The document summarizes a presentation given on prosecuting business method patents in light of the uncertainty created by the Bilski case before the Supreme Court. It provides background on business method patents and jurisprudence, summarizes the Bilski case, and outlines the presenters' plan to discuss approaches to prosecution while awaiting further Supreme Court guidance. The presenters believe reasonable approaches can be taken based on prior Supreme Court, CCPA, and Federal Circuit precedents and guidance.
Prosecuting Business Method Patents: The Bilski Conundrum
1. B EI JI N G F RAN KFU RT H O N G KO N G LO N D O N L O S AN G ELES MUNICH N EW YO RK SI N G AP O RE T O KYO W ASH I N G T O N , D C
Prosecuting Business Method Patents:
The Bilski Conundrum
Lawrence T. Kass
-and-
Blake Reese
2009 Business Method Partnership Meeting
July 15, 2009
[PRESENTATION]
2. Introduction
• Our purpose: Promote discussion about
prosecuting business method patents while
status of Bilski is in limbo
– Uncertainty has never been greater
– No one has all the “answers”
– Let’s work together
– Reasonable starting point: prior Supreme Court,
CCPA, and Federal Circuit guidance
– Discuss approaches as we await Supreme Court
guidance
Larry Kass is a partner and Blake Reese is an associate in the intellectual property group of
1 Milbank, Tweed, Hadley & McCloy. The views expressed in the presentation are those of the
authors and may not be attributed to Milbank or its clients.
5. What is a Business Method?
• Class 705 Invention:
– Data processing apparatus and methods designed
for or used in the “practice, administration, or
management of an enterprise, or in the
processing of financial data.”
– This class also provides for apparatus and
corresponding methods for performing data
processing or calculating operations in which a
charge for goods or services is determined.
4
6. Early Business Methods (pre-1900)
• Mar. 19, 1799 – U.S. patent entitled “Detecting Counterfeit
Notes” to Perkins (lost in Patent Office fire of 1836)
• Apr. 28, 1815 – USP 2301X for “A Mode of Preventing
Counterfeiting” to Kneass (printing method)
• Apr. 28, 1815 – USP 871 for “Bank Note” to Watson
• Apr. 16, 1857 – USP 63,889 for “Hotel Register” to Hawes
• Apr. 13, 1873 – USP 138,891 for “Revenue Stamps” to Hunter
• Jan. 8, 1889 – USPs 395,781; 395,782; 395,783 each entitled
“Art of Compiling Statistics” to Hollerith
– Early automated business data processing patents led to the
formation of IBM
• Jan. 26, 1897 – USP 575,731 for “Insurable Property Chart” to
Powers et al.
5
7. Constitutional and Statutory Framework
• Art. I § 8, cl. 8
– The Congress shall have power … [t]o promote the
progress … useful arts, by securing for limited
times to … inventors the exclusive right to their
respective … discoveries
• 35 U.S.C. § 101 Inventions patentable.
– Whoever invents or discovers any new and useful
[1] process, [2] machine, [3] manufacture, or [4]
composition of matter, or any new and useful
improvement thereof, may obtain a patent therefor,
subject to the conditions and requirements of this
title
6
8. Constitutional and Statutory Framework
• 35 U.S.C. § 273
– Effective Nov. 29, 1999
– Enacted as a defense to patent infringement of a
“method” if the accused infringer actually reduced
the subject matter to practice at least 1 year before
the effective filing date of the patent at issue
– “… ‘method’ means a method of doing or
conducting business”
7
9. Early Supreme Court Guidance: Mackay
• “While a scientific truth, or the mathematical
expression of it, is not a patentable invention,
a novel and useful structure created with the
aid of knowledge or scientific truth may be.”
– Mackay Radio & Tel. Co. v. Radio of Am., 306 U.S.
86, 94 (1939) (Stone, J.).
