On September 20, 2007, the Court of Appeals for the Federal Circuit (CAFC) rendered two separate decisions concerning what constitutes patentable statutory subject matter under 35 U.S.C. § 101. See, In re Comisky (Slip Op. 2006-1286) and In re Nuijten (Slip Op. 2006-1371). The Court’s decision in Comisky came about in an unusual manner. In the appeal as originally presented to the Federal Circuit, the United States Patent and Trademark Office (USPTO) had rejected the claims as being unpatentable under 35 U.S.C. § 103. The court sua sponte requested additional briefing on the patentability of the claimed subject matter under 35 U.S.C. § 101. This approach appears to have been taken so that the court could use Comiskey to clarify its position in State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998) as to the requirements for patentability of a business method. Nuitjen, on the other hand, presented a case of first impression. The issue in this case was whether the invention fell under one of the four categories of patentable subject matter elucidated in §101.

In Nuijten, the invention was directed to a signal which is used as a watermark on sound and video recordings to prevent unauthorized copying. Watermarks previously used in the industry introduced some level of sound distortion. Nuijten’s invention was an improved process of modifying the watermark in a manner which minimized the distortion of the original sound wave and; thus, maintained the fidelity of the sound.

The USPTO had granted Nuitjen’s claims directed to a process of embedding supplemental data in the signal, an encoder means for recording the signal and a storage medium holding the signal, but rejected the claims directed to the signal itself.

Claim 14, the only independent claim on appeal, read as follows:

A signal with embedded supplemental data, the signal being encoded in accordance with a given encoding process and selected samples of the signal representing the supplemental data, and at least one of the samples preceding the selected samples is different from the sample corresponding to the given encoding process.

The question before the court was “What is the claimed signal?” Is it simply numerical information without any physical embodiment, as argued by the USPTO, or something having sufficient physical substance to be recognized by a recipient as argued by the appellant? In construing the claim, the majority partially agreed with the appellant that a signal is the conveyance of information, but found in order to do so it required a physical medium such as wires, air or a vacuum. Here, the majority determined that the claims included “physical but transitory forms of signal transmission such as radio broadcasts, electrical signals through a wire, and light pulses through a fiber optic cable.” After careful analysis of the invention under the four different categories of patentable subject matter set forth in 35 U.S.C. § 1011 (process, machine, manufacture or composition of matter), the majority found that the claimed signal did not fall within any of them.

The most troublesome category of statutory subject matter for the majority (also the point of contention with the dissent) was whether the signal constituted a “manufacture.” The majority acknowledged that the signal was manmade; however, this was not found to be sufficient. According to the majority, the signal did not conform with the Supreme Court’s definition of “manufacture” as a verb meaning “the production of articles for use from raw or prepared material by giving to these materials new forms, qualities, properties, or combinations, whether by hand labor or by machinery.” Diamond v. Chakrabarty, 447 US 303, 308 (1980). Nor did they find that it corresponded with the definition of “manufacture” in its noun form, i.e., as articles produced by means of manufacture. Bayer AG v. Housey Pharms., Inc., 340 F.3d 1367, 1373, (Fed. Cir. 2003).

Accordingly, the majority held that because the claimed signal is fleeting by nature and not permanent, it was not directed to statutory subject matter.”

In a strongly worded dissent, Judge Linn argued that the panel must reconcile cutting edge technology with a statute whose language dates back to approximately 1790. In the dissent’s view, this case was being decided against a backdrop of ongoing controversy regarding the wisdom of software patenting and that the court should be mindful of its duty to interpret the law as Congress wrote it rather than attempt to “preempt congressional action by judicially decreeing what accords with ‘common sense and the public weal.’” Slip op. dissent at 1. The dissent further opined that the signal was both new and useful and not an abstract idea. Therefore, he agreed with the majority that the Supreme Court’s decision in Diamond v. Chakrabarty , 447 U.S. 303, 309, is controlling. The dissent concluded that the claimed signal qualifies as patentable subject matter because it (1) is a “manufacture” produced from raw materials and given a new form; (2) is “made by man”; and (3) does not encompass any of the unpatentable exceptions enumerated by the Supreme Court, i.e., “laws of nature, physical phenomena and abstract ideas.”

It is highly likely that Nuitjen will request an en banc hearing at the Federal Circuit. If denied, this case is perfectly postured to be granted certiorari by the Supreme Court. Recently, the Supreme Court has not been looking kindly on some of the bright line rules the Federal Circuit has been imposing. This was the case with KSR International Co. v. Teleflex, Inc., 127 S. Ct. 1727 (2007), where the Federal Circuit’s reliance on a rigid “teaching, motivation, suggestion” test to determine obviousness was curtailed by the Court. The Federal Circuit’s bright line rule – that a licensee could not establish an Article III case or controversy concerning a patent’s validity and, thus, could not get a declaratory judgment as long as they were paying licensing fees – was reversed in MedImmune Inc. v. Genentech, Inc. 127 S. Ct. 764 (2007), (holding that a licensee could be in eminent threat of litigation and need not terminate its licensing agreement before seeking a declaratory judgment that the patent was invalid). Finally, in eBay Inc. v. MercExchange L.L.C. 126 S. Ct. 1837 (2007), the Federal Circuit’s long-standing rule that permanent injunctions will be issued in patent infringement cases absent exceptional circumstances was reversed. The Supreme Court held that permanent injunctions “may” be acceptable provided the plaintiff [patentee] satisfies a four factor test.

It will be interesting to watch how the Nuitjen case progresses. Will the Supreme Court object to the Federal Circuit’s application of a rigid rule that transitory embodiments are not patentable regardless of their informational content and ability to be perceived? Will the Court agree that transitory signals are not patentable subject matter per se?