The Federal Circuit and Patent Eligibility in the Wake of Bilski v. Kappos

Two questions figured most prominently when the Supreme Court granted certiorari in the case of Bilski v. Kappos, 130 S. Ct. 3218 (2010): Would the Court accept the “machine-or-transformation” test as the exclusive standard for determining patent eligibility under 35 U.S.C. ' 101, and would the Court rule that business methods are categorically excluded from patent eligibility? The Court answered “no” to both, and reaffirmed the analytical framework set forth in the Benson-Flook-Diehr trilogy of its own prior precedent. Under this framework, ' 101 is to be construed expansively, in keeping with the “permissive approach” taken by Congress when it wrote the statute as embracing “any new and useful process, machine, manufacture, or composition of matter ' ” 35 U.S.C. ' 101 (emphasis added); Bilski, at 3225. This liberal approach to patent eligibility is subject only to three narrow exceptions: laws of nature, natural phenomena, and abstract ideas. Id. The subject matter at issue in Bilski was ruled an abstract idea, and thus excluded from eligibility under ' 101, because the claims “explain the basic concept of hedging, or protecting against risk” and the “concept of hedging ' is an unpatentable abstract idea ' ” Id. at 3231. Rather than exclude all business methods from patent eligibility on the basis of the machine-or-transformation test, the Court limited its ruling to stating that the “patent application here can be rejected under our precedents on the unpatentability of abstract ideas.” Id. Although the machine-or-transformation test is not the sole basis for determining patent eligibility, the “machine-or-transformation test is a useful and important clue, an investigative tool, for determining” patent eligibility. Id. at 3227.

Certain principles guided the Bilski court. First, patent eligibility should be consistent with the text of ' 101. “[C]ourts should not read into the patent laws limitations and conditions which the legislature has not expressed,” save for the “well-established exceptions” noted above, which, although they “are not required by the statutory text, [ ] are consistent with the notion that a patentable process must be 'new and useful.'” Id. at 3225, 3226. Moreover, the “Court has not indicated that the existence of these 'well-established' exceptions gives the Judiciary carte blanche to impose other limitations that are inconsistent with the text and the statute's purpose and design.” Id. at 3226. The machine-or-transformation test fails this principle because it amounts to a “limitation[ ] on the Patent Act ' inconsistent with the Act's text.” Id. at 3231. Second, the “' 101 patent-eligibility inquiry is only a threshold test,” Id. at 3225, meaning that it is not to address concerns arising under the substantive patentability requirements articulated in ” 102 (novelty), 103 (non-obviousness), and 112 (full disclosure). Finally, patent eligibility looks to the “invention as a whole, rather than dissect[ing] the claims into old and new elements and then ' ignor[ing] the presence of the old elements in the analysis.” Id. at 3230. With regard to the Federal Circuit, the Supreme Court stated that “we by no means foreclose the Federal Circuit's development of other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text.” Id. at 3231.

Post-Bilski Decisions

In the aftermath of Bilski, the Federal Circuit has ruled on patent-eligibility issues in several cases. In Research Corp. v. Microsoft, 627 F.3d 859 (Fed. Cir. 2010), the most significant characterization is that ' 101 functions as a mere “coarse eligibility filter,” which is in accord with Bilski treating patent eligibility as only a “threshold test.” Research Corp., 627 F.3d at 869. The Federal Circuit stated that “the Supreme Court advised that section 101 eligibility should not become a substitute for a patentability analysis related to prior art, adequate disclosure, or the other conditions and requirements of Title 35.” Id. at 868. Patent eligibility is thus a gatekeeper inquiry and is not to usurp the separate requirements of novelty, non-obviousness, and adequate disclosure. The claim at issue in Research Corp. was to a process for rendering a halftone image. The Federal Circuit followed the two-part analysis of Bilski by asking whether the claim falls into one of the categories of invention, and, if so, whether it nevertheless is disqualified under one of the three exceptions to the statute. As to the first part, nothing further need be done than to look at the claim to see if it facially invokes one of the statutory categories: “[i]n this case, the subject matter is a 'process' for rendering a halftone image. As a process, the subject matter qualifies under both the categorical language of section 101 and the process definition in section 100.” Id. As to the second part, the presumption of patent eligibility is overcome if the claim falls under one of the three exceptions, of which the court focused on the “abstractness” exception. Rather than follow a rigid formula, the Federal Circuit stated that “this court also 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.” Id. Since inventions like halftone rendering have “specific applications or improvements to technologies in the marketplace [they] are not likely to be so abstract that they override the statutory language and framework of the Patent Act.” Id. at 869.