8
10. Early Supreme Court Guidance: Benson
• Gottschalk v. Benson, 409 U.S. 63 (1972)
– Claim 8 (at issue). The method of converting signals from binary
coded decimal form into binary which comprises the steps of
• storing the binary coded decimal signals in a reentrant shift
register,
• shifting the signals to the right by at least three places, until there
is a binary `1' in the second position of said register,
• masking out said binary `1' in said second position of said
register,
• adding a binary `1' to the first position of said register,
• shifting the signals to the left by two positions,
• adding a `1' to said first position, and
• shifting the signals to the right by at least three positions in
preparation for a succeeding binary `1' in the second position of
said register.
9
11. Early Supreme Court Guidance: Benson
• Gottschalk v. Benson, 409 U.S. 63 (1972)
– “The claims were not limited to any particular art or technology, to
any particular apparatus or machinery, or to any particular end use.”
• Note: Reentrant shift register is a basic memory circuit
– “Here the ‘process’ claim is so abstract and sweeping as to cover
both known and unknown uses of the BCD to pure binary
conversion.”
• Prohibition on abstract ideas that would preempt an entire field
– “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.”
• “We do not hold that no process patent could ever qualify if it did not
meet the requirements of our prior precedents.”
• “It is said that the decision precludes a patent for any
program servicing a computer. We do not so hold.”
10
12. Further Supreme Court Guidance: Flook
• Parker v. Flook, 437 U.S. 584 (1978)
– Field-of-use restriction to catalytic conversion
insufficient to distinguish Benson.
– “Post-solution activity” limitations insufficient to
establish patent eligibility.
– “[I]f a claim is directed essentially to a method of
calculating, using a mathematical formula, even if
the solution is for a specific purpose, the claimed
method is nonstatutory."
11
13. Further Supreme Court Guidance: Diehr
• Diamond v. Diehr, 450 U.S. 175 (1981)
– “Although their process employs a well-known
mathematical equation, they do not seek to
preempt the use of that equation, except in
conjunction with all of the other steps in their
claimed process.”
– “A claim drawn to subject matter otherwise
statutory does not become nonstatutory simply
because it uses a mathematical formula, computer
program, or digital computer.”
– “An argument can be made … that this Court has
only recognized a process as within the statutory
definition when it either was tied to a particular
apparatus or operated to change materials to a
different state or thing."
12
14. Pre- Federal Circuit CCPA Guidance
• “Freeman-Walter-Abele test”:
(1) determine whether the claim recites an algorithm
within the meaning of Benson; and, if so,
(2) determine whether the algorithm is “applied in
any manner to physical elements or process
steps” pursuant to In re Abele.
In re Freeman, 573 F.2d 1237 (C.C.P.A. 1978);
In re Walter, 618 F.2d 758 (C.C.P.A. 1980);
In re Abele, 684 F.2d 902 (C.C.P.A. 1982).
13
15. Federal Circuit Guidance: Alappat
• In re Alappat, 33 F.3d 1526 (Fed. Cir. 1994)
– Claim 15 (at issue). A rasterizer for converting vector list data
representing sample magnitudes of an input waveform into
anti-aliased pixel illumination intensity data to be displayed on
a display means comprising:
(a) means for [an arithmetic logic circuit configured for]
determining the vertical distance between the endpoints of each of
the vectors in the data list;
(b) means for [an arithmetic logic circuit configured for]
determining the elevation of a row of pixels that is spanned by the
vector;
(c) means for [a pair of barrel shifters for] normalizing the vertical
distance and elevation; and
(d) means for [a read-only-memory for] outputting illumination
intensity data as a predetermined function of
14
the normalized vertical distance and elevation.
16. Federal Circuit Guidance: Alappat
• In re Alappat, 33 F.3d 1526 (Fed. Cir. 1994)
– 101 covers “any new and useful process, machine,
manufacture, or composition of matter”
– “claim 15, properly construed, claims a machine”
– “We have held that such programming creates a new
machine, because a general purpose computer in effect
becomes a special purpose computer once it is programmed
to perform particular functions pursuant to instructions from
program software.”
– “This is not a disembodied mathematical concept which may
be characterized as an ‘abstract idea,’ but rather a specific
machine to produce a useful, concrete, and tangible result.”
15
17. Federal Circuit Guidance: Beauregard
• In re Beauregard, 53 F.3d 1583 (Fed. Cir.
