Patentable subject matter and preemption

Ever since the U.S. Supreme Court spoke on patentable subject matter in Bilski v. Kappos, 130 S. Ct. 3218 (2010), Federal Circuit panels have taken a variety of approaches to the subject.  The latest approach is seen in Dealertrack, Inc. v. Huber, No. 09-1566 (Fed. Cir. Jan. 20, 2012).  It brings back the notion of preemption as a test for patentable subject matter (also known as patent eligibility).  The notion of preemption was briefly touched on in the original In re Bilski opinion, 545 F.3d 943 (Fed. Cir. 2008) (en banc).

In Dealertrack v. Huber, the district court had invalidated in July 2009 the following claim:  “1. A computer aided method of managing a credit application, the method comprising the steps of: [A] receiving credit application data from a remote application entry and display device; [B] selectively forwarding the credit application data to remote funding source terminal devices; [C] forwarding funding decision data from at least one of the remote funding source terminal devices to the remote application entry and display device; [D] wherein the selectively forwarding the credit application data step further comprises: [D1] sending at least a portion of a credit application to more than one of said remote funding sources substantially at the same time; [D2] sending at least a portion of a credit application to more than one of said remote funding sources sequentially until a f[u]nding source returns a positive funding decision; [D3] sending at least a portion of a credit application to a first one of said remote funding sources, and then, after a predetermined time, sending to at least one other remote funding source, until one of the f[u]nding sources returns a positive funding decision or until all funding sources have been exhausted; or, [D4] sending the credit application from a first remote funding source to a second remote f[u]nding source if the first funding source declines to approve the credit application.”  The district court applied the law current at the time, the machine-or-transformation test.  It did so despite the express recitation of a “computer” in the preamble, a “remote application entry and display device” in step [A], and “remote funding source terminal devices” in step [B] – none of these were sufficiently “specific machines” to pass the machine-or-transformation test.

The Dealertrack v. Huber panel majority (Judges Linn and Dyk) could, I suppose, have applied the machine-or-transformation test.  After all, the Supreme Court in Bilski v. Kappos said that it was a valid test for patentable subject matter, just not the only test.

However, possibly in light of other recent Federal Circuit cases (see below), the Dealertrack v. Huber panel majority decided to take a different approach.  The new test which they set out is:  “any invention within the broad statutory categories of [35 U.S.C.] § 101 that is made by man, not directed to a law of nature or physical phenomenon, and not so manifestly abstract as to preempt a fundamental concept or idea is patent eligible.”
The claim at issue failed this test.  The following is the panel majority’s reasoning to reach this conclusion:

“Dealertrack’s claimed process in its simplest form includes three steps: receiving data from one source (step A), selectively forwarding the data (step B, performed according to step D), and forwarding reply data to the first source (step C). The claim explains the basic concept of processing information through a clearinghouse, just as claim 1 in Bilski [v. Kappos] explained the basic concept of hedging.  The steps that constitute the method here do not impose meaningful limits on the claim’s scope. Neither Dealertrack nor any other entity is entitled to wholly preempt the clearinghouse concept.”

The panel majority expressed concern that claims “preemptive of a fundamental concept or idea . . . would foreclose innovation in this area.”

The patentee pointed to the specific recitations of structure in the claim, but without success:  “Simply adding a ‘computer aided’ limitation to a claim covering an abstract concept, without more, is insufficient to render the claim patent eligible.  . . . The claims here do not require a specific application, nor are they tied to a particular machine. The computer here does no more than the computer in Benson to limit the scope of the claim.”
Dealertrack v. Huber also addresses some claim construction issues for a related patent. Senior Circuit Judge Plager dissented as to patentable subject matter.  He proposed that courts should only address patentable subject matter, characterized by him as a “jurisprudential morass,” after all other defenses.

There is some value in briefly recapitulating how we got to where we are now, starting with In re Bilski.

1) In re Bilski set out the machine-or-transformation test as the only valid approach to patentable subject matter.  “A claimed process is . . . patent-eligible under § 101 if [and only if]: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.”  Nine judges, including all three members of the Dealertrack v. Huber panel, signed on.  The claims at issue, business method claims, were found to lack patentable subject matter.

