the solution of practical problems is no more than a claim to a fundamental principle. The court further explained that its Comiskey decision did not rely on any requirement of “physical steps” in a claim. Indeed, the court stated, “even a claim that recites ‘physical steps’ but neither recites a particular machine or apparatus, nor transforms any article into a different state or thing, is not drawn to patent-eligible subject matter.” On the other hand, the court stated, “a claim that purportedly lacks any ‘physical steps’ but is still tied to a machine or achieves an eligible transformation passes muster under § 101.”
The Federal Circuit’s Application of the Machineor- Transformation Test
Because the applicants in the instant case admitted that their claims (e.g., claim 1 above) did not limit any process step to any specific machine or apparatus, the court did not consider issues specific to the machine implementation part of the machine-or-transformation test. Instead, the court left elaboration on the precise contours of machine implementation, as well as the answers to particular questions such as whether or when recitation of a computer suffices to tie a process claim to a particular machine to future cases. The court then considered the transformation part of the test.
The court made clear that a claimed process is patent-eligible if it transforms an article into a different state or thing. This transformation, the court states, must be central to the purpose of the claimed process. Further, the court emphasized that the main aspect of the transformation test that requires clarification is what sorts of things constitute “articles” such that their transformation is sufficient to impart patenteligibility under § 101. While the court noted that it was virtually self-evident that a process for a chemical or physical transformation of physical objects or substances is patent-eligible subject matter, the court observed that “[t]he raw materials of many information-age processes, however, are electronic signals and electronically-manipulated data.” Thus, the court adopted the “measured approach” from its prior precedents in determining whether transformation of such data would suffice to meet the transformation branch of the test.
Meaning of “Transformation”
In determining what it means to sufficiently “transform” an article as to establish patent-eligible subject matter, the Bilski court looked to its own (and its predecessor court’s) precedents. In particular, the court found guidance in In re Abele, where the court’s predecessor held unpatentable a broad independent claim reciting a process of graphically displaying variances of data from average values. This broad independent claim was held unpatentable, the court noted, because the claim did not specify any particular type or nature of data, nor did it specify how or from where the data was obtained or what the data represented. In contrast, the court further noted, a dependent claim was deemed to be drawn to patent-eligible subject matter where it specified that “said data is X-ray attenuation data produced in a two dimensional field by a computed tomography scanner.” The rationale elucidated by the court was that this data clearly represented physical and tangible objects, namely the structure of bones, organs, and other body tissues. Thus, the transformation of that raw data into a particular visual depiction of a physical object on a display was sufficient to render that more narrowly claimed process patent-eligible.
Further, the Federal Circuit noted for clarity that because the electronic transformation of the data itself into a visual depiction was sufficient, the claim in Abele was not required to involve any transformation of the underlying physical object that the data represented. This result, the court asserts, satisfies the basic principle underlying the Supreme Court’s articulation for the machine-or-transformation test, namely the prevention of preemption of fundamental principles. As demonstrated by Abele, so long as the claimed process is limited to a practical application of a fundamental principle to transform specific data, and the claim is limited to a visual depiction that represents specific physical objects or substances, there is no danger that the scope of the claim would wholly preempt all uses of the principle.
Refining this analysis further, the court noted precedents that “adding a data-gathering step to an algorithm is insufficient to convert that algorithm into a patent-eligible process.” Thus, a claim that is merely an algorithm combined with a data-gathering step will not meet the transformation requirement because simply stating that data inputs are gathered—without specifying how—is a meaningless limit on a claim, since every algorithm inherently requires the gathering of data inputs.
Application of the Machine-Or-Transformation Test In Bilski
In holding that the Applicants’ process as claimed failed to transform any article to a different state or thing, the Bilski court 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. The court stated that the Applicants’ process at most incorporated only ineligible transformations in that the claimed process transformed the relationships between the commodity provider, the consumers and market participants. The court found that the claim only refers to “transactions” involving the exchange of legal rights at a “fixed rate corresponding to a risk position.” Thus, the court held that the claims did not involve the transformation of any physical object or substance, or an electronic signal representative of any physical object or substance. Given the applicants’ admitted failure to meet the machine implementation part of the test as well their failure to meet the transformation part of the test, the court held that the claim entirely fails the machine-ortransformation test and is not drawn to patent-eligible subject matter.
Therefore, the Federal Circuit held that, while it agreed with the Applicants that the only limit to patent-eligibility imposed by Congress is that the invention fall within one of the four categories enumerated in § 101, the Federal Circuit stated that it must apply the Supreme Court’s test to determine whether a claim to a process is drawn to a statutory “process” within the meaning of § 101. By applying the machineor- transformation test, the Bilski court held that the Applicants’ claim fails that test. Accordingly, the Applicants’ claim is not drawn to a “process” under § 101 as that term has been interpreted.
While the Bilski court was very explicit in its determination that the machine-or-transformation test is the exclusive test to be used when determining patent eligibility of process or method claims, it also gives rise to a number of issues that will require further explanation before the full impact of Bilski can be determined. Perhaps most obviously, because the applicants in Bilski admitted that their claims failed to recite any specific machine, the court expressly declined to elaborate on “issues specific to the machine implementation part of the test.” Instead, such questions are left to future cases, particularly the question “whether or when recitation of a computer suffices to tie a process claim to a particular machine.” On the sufficiency of a computer as the necessary machine, it is worth noting the court’s observation that the Benson court rejected the use of a computer as a sufficient “machine” because the use of a computer did not resolve their preemption concerns. That is, because the claimed method could only be used on a general purpose computer, the claim would still amount to a complete preemption of the underlying fundamental principle. This suggests the possibility that a process claim reciting a general purpose computer as the specific machine to which the process is tied could satisfy the specific machine branch of the machineor- transformation test to the extent that the process could be carried out by other machines, e.g., application specific circuits, etc.