1995)
– “The Commissioner now states ‘that computer
programs embodied in a tangible medium, such as
floppy diskettes, are patentable subject matter under
35 U.S.C. § 101….’”
16
18. Federal Circuit Guidance: State Street
• State Street Bank & Trust Co. v. Signature Fin.
Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998)
– “claim 1 is directed to a machine programmed with
the Hub and Spoke software and admittedly produces
a ‘useful, concrete, and tangible result.”
• “This renders it statutory subject matter, even if the useful
result is expressed in numbers, such as price, profit,
percentage, cost, or loss.”
– “Since the 1952 Patent Act, business methods have
been, and should have been, subject to the same
legal requirements for patentability as applied to any
other process or method.”
17
19. Federal Circuit Guidance: AT&T Corp.
• AT&T Corp. v. Excel Comm’cns, Inc., 172 F.3d
1352 (Fed. Cir. 1999)
– “[W]e are comfortable in applying our reasoning in
Alappat and State Street to the method claims at
issue in this case.”
18
20. Federal Circuit Guidance: In re Nuitjen
• In re Nuijten, 500 F.3d 1346 (Fed. Cir. 2007)
– Naked “signal” claims not patentable
– Signal is not a “machine”
– “Machine” means “a concrete thing, consisting of
parts, or of certain devices and combination of
devices.” See Burr v. Duryee, 68 U.S. (1 Wall.) 531,
570 (1863).
• This “includes every mechanical device or combination of
mechanical powers and devices to perform some function
and produce a certain effect or result.” See Corning v.
Burden, 56 U.S. 252, 267 (1854).
• Requires “concrete structure”
19
22. In re Bilski
• In re Bilski, 545 F.3d 943 (Fed. Cir. 2008)
– Claim 1 (at issue). 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 balances the risk
position of said series of consumer transactions
21
23. In re Bilski
• In re Bilski, 545 F.3d 943 (Fed. Cir. 2008)
– “A claimed process is [only ] patent-eligible under § 101 if:
(1) it is tied to a particular machine or apparatus, or
(2) it transforms a particular article into a different state or thing.”
– “[T]he use of a specific machine or transformation of an article
must impose meaningful limits on the claim's scope to impart
patent-eligibility”; and “not merely be insignificant extra-solution
activity.”
• “[I]ssues specific to the machine implementation part of the test are
not before us today.”
• “We leave to future cases the elaboration of 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.”
22
24. In re Bilski
• In re Bilski, 545 F.3d 943 (Fed. Cir. 2008)
– “This transformation must be central to the purpose of the claimed
process.”
• “a process for a chemical or physical transformation of physical
objects or substances is patent-eligible subject matter.
• “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 pre-empt all uses of the principle.”
• “Purported transformations or manipulations simply of public or private
legal obligations or relationships, business risks, or other such
abstractions cannot meet the test”
– “they are not physical objects or substances, and they are not
representative of physical objects or substances.”
– “we decline to adopt a broad exclusion over software or any other
such category of subject matter”
23
25. More on Bilski from the Federal Circuit
• In re Ferguson, 558 F.3d 1359 (Fed. Cir. 2009)
– Claim 1 (at issue). A method of marketing a product, comprising:
developing a shared marketing force, said shared marketing force
including at least marketing channels, which enable marketing a
number of related products;
• using said shared marketing force to market a plurality of
different products that are made by a plurality of different
autonomous producing company, so that different autonomous
companies, having different ownerships, respectively produce
said related products;
• obtaining a share of total profits from each of said plurality of
different autonomous producing companies in return for said
using; and
• obtaining an exclusive right to market each of said plurality of
products in return for said using.”
– Claim 24 (at issue). A paradigm for marketing software,
comprising: a marketing company….
24
26. More on Bilski from the Federal Circuit
• In re Ferguson, 558 F.3d 1359 (Fed. Cir.
2009)
– Method claim fails “machine-or-transformation” test
• “shared market force” doesn’t satisfy definition of “machine”
from In re Nuitjen.
• methods of “organizing business or legal relationships in the
structuring of a sales force (or marketing company)” do not
transform “physical objects or substances” or
“representati[ons] of physical objects or substances.”
