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A New Era for Patent-Eligible Subject Matter

By Austen Zuege

From Intellectual Property Today, Vol. 19, No. 5 (May 2012)

The Supreme Court has announced a new approach to assessing patent subject matter eligibility under 35 U.S.C. § 101. Bilski v. Kappos “punted” and did little more than reiterate that laws of nature, physical phenomena, and abstract ideas are ineligible for patent protection, stating that the machine-or-transformation (“MoT”) test may be a useful and important clue or investigative tool but is not the sole test for deciding whether an invention is a patent-eligible “process”. [1] But in Mayo Collaborative Servs. v. Prometheus Labs., Inc., a unanimous Court made “preemption” a primary criterion for patent-eligible subject matter under § 101.[2] Broad generic claims are not patent-eligible unless they permit some other activity in the same field of endeavor. This frames the analysis under § 101 in much the same way certain genus/species and functional claiming issues have been addressed under the enablement and definiteness requirements of 35 U.S.C. § 112.[3] While Mayo dealt with laws of nature and medical treatments, certain recent Federal Circuit opinions have applied a similar analysis to software and business method claims, and the Supreme Court recently remanded a case to the Federal Circuit to reconsider patentability of DNA isolation in view of Mayo.[4]

MEDICAL TREATMENTS

Mayo involved claims to drug therapies for treatment of immune-mediated gastrointestinal disorders.[5] The Supreme Court found the claims unpatentable under § 101. The Court considered whether the claims merely described a law of nature, “namely the correlations between thiopurine metabolite levels and the toxicity and efficacy of thiopurine drug dosages[.]” Mayo, 2012 WL 912952 at *8. The key inquiry was whether “the patent claims add enough to their statements of the correlations to allow the processes they describe to qualify as patent-eligible processes that apply natural laws?” Id. at *5,8.

The Court held that claims written “too broadly” or “overly broad” so as to foreclose innovation in a particular field of endeavor are unpatentably preemptive under § 101. “[T]he underlying functional concern here is a relative one: how much future innovation is foreclosed relative to the contribution of the inventor[?]” Mayo, 2012 WL 912952 at *15. This is very much like saying that an inventor of particular inventive species cannot claim an entire genus that effectively precludes the development of further inventive species in the same field. “Unlike, say, a typical patent on a new drug or a new way of using an existing drug, the patent claims [in suit] do not confine their reach to particular applications of those laws. The presence here of the basic underlying concern that these patents tie up too much future use of laws of nature simply reinforces our conclusion that the processes described in the patents are not patent eligible . . . .” Id. at *14.

According to Mayo, “a process that focuses upon the use of a natural law [must] also contain other elements or a combination of elements, sometimes referred to as an ‘inventive concept,’ sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the natural law itself.” 2012 WL 912952 at *5. What is an “inventive concept”? The Court formulated the analysis in negative rather than positive terms: one cannot merely “pick[] out the relevant audience” or recite “well-understood, routine, conventional activity[.]” Id. at *8-9,11. Claims cannot simply reserve the commercial market for a law of nature, that is, use of the law of nature in a given technological or economic environment, without explicitly reciting a useful new contribution within that environment. Such claims are unpatentably preemptive when drafted in an open-ended fashion that allows key steps to be performed with “whatever process the doctor or laboratory wishes to use[,]” rather than with a specific, new methodology.[6]

While past Supreme Court opinions focused on “post-solution” activities being non-patentable, the new approach reformulates that doctrine as a concern with claims to pre-solution activities. Mayo, 2012 WL 912952 at *9. This more practical formulation asks whether the claims recite enough technical detail, and presumes that audience or market identification activities do not reach “inventive concept” activities. The new touchstone is that claims must recite enough detail to document a particular, non-conventional, non-obvious technological contribution beyond (i.e., subsequent to) merely “picking out the relevant audience” or economic market. The applicability of Mayo to software or business method claims will likely center on this inquiry.

Although Mayo makes no reference to any Federal Circuit case law, it rejected the position argued by the Government as amicus curiae and often espoused by certain Federal Circuit judges, that the underlying concerns can be resolved under §§ 102, 103 and 112, because the judicially-created exceptions to § 101 would then be “dead letter”.[7] Patentability analysis under § 101 may overlap with other inquiries, but it cannot be subsumed by them.