In this same vein, the court stated that, in order to meet the test, the involvement of the specific machine or transformation must impart “meaningful limits” on the claim’s scope. This begs the question: What kinds of ties between the claimed process and the recited machine and/or their degree of connection are required to establish such “meaningful limits” on a claim’s scope? For example, would a process claim reciting function-specific “components” used to carry out the process impart meaningful limits on the claim? Certainly, such a claim would seem to impart more specific (and therefore more meaningful) limitations than a bare recitation of a computer programmed to carry out the process, thereby paying greater heed to the preemption concerns underpinning the machine-or-transformation test.
Regarding the transformation alternative of the test, the court established that transformation of data that is clearly representative of “physical and tangible objects,” e.g., bone, organs and body tissues, would suffice to render a process patent-eligible. How far could an applicant push the meaning of a “physical and tangible” object? Data concerning Christopher P. Moreno Uchendu O. Anyaso the status or performance of a machine (e.g., a car engine, a server computer, etc.) would seem to be sufficiently attached to a physical and tangible object. Clearly, the subject matter of the claims at issue in Bilski, i.e., data representing a legal or contractual obligation between parties, is not tied to a sufficiently physical or tangible object. If a person is a physical or tangible object, would transformation of a person’s biometric data (e.g., height, weight, fingerprints, etc.) be sufficient? If so, how is the amount of money that person owes to a creditor a less meaningful “state variable” of that person than his/her biometric data if one is developing an “information-age” process, for example, an algorithm for determining if someone is a good credit risk?
Further still, the court explained that a claim preempting a fundamental principle within a specific “field” of endeavor was no more eligible for patenting than a claim precluding all uses of the fundamental principle. Instead, the court noted, “a claim that is tied to a particular machine or brings about a particular transformation of a particular article does not preempt all uses of a fundamental principle in any field but rather is limited to a particular use, a specific application.” However, at some sufficiently high level of abstraction, a specific application may be perceived as impermissible as an entire field. For example, if, instead of “X-ray attenuation data produced . . . by a computed tomography scanner” as in Abele, the claim recited “X-ray attenuation data produced by an X-ray machine” or “attenuation data produced by any diagnostic imaging device,” would the inclusion of all possible “diagnostic imaging devices” constitute an impermissible field limitation?
It is anticipated that these and other issues will be further developed by the courts in the coming months and years. Several practice tips in view of the Bilski case follow.
Practice Tips in View of Bilski
- In order to pass the scrutiny of patent-eligibility under § 101, a claim to a process should now recite either a specific machine to which the process is tied, or specifically recite transformation of a physical and tangible object (or signals/data representative thereof). In the case of a patent application directed to, for example, electronically manipulated data, one would do well to specify (a) the type or nature of the data, (b) how or where the data was obtained and/ or (c) what data is represented. Compare this with the allowed claim in Abele cited with approval by the Bilski court, i.e., “said data is X-ray attenuation data [setting forth what the data represents] produced in a two dimensional field [setting forth the type or nature of the data] by a computed tomography scanner [setting forth where the data is obtained].”
- If a method or process is computer-implemented, bare recitation of that fact in the claim may not be sufficient to meet the specific machine branch of the machine-or-transformation test. To the extent possible, it may be better to recite specific structures implemented within a computer for implementing the claimed process, e.g., “performing, by a first component, X; performing, by a second component in communication with the first component, Y; etc.” Alternatively, if implementations other than computer-based implementations are possible, e.g., pen and paper or other machines not strictly interpreted as computers, then recitation of a “computerimplemented” method might be sufficiently restrictive as to avoid the fatal preemption concern.
- Because questions remain as to the precise scope of what constitutes a sufficient “machine” or when data is sufficiently representative of a “physical and tangible object,” it is advisable, if possible, to include multiple method claims touching upon both branches of the test. That is, one set of method claims might be directed to a specific machinebased implementation, whereas another set of method claims might be directed to tying any claimed transformation into specific physical and tangible objects or data representative thereof.
- If one assumes that the Supreme Court would not grant certiorari on an appeal from the Bilski decision (given the Federal Circuit’s grounding of its opinion in the Court’s precedents) or that the applicants in Bilski are not willing to push the issue further, then patentees should start considering any issued, pre-Bilski claims that may be questionable under the machine-or-transformation test. For any claims where patenteligibility under the machine-ortransformation test is questionable, and where support for meeting the test’s requirements exists, reissue proceedings may present a potential remedy. 35 U.S.C. § 251 states that “[w]henever any patent is, through error without any deceptive intention, deemed wholly or partly inoperative or invalid . . . by reason of the patentee claiming more or less than he had a right to claim in the patent,” then the patentee may seek to correct the error through a reissue of the patent. Noting that § 251 is remedial in nature and should therefore be construed liberally, the Federal Circuit in its 2006 Medrad v. Tyco decision found that § 251 should “be read to encompass any error that causes a patentee to claim more or less than he had a right to claim” (emphasis added), including, one may presume, errors in adhering to the requirements of 35 U.S.C. § 101.