25
27. More on Bilski from the Federal Circuit
• In re Ferguson, 558 F.3d 1359 (Fed. Cir.
2009)
– Paradigm claims not statutory subject matter
• not “directed to processes, as ‘no act or series of acts’ is
required”;
• not a “manufacture” because a marketing company “cannot
itself be an ‘article[] resulting from the process of
manufacture’”;
• not a “machine” as “you cannot touch the company”; and
• “certainly not a composition of matter.”
26
28. Bilski on Certiorari
• Bilski v. Doll, No. 08-964 (cert granted)
– “Whether the Federal Circuit erred by holding that a
‘process’ must be tied to a particular machine or
apparatus, or transform a particular article into a
different state or thing (‘machine-or-transformation’
test), to be eligible for patenting under 35 U.S.C. §
101, despite this Court's precedent declining to limit
the broad statutory grant of patent eligibility for ‘any’
new and useful process beyond excluding patents for
‘laws of nature, physical phenomena, and abstract
ideas.’"
27
29. Bilski on Certiorari
• Bilski v. Doll, No. 08-964 (cert granted)
– “Whether the Federal Circuit's ‘machine-or-
transformation’ test for patent eligibility, which
effectively forecloses meaningful patent protection to
many business methods, contradicts the clear
Congressional intent that patents protect ‘method[s]
of doing or conducting business.’ 35 U.S.C. § 273.”
28
33. Some Ideas on Prosecution in Bilski Limbo
• How do we shore up the following patent claim
in view of the current uncertainty?
– (claim 1) A method for predicting retail sales, the method
comprising:
• (a) retrieving from a plurality of sources data including
historic sales, historic advertising expenditures, and
current advertising expenditures;
• (b) storing the data;
• (c) preparing a [novel] sales analysis based on the data;
and
• (d) providing a user a model based on the [novel] sales
analysis.
32
34. Some Ideas on Prosecution in Bilski Limbo
• Specification
– Detail Example System 1, Example System 2, etc.
– Define a term of art for architecture
• E.g., “computing system”– define in spec to cover various
systems including one or more programmed computers,
systems employing distributed networking, or other type
of system that might be used
• Otherwise “computer” could be construed (or limited by
DOE) to be a single computer throughout the claims.
33
35. Some Ideas on Prosecution in Bilski Limbo
• Claims
– Broadest reasonable interpretation (BRI) standard
• MPEP 2111: The USPTO “determines the scope of claims in
patent applications not solely on the basis of the claim
language, but upon giving claims their broadest reasonable
construction ‘in light of the specification as it would be
interpreted by one of ordinary skill in the art.’”
– Recite machine/transformation limitations in the
body of the claim
• Machine/transformation limitations in the preamble will likely
not convince the examiner that the claim is statutory
(arguably preamble may have no meaning under BRI)
– Try to use machine limitations that are “concrete”
• Avoid solely using terms that could be interpreted under BRI
as not requiring hardware
34 – E.g., data structure, database, etc.
36. Some Ideas on Prosecution in Bilski Limbo
• Don’t count on “extra solution” / “post solution”
activity
– Tie novel aspects of invention (i.e., novel elements)
to machine/transformation limitations
35
37. Some Ideas on Prosecution in Bilski Limbo
• (claim 1) (Currently Amended) A method for predicting retail sales
performed in a computing system, the method comprising:
– (a) retrieving by the computing system from a plurality of
sources data including historic sales, historic advertising
expenditures, and current advertising expenditures;
– (b) storing the data in one or more data structures using the
computing system;
– (c) preparing a [novel] sales analysis based on the data using
the computing system;
– (d) providing by the computing system a user a model based
on the [novel] sales analysis.
• Other ways to amend the claim?
– E.g., to avoid potential subject matter exclusions?
36
38. Some Ideas on Prosecution in Bilski Limbo
• Claim differentiation to distinguish broader
(independent) claims from narrower claims by
requiring additional architecture.
– (claim 2) (New). The method of claim 1, wherein the
computing system includes one or more programmed
computers.
– (claim 3) (New). The method of claim 1, wherein the
computing system is distributed over a plurality of
programmed computers.
– (claim 4) (New). The method of claim 1, wherein the one or
more data structures are one or more databases.