In other post-Bilski decisions, the Federal Circuit has followed the Supreme Court prescription to use the machine-or-transformation test as “a useful and important clue, an investigative tool, for determining” patent eligibility, particularly in cases involving medical diagnosis technologies. In Prometheus Laboratories v. Mayo Collaborative Services, 628 F.3d 1347 (Fed. Cir. 2010), cert. granted, __ U.S. __ (2011), the claim at issue was directed to a method that included the physical steps of administering a drug containing 6-thioguanine to a subject and determining the level of 6-TG in the subject, together with the purely mental step of determining a correlation between drug dosage and toxicity and efficacy. In analyzing this claim, the Federal Circuit relied on the principle, endorsed by Bilski, that a claim is to be analyzed as a whole and not “dissect[ed] into old and new elements and then to ignore the presence of the old elements in the analysis.” Bilski, 130 S. Ct. at 3230. Because “[w]hen administering a drug such as AZA or 6-MP, the human body necessarily undergoes a transformation,” the claims satisfied the transformation prong of the machine-or-transformation test, notwithstanding the presence of the abstractness pertaining to correlations between dosage and toxicity and efficacy. Prometheus Laboratories, 628 F.3d at 1356. As noted in the citation, the Supreme Court agreed to review this term. Similarly, in Classen Immunotherapies v. Biogen IDEC, 2011 WL 3855409 (Fed. Cir. 2011), the Federal Circuit applied the machine-or-transformation test to rule as eligible claims containing the abstract limitation of comparing immunization schedules and occurrence of chronic diseases to determine the lower risk schedule. Some of the claims also contained the physical step of immunizing a subject according to the determined immunization schedule; while others lacked the immunization step. Since “precedent has recognized that the presence of a mental step is not of itself fatal to ' 101 eligibility,” Id. at *7, the Federal Circuit ruled that the claims containing the immunization step are patent-eligible because immunization represents “the physical implementation of the mental step,” Id. at *9, involving the selection of an immunization schedule, and as such, satisfies the transformation prong of the machine-or-transformation test.