SOFTWARE AND BUSINESS METHODS

Mayo dealt with medical procedures, but it echoed a number of recent opinions from a particular faction of Federal Circuit judges in the areas of software and business methods, which are assessed for their relationships to “abstract ideas”.[8] Those cases held that a claim cannot carve out a portion of an abstract idea for patent protection merely on the basis of reciting an incidental machine, computer or broad field of endeavor. Dealertrack, 2012 WL 164439 at *17-18. A patentee cannot simply carve up the economic marketplace for an abstract idea by limiting herself to activities involving a computer.  Claims that are “preemptive of a fundamental concept or idea that would foreclose innovation” in a given area are too abstract to be patent-eligible. Id. at *16. For example, “using a clearinghouse generally and using a clearinghouse specifically to apply for car loans, like the relationship between hedging and hedging in the energy market in Bilski II, is of no consequence without more.” Id. at *18. The problem of preemption is not overcome unless the claims reduce the level of abstraction below a threshold. How much is required in the claims is the heart of the matter. In the language of Mayo, one would ask whether the recitation of a machine, computer or broad field of endeavor describes a non-conventional, non-obvious “inventive concept” more specific than the underlying abstract idea. This is a matter of identifying what is the relevant economic market or field of endeavor (i.e., the abstract idea), and deciding whether a broad (genus) claim effectively forecloses all of it.

Establishing New Preemption Criteria

Some recent Federal Circuit cases have sought more detailed criteria for patentability. The boldest case is Cybersource, which struck down so-called Beauregard claims, stating that “merely claiming a software implementation of a purely mental process that could otherwise be performed without the use of a computer does not satisfy the machine prong of the [MoT] test.” Cybersource, 654 F.3d at 1375. Cybersource held that “the basic character of a process claim drawn to an abstract idea is not changed by claiming only its performance by computers, or by claiming the process embodied in program instructions on a computer readable medium.” Id. Later opinions confirmed this view. “Simply adding a ‘computer aided’ limitation to a claim covering an abstract concept, without more, is insufficient to render the claim patent eligible.” Dealertrack, 2012 WL 164439 at *17; accord Fort Props., 2012 WL 603969 at *6. This recalls Mayo’s instruction that reciting conventional or obvious activity is insufficient. In view of these opinions, owners of patents with Beauregard claims may wish to consider reissue.

Judge Rader has emphasized that “[t]he court does not define the level of programming complexity required before a computer-implemented method can be patent eligible.” Ultramercial, LLC v. Hulu, LLC, 657 F.3d 1323, 1328 (Fed. Cir. 2011). However, the Fort Properties opinion cited Ultramercial approvingly where Judge Rader pointed out claim language in which “[m]any of these steps are likely to require intricate and complex computer programming” and that “[v]iewing the subject matter as a whole, the invention involves an extensive computer interface.”[9] Judge Rader was detailing how the claims would meet an “inventive concept” or technological arts test for preemption, even as he declined to establish a definite threshold.

Machine-or-Transformation?

Strikingly, Mayo did not utilize the MoT test at all. Preemption has instead become a separate inquiry that perhaps takes precedence over the MoT test. This may make the MoT test something of a secondary inquiry, useful only where there is some nominal recitation of a specific “inventive concept” to alleviate preemption concerns.

The “transformation” prong of the MoT test rarely supports patentability in close cases. Few if any “processes” outside the realm of manufacturing methods seem to satisfy that prong, because an “abstract concept cannot be transformed into patentable subject matter merely because of connections to the physical world through deeds, contracts and real property.” Fort Props., 2012 WL 603969 at *5. Moreover, “mere manipulation or reorganization of data . . . does not satisfy the transformation prong.” Cybersource, 654 F.3d at 1375.

For the “machine” prong of the MoT test, recent Federal Circuit case law has focused on recitations of a computer or computer-readable medium. These analyses recall Mayo, and address the possibility of performing a method mentally. “[T]he incidental use of a computer to perform [a] mental process . . . does not impose a sufficiently meaningful limit on . . . claim[] scope.” Cybersource, 654 F.3d at 1375. “In order for the addition of a machine to impose a meaningful limit on the scope of a claim, it must play a significant part in permitting the claimed method to be performed, rather than function solely as an obvious mechanism for permitting a solution to be achieved more quickly, i.e., through the utilization of a computer for performing calculations.” SiRF Tech., 601 F.3d at 1333. The undefined phrase “computer aided” does not make the claimed concept less abstract where “[t]he claims are silent as to how a computer aids the method, the extent to which a computer aids the method, or the significance of a computer to the performance of the method.”. Dealertrack 2012 WL 164439 at *17. The Cybersource and Fort Properties opinions (both finding claims unpatentable) noted that the patent owners admitted the methods could be performed mentally, while in SiRF (finding claims patentable) there was no evidence that the invention could be performed purely mentally.