• This adds structure without relying on post-solution
activity or unduly narrowing the independent claim.
37
39. Some Ideas on Prosecution in Bilski Limbo:
Machine Claims
• (claim 5) (New). A system for predicting retail sales, the system
comprising:
– (a) means for retrieving data from a plurality of sources data
including historic sales, historic advertising expenditures, and
current advertising expenditures;
– (b) means for storing the data;
– (c) means for preparing a [novel] sales analysis based on the
data; and
– (d) means for providing a user a model based on the [novel]
sales analysis.
38
40. Some Ideas on Prosecution in Bilski Limbo:
Machine Claims
• (claim 6) (New). A programmed computer for predicting retail
sales, the programmed computer comprising:
– a memory having at least one region for storing computer
executable program code; and
– a processor for executing the program code stored in the
memory, wherein the program code comprises:
• (a) code to retrieve from a plurality of sources data
including historic sales, historic advertising expenditures,
and current advertising expenditures;
• (b) code to store the data;
• (c) code to prepare a [novel] sales analysis based on the
data; and
• (d) code to provide a user a model based on the [novel]
sales analysis.
39
41. Some Ideas on Prosecution in Bilski Limbo:
Product Claims
• (claim 7) (New). A computer readable medium encoded with
computer readable program code for predicting retail sales, the
program code including subroutines for:
– (a) retrieving from a plurality of sources data including historic
sales, historic advertising expenditures, and current
advertising expenditures;
– (b) storing the data;
– (c) preparing a [novel] sales analysis based on the data; and
– (d) providing a user a model based on the [novel] sales
analysis.
40
42. Some Ideas on Prosecution in Bilski Limbo:
Product Claims
• (claim 8) (Canceled).
• (claim 9) (New) – just like claim 7, but “using a first computer” –
“using a second computer” – etc.
• (claim 10) (New). The computer readable medium of claim 9,
wherein the first, second, third, and fourth computers is one or
more programmed computers.
• (claim 11) (New). The computer readable medium of claim 10,
wherein the one or more programmed computers are distributed
over several physical locations.
41
43. Proposed Claims Drafting Strategy:
Surviving a Stricter Bilski v. Doll Test
• International harmony?
– If the Supreme Court reads “useful arts” as
“technological arts” and goes the “technical
contribution” route of the EPO/Britain, it will be
important to focus on the “technical contribution” the
invention brings.
42
44. Proposed Claims Drafting Strategy:
Surviving a Stricter Bilski v. Doll Test
• When reading your drafted claims try to think of
whether the claimed invention as a whole:
– Increases the speed/efficiency of a thing
• More likely to survive if it’s the computer science
arts rather than business-related
– Consumes less resources
– Stores information better, etc.
• Consider making these statements in the
specification, and even in claims
43
45. 2009 Business Method Partnership Meeting:
The Past, Present, and Future of Practice
Thank you
Lawrence T. Kass
Milbank, Tweed, Hadley & McCloy LLP
1 Chase Manhattan Plaza
New York, NY 10005
(212) 530-5178
LKass@milbank.com
Blake Reese
Milbank, Tweed, Hadley & McCloy LLP
1 Chase Manhattan Plaza
New York, NY 10005
(212) 530-5496
BReese@milbank.com
Larry Kass is a partner and Blake Reese is an associate in the intellectual property group of
44 Milbank, Tweed, Hadley & McCloy. The views expressed in the presentation are those of the
authors and may not be attributed to Milbank or its clients.
![B EI JI N G F RAN KFU RT H O N G KO N G LO N D O N L O S AN G ELES MUNICH N EW YO RK SI N G AP O RE T O KYO W ASH I N G T O N , D C
Prosecuting Business Method Patents:
The Bilski Conundrum
Lawrence T. Kass
-and-
Blake Reese
2009 Business Method Partnership Meeting
July 15, 2009
[PRESENTATION]](https://image.slidesharecdn.com/20090714kassreesebusinessmethodpartnershippresentationslides-12761990818228-phpapp01/85/Prosecuting-Business-Method-Patents-The-Bilski-Conundrum-1-320.jpg)