While the machine-or-transformation test is particularly apt for analyzing claims in technologies that, like medical treatments, typically include physical steps of some kind, the Federal Circuit recognized in Ultramercial v. Hulu, 2011 WL 4090761 (Fed. Cir. 2011) that “[w]hile 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.” Id. at *3. In Ultramercial, the claimed invention was directed to “a method for distributing copyrighted products (e.g., songs, movies, books) over the Internet where the consumer receives a copyrighted product for free in exchange for viewing an advertisement, and the advertiser pays for the copyrighted content.” Id. at *4. The claim contained, among other steps, a step “of providing the media product for sale at an Internet website.” Id. at *1. In addition to re-emphasizing the nature of the patent eligibility inquiry as a “threshold check” that cannot substitute for the substantive patentability criteria of the rest of the statute, the Ultramercial court stated that “title 35 does not list a single ineligible category, suggesting that any new, non-obvious, and fully disclosed technical advance is eligible for protection, subject to the ' limited judicially created exceptions” noted above. Id. at *2. Mindful of the intent of ' 101 to “encompass new and unforeseen inventions,” the Federal Circuit “gives substantial weight to the statutory reluctance to list any new, non-obvious, and fully disclosed subject matter as beyond the reach of title 35.” Id. at *4. Similar to the Research Corp. case, the initial inquiry of the patent eligibility analysis ' determining whether the claim falls within one of the statutory categories ' is satisfied simply by examining whether the claim has been written to literally correspond to one of these categories. No deeper analysis is needed. According to the Federal Circuit, “the claimed invention is a method for monetizing and distributing copyrighted products over the Internet. As a method, it satisfies ' 100's definition of 'process' and thus falls within a ' 101 category of patent-eligible subject matter.” Id. The court next denied that the claim fell within the “abstractness” exception. Several factors led to this conclusion. First, inventions that are specific improvements to technology already in the marketplace, as the claimed invention here was, “are not likely to be so abstract that they override the statutory language and framework of the Patent Act.” Id. Second, “if the products are offered for sale on the Internet, they must be 'restricted' ' step four [of the claim] ' by complex computer programming as well.” Id. at *5. Although the Federal Circuit did not “define the level of programming complexity required before a computer-implemented method can be patent eligible,” nor did it “hold that use of an Internet website to practice such a method is either necessary or sufficient in every case to satisfy ' 101,” the Federal Circuit “simply find[s] the claims here to be patent-eligible, in part because of these factors.” Id. In endorsing the notion that advances in computer software are just as entitled to patent eligibility as any other area of innovation, the court noted that “[f]ar from abstract, advances in computer technology ' both hardware and software ' drive innovation in every area of scientific and technical endeavor.” Id. at *6.

Tension Between Recent Cases

The Ultramercial case appears to be in tension with another recently decided Federal Circuit case, CyberSource Corp. v. Retail Decisions, Inc., 2011 WL 3584472 (Fed. Cir. 2011). One claim, a method of detecting credit card fraud, was determined to fall within the “abstract idea” exception because it could be performed entirely in the mind of a person. Although the Ultramercial court distinguished CyberSource on the ground that the media-delivery method at issue there is “something far removed from purely mental steps,” Id., the court did not examine how the prohibition against expanding the non-textual exceptions to patent eligibility can be squared with the decision by the CyberSource court to disqualify a “Beauregard” claim directed to a computer readable medium on the same basis as the method claim. In rejecting the contention that such claims are per se statutory because they invoke an undeniably tangible (and hence non-abstract) category of invention, the CyberSource court stated “[r]egardless of what statutory category ('process, machine, manufacture, or composition of matter,' 35 U.S.C. ' 101) a claim's language is crafted to literally invoke, we look to the underlying invention for patent-eligibility purposes.” Id. at *7 (emphasis added). Since the invention underlying the Beauregard claim was the purely mental method of credit card fraud detection, and was not “'truly drawn to a specific' computer readable medium,” this claim was evaluated as a process claim for eligibility purposes and fell for the same reason as the literally written method claim. Id. at *8. Treating a claim expressly written to fall within one statutory category of invention as being “truly drawn” to another category lacks any support in the text of the statute, since there is no language authorizing a court to rewrite a claim for any purpose. Thus, this approach appears to be contrary to the prescription set forth in Bilski against imposing non-textual conditions of patent-eligibility on the statute beyond the three already recognized. Moreover, the “truly drawn” approach also appears to impermissibly expand the eligibility inquiry beyond its role as a mere “threshold check” because this approach in effect overrides
' 112, which states that the “specification shall conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as his invention.” 35 U.S.C. ' 112, '2. If, for any purpose, a court can rewrite a claim as belonging to a different category, then it would seem that such an approach would not honor the statutory mandate requiring claims to be regarded in the way written by the applicant.

Dervis Magistre is a partner at the intellectual property law firm of Fay Kaplun & Marcin LLP in New York, where he specializes in patent infringement and invalidity analysis, inter partes and ex parte re-examinations, and all aspects of patent prosecution in electronics, software, and medical devices. He can be reached at [email protected].

