Maybe. Ex parte Bilski (Fed. Cir. 2008 – en banc) arguably modifies the test that the U.S. Patent and Trademark Office (“PTO”) and the district courts must use when determining whether a particular claim is patent-eligible. Thus, some patents that were previously granted by the PTO may now be held invalid under a new “machine-or-transformation” test. This test will be applied to any patent that is challenged in court, submitted to re-examination, or is currently in prosecution at the PTO.
While this decision is likely relevant to all types of U.S. patents, it will affect primarily patents relating to business methods and computer software. Before this opinion was announced, there were various tests employed by the PTO and district courts for determining whether a particular process was eligible for patent protection (e.g., met the statutory requirements of 35 U.S.C. § 101). The use of varying tests made the determination of whether a particular claim was statutorily valid quite difficult to predict. After Ex parte Bilski, much of this uncertainty has been reduced as a result of the new requirement to use one particular test and the court’s explicit overruling of all the other tests. But, as is the case with most new rules, there are still many unanswered questions with regard to how the test should be applied in certain factual situations.
Background of the Ex parte Bilski Decision
The Ex parte Bilski decision came as a result of an appeal from the United States Board of Patents Appeals & Interferences, where the appellant argued that the claims of the patent application met the statutory requirements of 35 U.S.C. § 101, despite the Board’s contrary decision. The claim in dispute was a business method for hedging financial securities. Claim 1 of the 08/833,892 application 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:
- 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;
- identifying market participants for said commodity having a counter-risk position to said consumers; and
- 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 balances the risk position of said series of consumer transactions.
Considering the claim en banc, the Federal Circuit held that the claim did not satisfy the machine-or-transformation test, and thus was not patent-eligible.
The Machine-or-Transformation Test
Under 35 U.S.C. § 101, inventions relating to processes, machines, manufactures, or compositions of matter may be patented. In addition, the invention must not fall within any of the judicially created exceptions, laws of nature, natural phenomena, or abstract ideas (collectively the “fundamental principles”). Diamond v. Diehr, 450 U.S. 175, 185 (1981). In many cases, drawing the line between what is patentable and what is a fundamental principle becomes difficult, but, as the Supreme Court recognized in Benson, application of the machine-or-transformation test is the clue to patentability. Majority Op. at 13 (interpreting Gottschalk v. Benson, 409 U.S. 63 (1972)).
The machine-or-transformation test, as articulated by the Federal Circuit in Ex parte Bilski, requires determining “whether the process being claimed (1) is tied to a particular machine or apparatus, or (2) transforms a particular article into a different state or thing.” Majority Op. at 10. In addition, an inquiry must be made into whether the claimed process attempts to preempt an entire fundamental principle (not patentable) or whether it seeks an application of a law of nature or mathematical formula to a known structure or process (likely patentable). Majority Op. at 8. Moreover, “mere field-of-use limitations are generally insufficient to render an otherwise ineligible process claim patent-eligible.”1 Majority Op. at 15. Also, “insignificant post solution activity will not transform an unpatentable principle into a patentable process.”2 When these principles are combined, the task before a district court or the PTO when determining the patentability of a particular process after Ex parte Bilski is to determine whether the “claim recites a fundamental principle, and if so, whether it would [preempt] substantially all uses of a fundamental principle.” Majority Op. at 10. Proper inquiry under § 101 does not consider whether a process claim recites sufficient physical steps, but rather whether the claim meets the machine-or-transformation test.3
Computer and Business Method/Process Patents After Ex parte Bilski
Initially, incorporating a computer or processor into a process claim would seem to satisfy the machine-or-transformation test, since reciting a computer appears to incorporate the machine prong of the test. On the contrary, the Federal Circuit specifically stated that this is an unanswered question. Majority Op. at 24. Moreover, if the claimed process can only be practiced on a computer, limiting the claim to require the use of a computer does not modify the claim’s patent-eligibility. Majority Op. at 12 (considering the Benson decision). Computer process claims, like all other process claims, must be drafted to satisfy the machine-or transformation test and are not afforded any special treatment. Majority Op. at 21, fn 23.
Business methods have long been patent-eligible subject matter, and Ex parte Bilski does not alter this trend. When considering the question, the Federal Circuit stated that it is rejecting calls for categorical exclusion beyond those relating to fundamental principles already identified by the Supreme Court, and is reaffirming its holding in State St. Bank & Trust Co. v Signature Fin. Group, 149 F.3d 1368, 1375-76 (Fed. Cir. 1998) (holding that business method patents are patent eligible). That said, the requirement that all business processes meet the machine-or-transformation test will restrict some of the breadth in which these processes can be claimed.
Applying the Machine-or-Transformation Test
Limiting its holding to the facts before it, the Federal Circuit opted to provide very little guidance on how to determine whether a process claim satisfies the “tied to a particular machine or apparatus” prong.4 Expounding upon the transformation prong, the Court held that a claimed process is patent-eligible if it transforms an article into a different state or thing, and the transformation is central to the purpose of the claimed process. Despite this articulation, it is unclear what types of things constitute “articles.” Certainly chemical or physical transformation of physical objects or substances are patent-eligible subject matter, but do the raw materials of the information-age (i.e., electrons, signals, and electronically-manipulated data) constitute “articles” under this test? Majority Op. at 25. And what of the manipulation of legal obligations, organization relationships, and business risks? In answering its own question, the Court held that “purported transformation or manipulation 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.” Majority Op. at 28.
One technique suggested by the Federal Circuit is to utilize dependent claims which tie in a stronger relationship with a machine or an apparatus, or more clearly require the transformation of a more physical thing or substance. For example, the Federal Circuit revisited the CCPA decision of In re Abele, 684 F.2d 902 (C.C.P.A. 1982), which held a “process claim involving an undefined ‘complex system’ and indeterminate ‘factors’ drawn from unspecified ‘testing’ [was] not patent-eligible,” while a claim dependent on this process claim which involved “X-ray attenuation data produced in a two dimensional field by a computer tomography scanner” to be patent-eligible. Majority Op. at 25. Thus, “limiting a claimed process to a practical application of a fundamental principle to transform specific data,” and limiting the claim “to a visual depiction that represents a specific physical object or substance,” removes the “danger that the scope of the claim would wholly [preempt] all uses of the principle.” Id. Nonetheless, patent practitioners undoubtedly will be requested by their clients to draft claims that attempt to preempt as much of a fundamental principle as possible, and when faced with the task of writing such claims, practitioners will be wise to draft additional dependent claims that more readily overcome the patent-eligibility hurdle in the event their borderline claims are ultimately held to be invalid.
The Federal Circuit acknowledged that future developments in technology and the sciences may present challenges to the machine-or-transformation test in the future. The court also was cognizant that the Supreme Court could decide to alter or set aside this test to accommodate emerging technologies. The court similarly acknowledged the possibility that it could itself refine or augment the test or alter the method of its application in the future. Majority Op. at 14-15. Whether the Supreme Court will affirm the Federal Circuit’s attempt to organize an unsettled area of the law remains to be seen. Nonetheless, for the moment, having a definitive test to apply will minimize much of the uncertainty in drafting broad process claims.