EMERGING VIEWS

It is still a matter of guesswork to articulate a positive test for patentable subject matter base on recent cases. However, the order of analysis from older Supreme Court precedent has effectively been reversed. “Preemption” has become a separate and distinct test, one that may or may not be supplemented with the MoT test. Furthermore, emphasis on an “inventive concept” requirement may be a step toward something like a technological arts test.

Recent cases express concern for how patent claims can preempt what amount to entire economic markets, thereby foreclosing further innovative activity. While it may take great business skill to identify lucrative market segments, those activities don’t seem to contribute an “inventive concept” to the useful arts in the manner required. Courts won’t allow patent claims to carve up economic markets based only on cursory reference to practical implementations that make a market lucrative. Such monopolization “through the grant of a patent might tend to impede innovation more than it would tend to promote it.” Mayo, 2012 WL 912952 at *4. These are old concerns for enablement and definiteness, but are new under § 101 analyses.

Patent claims must generally establish how to achieve a technical solution, not merely identify what a desired result may be. It is not enough to write a claim that conveys no more than surveying a landscape, choosing the most desirable tract, and saying from a distance, with finger pointing, “I claim this in the name of Spain.” Doing so potentially forecloses exploration of that territory, which, in this example, was of course preexisting. A technological contribution or “inventive concept” establishing how something new was achieved in the territory must be evident from the claims in a non-trivial way. Even where a technological contribution is disclosed in a patent specification, claims written at such a high level of abstraction that the specific technological contribution cannot be discerned still raise patent-eligibility concerns. The technical contribution could be small. Seasoned practitioners understand that patents usually cover small, incremental improvements. But if claims do no more than identify a realm of economic opportunity, they would seem too broad. Such claims are likely now unpatentably preemptive under § 101.

In software development, a common concern is that there may be so many alternative means to achieve a given objective that unless preemptive claims are obtained the patent is “worthless”. This calls for hard decisions. Those seeking patent protection will be forced to disclose all the important species and claim them piecemeal, expending considerable effort to create a patent thicket, or content themselves with more limited claim coverage that allows others to develop and practice alternative technical solutions. But without restrictions on preemption, litigation pitting “patent trolls” against productive industry risks turning letters patents into letters of marque and reprisal, the historical authorizations for “privateers” to capture foreign ships at sea and bring them before admiralty courts for condemnation.

Mayo hardly ends the § 101 saga. Expect further litigation before these issues are settled.

[1] 130 S.Ct. 3218, 95 U.S.P.Q.2d 1001 (2010) (“Bilski II”).

[2] 2012 WL 912952 (U.S. March 20, 2012) (No. 10-1150).

[3] The Court discusses O’Reilly v. Morse, 15 How. 62, 112–120, 14 L.Ed. 601 (1854) at length, but makes no reference to predictability of the art. Contrast M.P.E.P. § 2164.03.

[4] Ass’n Molecular Pathology v. Myriad Genetics, 2012 WL 986819 (March 26, 2012).

[5] U.S. Pat. Nos. 6,355,623 and 6,680,302.

[6] Id. at *8-9. Compare Halliburton Oil Well Cementing Co. v. Walker, 329 U.S. 1 (1946) and later cases under § 112, ¶ 2 on functional claiming at the point of novelty. E.g., Ex parte Miyazaki, 89 USPQ.2d 1207 (BPAI 2008); Halliburton Energy Servs., Inc. v. M-I LLC, 514 F.3d 1244 (Fed. Cir. 2008).

[7] 2012 WL 912952 at *15-16; contrast Myspace, Inc. v. GraphOn Corp., 2012 WL 716435 (Fed. Cir. 2012). It is curious to call judicially-created doctrines “dead letter”. But this may simply set the stage for a constitutional analysis. See In re Comiskey, 554 F.3d 967, 976-77 (2009) (revised opinion).

[8] Key opinions by this faction include Fort Props., Inc. v. Am. Master Lease LLC, 2012 WL 603969 (Fed. Cir. Feb. 27, 2012); Dealertrack, Inc. v. Huber, 2012 WL 164439 (Fed. Cir. Jan. 20, 2012); Cybersource Corp. v. Retail Decisions, Inc., 654 F.3d 1366 (Fed. Cir. 2011); SiRF Tech., Inc. v. Int’l Trade Comm’n, 601 F.3d 1319 (Fed. Cir. 2010); and Comiskey, 554 F.3d 967.

[9] Ultramercial, 657 F.3d at 1328. Ultramercial’s U.S. Pat. No. 7,346,545 disclosed no software code and only high-level flow charts.

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