2) Bilski v. Kappos said that the machine-or-transformation test was a good test, but not the only test.  It affirmed In re Bilski.

3) In Research Corp. Techs. v. Microsoft Corp., 627 F.3d 859 (Fed. Cir. 2010), Chief Judge Rader, a Bilski dissenter, wrote that the patentable subject matter analysis should be based on “abstractness.”  There was no mention of machine-or-transformation in the opinion.  “[T]his 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.”  The technology was digital halftoning.

4) In Prometheus Laboratories v. Mayo Collaborative Servs., 628 F.3d 1347 (Fed. Cir. 2010), Judge Lourie’s opinion employed the machine-or-transformation test to conclude that particular claims had patentable subject matter.  The claims addressed administering a drug and then measuring the levels of its metabolites in the patient’s system.  In Bilski v. Kappos, the panel noted, “the [Supreme] Court did not disavow the machine-or-transformation test.”

5) In Association for Molecular Pathology v. PTO, 653 F.3d 1329 (Fed. Cir. 2011), Judge Lourie found certain claims lack patentable subject matter because they “are directed to patent-ineligible, abstract mental processes, and fail the machine-or-transformation test.”  The challenged claims addressed was “analyzing” or “comparing” a patient’s BRCA sequence with the normal (wild-type) sequence to identify the presence of cancer-predisposing mutations.

6) In Cybersource Corp. v. Retail Decisions, Inc., 654 F.3d 1366 (Fed. Cir. 2011), Judge Dyk’s opinion revived the mental steps doctrine, already hinted at in Association for Molecular Pathology.  “[M]ethods which can be performed mentally, or which are the equivalent of human mental work, are unpatentable abstract ideas.”  “All of claim 3’s method steps can be performed in the human mind, or by a human using a pen and paper,” so they lacked patentable subject matter.  The challenged claim 3 was to a method for detecting fraud in a credit card transaction between consumer and a merchant over the Internet, and recited such things as consulting past Internet addresses used by the consumer.

7) In Classen Immunotherapies v. Biogen IDEC, 659 F.3d 1057 (Fed. Cir. 2011), Judge Newman’s opinion found that certain claims had patentable subject matter and others not, reasoning that “[t]he ’283 claims . . . are directed to the abstract principle that variation in immunization schedules may have consequences for certain diseases.  In contrast, the claims of the ’139 and ’739 patents require the further act of immunization in accordance with a lower-risk schedule, thus moving from abstract scientific principle to specific application.”  Judges Rader and Newman, in a concurrence, stated that “the statute places few, if any, limits on subject matter eligibility” (emphasis added).

8) In Ultramercial v. Hulu, 657 F.3d 1323 (Fed. Cir. 2011), Chief Judge Rader wrote:  “While machine-or-transformation logic served well as a tool to evaluate the subject matter of Industrial Age processes, that test has far less application to the inventions of the Information Age.”  “[T]he mere idea that advertising can be used as a form of currency is abstract, just as the vague, unapplied concept of hedging proved patent-ineligible in Bilski.  However, the ’545 patent does not simply claim the age-old idea that advertising can serve as currency.  Instead the ’545 patent discloses a practical application of this idea.  The ’545 patent claims a particular method for monetizing copyrighted products.”  Specifically, “[m]any of the [claim] steps are likely to require intricate and complex computer programming. In addition, certain of these steps clearly require specific application to the Internet and a cyber-market environment. One clear example is the third step [of the claim], ‘providing said media products for sale on an Internet website.’ And, of course, if the products are offered for sale on the Internet, they must be ‘restricted’—step four—by complex computer programming as well. Viewing the subject matter as a whole, the invention involves an extensive computer interface. This court does not define the level of programming complexity required before a computer-implemented method can be patent-eligible. Nor does this court hold that use of an Internet website to practice such a method is either necessary or sufficient in every case to satisfy § 101. This court simply find the claims here to be patent-eligible, in part because of these factors.”

Doubtless further approaches to patentable subject matter will be seen as more cases are handed down.

Flavio M. Rose, Irell & Manella LLP

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