Two questions figured most prominently when the Supreme Court granted certiorari in the case of Bilski v. Kappos , 130 S. Ct. 3218 (2010): Would the Court accept the “machine-or-transformation” test as the exclusive standard for determining patent eligibility under 35 U.S.C. ' 101, and would the Court rule that business methods are categorically excluded from patent eligibility? The Court answered “no” to both, and reaffirmed the analytical framework set forth in the Benson-Flook-Diehr trilogy of its own prior precedent. Under this framework, ' 101 is to be construed expansively, in keeping with the “permissive approach” taken by Congress when it wrote the statute as embracing “any new and useful process, machine, manufacture, or composition of matter ' ” 35 U.S.C. ' 101 (emphasis added); Bilski, at 3225. This liberal approach to patent eligibility is subject only to three narrow exceptions: laws of nature, natural phenomena, and abstract ideas. Id. The subject matter at issue in Bilski was ruled an abstract idea, and thus excluded from eligibility under ' 101, because the claims “explain the basic concept of hedging, or protecting against risk” and the “concept of hedging ' is an unpatentable abstract idea ' ” Id. at 3231. Rather than exclude all business methods from patent eligibility on the basis of the machine-or-transformation test, the Court limited its ruling to stating that the “patent application here can be rejected under our precedents on the unpatentability of abstract ideas.” Id. Although the machine-or-transformation test is not the sole basis for determining patent eligibility, the “machine-or-transformation test is a useful and important clue, an investigative tool, for determining” patent eligibility. Id. at 3227.

Certain principles guided the Bilski court. First, patent eligibility should be consistent with the text of ' 101. “[C]ourts should not read into the patent laws limitations and conditions which the legislature has not expressed,” save for the “well-established exceptions” noted above, which, although they “are not required by the statutory text, [ ] are consistent with the notion that a patentable process must be 'new and useful.'” Id. at 3225, 3226. Moreover, the “Court has not indicated that the existence of these 'well-established' exceptions gives the Judiciary carte blanche to impose other limitations that are inconsistent with the text and the statute's purpose and design.” Id. at 3226. The machine-or-transformation test fails this principle because it amounts to a “limitation[ ] on the Patent Act ' inconsistent with the Act's text.” Id. at 3231. Second, the “' 101 patent-eligibility inquiry is only a threshold test,” Id. at 3225, meaning that it is not to address concerns arising under the substantive patentability requirements articulated in ” 102 (novelty), 103 (non-obviousness), and 112 (full disclosure). Finally, patent eligibility looks to the “invention as a whole, rather than dissect[ing] the claims into old and new elements and then ' ignor[ing] the presence of the old elements in the analysis.” Id. at 3230. With regard to the Federal Circuit, the Supreme Court stated that “we by no means foreclose the Federal Circuit's development of other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text.” Id. at 3231.

Post-Bilski Decisions

In the aftermath of Bilski, the Federal Circuit has ruled on patent-eligibility issues in several cases. In Research Corp. v. Microsoft , 627 F.3d 859 (Fed. Cir. 2010), the most significant characterization is that ' 101 functions as a mere “coarse eligibility filter,” which is in accord with Bilski treating patent eligibility as only a “threshold test.” Research Corp., 627 F.3d at 869. The Federal Circuit stated that “the Supreme Court advised that section 101 eligibility should not become a substitute for a patentability analysis related to prior art, adequate disclosure, or the other conditions and requirements of Title 35.” Id. at 868. Patent eligibility is thus a gatekeeper inquiry and is not to usurp the separate requirements of novelty, non-obviousness, and adequate disclosure. The claim at issue in Research Corp. was to a process for rendering a halftone image. The Federal Circuit followed the two-part analysis of Bilski by asking whether the claim falls into one of the categories of invention, and, if so, whether it nevertheless is disqualified under one of the three exceptions to the statute. As to the first part, nothing further need be done than to look at the claim to see if it facially invokes one of the statutory categories: “[i]n this case, the subject matter is a 'process' for rendering a halftone image. As a process, the subject matter qualifies under both the categorical language of section 101 and the process definition in section 100.” Id. As to the second part, the presumption of patent eligibility is overcome if the claim falls under one of the three exceptions, of which the court focused on the “abstractness” exception. Rather than follow a rigid formula, the Federal Circuit stated that “this court also 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.” Id. Since inventions like halftone rendering have “specific applications or improvements to technologies in the marketplace [they] are not likely to be so abstract that they override the statutory language and framework of the Patent Act.” Id. at 869.

In other post-Bilski decisions, the Federal Circuit has followed the Supreme Court prescription to use the machine-or-transformation test as “a useful and important clue, an investigative tool, for determining” patent eligibility, particularly in cases involving medical diagnosis technologies. In Prometheus Laboratories v. Mayo Collaborative Services , 628 F.3d 1347 (Fed. Cir. 2010), cert. granted , __ U.S. __ (2011), the claim at issue was directed to a method that included the physical steps of administering a drug containing 6-thioguanine to a subject and determining the level of 6-TG in the subject, together with the purely mental step of determining a correlation between drug dosage and toxicity and efficacy. In analyzing this claim, the Federal Circuit relied on the principle, endorsed by Bilski, that a claim is to be analyzed as a whole and not “dissect[ed] into old and new elements and then to ignore the presence of the old elements in the analysis.” Bilski, 130 S. Ct. at 3230. Because “[w]hen administering a drug such as AZA or 6-MP, the human body necessarily undergoes a transformation,” the claims satisfied the transformation prong of the machine-or-transformation test, notwithstanding the presence of the abstractness pertaining to correlations between dosage and toxicity and efficacy. Prometheus Laboratories, 628 F.3d at 1356. As noted in the citation, the Supreme Court agreed to review this term. Similarly, in Classen Immunotherapies v. Biogen IDEC, 2011 WL 3855409 (Fed. Cir. 2011), the Federal Circuit applied the machine-or-transformation test to rule as eligible claims containing the abstract limitation of comparing immunization schedules and occurrence of chronic diseases to determine the lower risk schedule. Some of the claims also contained the physical step of immunizing a subject according to the determined immunization schedule; while others lacked the immunization step. Since “precedent has recognized that the presence of a mental step is not of itself fatal to ' 101 eligibility,” Id. at *7, the Federal Circuit ruled that the claims containing the immunization step are patent-eligible because immunization represents “the physical implementation of the mental step,” Id. at *9, involving the selection of an immunization schedule, and as such, satisfies the transformation prong of the machine-or-transformation test.

While the machine-or-transformation test is particularly apt for analyzing claims in technologies that, like medical treatments, typically include physical steps of some kind, the Federal Circuit recognized in Ultramercial v. Hulu, 2011 WL 4090761 (Fed. Cir. 2011) that “[w]hile 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.” Id. at *3. In Ultramercial, the claimed invention was directed to “a method for distributing copyrighted products (e.g., songs, movies, books) over the Internet where the consumer receives a copyrighted product for free in exchange for viewing an advertisement, and the advertiser pays for the copyrighted content.” Id. at *4. The claim contained, among other steps, a step “of providing the media product for sale at an Internet website.” Id. at *1. In addition to re-emphasizing the nature of the patent eligibility inquiry as a “threshold check” that cannot substitute for the substantive patentability criteria of the rest of the statute, the Ultramercial court stated that “title 35 does not list a single ineligible category, suggesting that any new, non-obvious, and fully disclosed technical advance is eligible for protection, subject to the ' limited judicially created exceptions” noted above. Id. at *2. Mindful of the intent of ' 101 to “encompass new and unforeseen inventions,” the Federal Circuit “gives substantial weight to the statutory reluctance to list any new, non-obvious, and fully disclosed subject matter as beyond the reach of title 35.” Id. at *4. Similar to the Research Corp. case, the initial inquiry of the patent eligibility analysis ' determining whether the claim falls within one of the statutory categories ' is satisfied simply by examining whether the claim has been written to literally correspond to one of these categories. No deeper analysis is needed. According to the Federal Circuit, “the claimed invention is a method for monetizing and distributing copyrighted products over the Internet. As a method, it satisfies ' 100's definition of 'process' and thus falls within a ' 101 category of patent-eligible subject matter.” Id. The court next denied that the claim fell within the “abstractness” exception. Several factors led to this conclusion. First, inventions that are specific improvements to technology already in the marketplace, as the claimed invention here was, “are not likely to be so abstract that they override the statutory language and framework of the Patent Act.” Id. Second, “if the products are offered for sale on the Internet, they must be 'restricted' ' step four [of the claim] ' by complex computer programming as well.” Id. at *5. Although the Federal Circuit did not “define the level of programming complexity required before a computer-implemented method can be patent eligible,” nor did it “hold that use of an Internet website to practice such a method is either necessary or sufficient in every case to satisfy ' 101,” the Federal Circuit “simply find[s] the claims here to be patent-eligible, in part because of these factors.” Id. In endorsing the notion that advances in computer software are just as entitled to patent eligibility as any other area of innovation, the court noted that “[f]ar from abstract, advances in computer technology ' both hardware and software ' drive innovation in every area of scientific and technical endeavor.” Id. at *6.

Tension Between Recent Cases

The Ultramercial case appears to be in tension with another recently decided Federal Circuit case, CyberSource Corp. v. Retail Decisions, Inc., 2011 WL 3584472 (Fed. Cir. 2011). One claim, a method of detecting credit card fraud, was determined to fall within the “abstract idea” exception because it could be performed entirely in the mind of a person. Although the Ultramercial court distinguished CyberSource on the ground that the media-delivery method at issue there is “something far removed from purely mental steps,” Id., the court did not examine how the prohibition against expanding the non-textual exceptions to patent eligibility can be squared with the decision by the CyberSource court to disqualify a “Beauregard” claim directed to a computer readable medium on the same basis as the method claim. In rejecting the contention that such claims are per se statutory because they invoke an undeniably tangible (and hence non-abstract) category of invention, the CyberSource court stated “[r]egardless of what statutory category ('process, machine, manufacture, or composition of matter,' 35 U.S.C. ' 101) a claim's language is crafted to literally invoke, we look to the underlying invention for patent-eligibility purposes.” Id. at *7 (emphasis added). Since the invention underlying the Beauregard claim was the purely mental method of credit card fraud detection, and was not “'truly drawn to a specific' computer readable medium,” this claim was evaluated as a process claim for eligibility purposes and fell for the same reason as the literally written method claim. Id. at *8. Treating a claim expressly written to fall within one statutory category of invention as being “truly drawn” to another category lacks any support in the text of the statute, since there is no language authorizing a court to rewrite a claim for any purpose. Thus, this approach appears to be contrary to the prescription set forth in Bilski against imposing non-textual conditions of patent-eligibility on the statute beyond the three already recognized. Moreover, the “truly drawn” approach also appears to impermissibly expand the eligibility inquiry beyond its role as a mere “threshold check” because this approach in effect overrides
' 112, which states that the “specification shall conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as his invention.” 35 U.S.C. ' 112, '2. If, for any purpose, a court can rewrite a claim as belonging to a different category, then it would seem that such an approach would not honor the statutory mandate requiring claims to be regarded in the way written by the applicant.

Dervis Magistre is a partner at the intellectual property law firm of Fay Kaplun & Marcin LLP in New York, where he specializes in patent infringement and invalidity analysis, inter partes and ex parte re-examinations, and all aspects of patent prosecution in electronics, software, and medical devices. He can be reached at [email protected].