No. 08-964
————
IN THE
Supreme Court of the United States
BERNARD L. BILSKI AND RAND A. WARSAW,
Petitioners,
v.
JOHN J. DOLL, ACTING UNDER SECRETARY
OF COMMERCE FOR INTELLECTUAL
PROPERTY AND ACTING DIRECTOR
OF THE UNITED STATES PATENT AND
TRADEMARK OFFICE,
Respondent.
————
On Writ of Certiorari to the
United States Court of Appeals
for the Federal Circuit
BRIEF OF DOUBLE ROCK CORPORATION,
ISLAND INTELLECTUAL PROPERTY LLC,
LIDs CAPITAL LLC, INTRASWEEP LLC,
ACCESS CONTROL ADVANTAGE, INC.,
ECOMP CONSULTANTS, PIPELINE TRADING
SYSTEMS LLC, REARDEN CAPITAL
CORPORATION, CRAIG MOWRY AND PCT
CAPITAL LLC AS AMICI CURIAE IN
SUPPORT OF PETITIONERS
Charles R. Macedo
Counsel of Record
Anthony F. Lo Cicero
Norajean McCaffrey
AMSTER, ROTHSTEIN & EBENSTEIN LLP
90 Park Avenue
New York, NY 10016
(212) 336-8000
Counsel for Amici Curiae
LEGAL PRINTERS LLC, Washington DC ! 202-747-2400 ! legalprinters.com
i
TABLE OF CONTENTS
TABLE OF AUTHORITIES .....................................iii
STATEMENT OF INTEREST
OF AMICI CURIAE ........................................ 1
SUMMARY OF ARGUMENT.................................... 2
ARGUMENT .............................................................. 7
I.
GENERAL PRINCIPLES GOVERNING
PATENT-ELIGIBLE SUBJECT MATTER
BASED ON THIS COURT’S PRECEDENT... 8
II. THE
BILSKI MAJORITY ERRONEOUSLY
DEVIATED FROM THIS COURT’S
PRECEDENT ................................................ 10
A. The
Bilski Majority Erroneously Adopted the
“Machine-or-Transformation” Test as the Sole
Governing Test .............................................. 11
B. The
Bilski Majority Erroneously Limits the
Definition of “Process” and Erroneously
Adopts a Rigid Version of the “Machine-or-
Transformation Test” Contrary To Clear
Congressional Intent ..................................... 14
C. The
Bilski Majority’s Restriction on Patent-
Eligible Transformations Is Contrary to The
Rationale of this Court’s Precedent .............. 27
D.
This Court Should Clarify That a Computer-
Implemented Invention Which Operates on a
ii
General-Purpose Computer Is Nonetheless
Patent-Eligible as Long as It Does Not
Preempt a Fundamental Principle ............... 33
III.
BUSINESS- AND COMPUTER-RELATED
PATENTS ARE AN IMPORTANT AND
VALUABLE PART OF OUR ECONOMY AND
PROMOTE THE PROGRESS OF THE
USEFUL ARTS ............................................. 37
CONCLUSION......................................................... 44
APPENDIX A.......................................................... A-1
iii
TABLE OF AUTHORITIES
CASES
AT&T Corp. v. Excel Commc’ns, Inc., 172 F.3d
1352 (Fed. Cir. 1999)............................... 7, 10, 22
Bob Jones Univ. v. United States, 461 U.S.
574 (1983) .......................................................... 26
Cochrane v. Deener, 94 U.S. 780 (1877)...... 17, 20, 26
Corning v. Burden, 56 U.S. (15 How.) 252
(1854) ...................................................... 9, 26, 27
Cybersource Corp. v. Retail Decisions, Inc.,
No. C 04-03268, 2009 U.S. Dist. LEXIS
26056 (N.D. Cal. Mar. 26, 2009)....................... 36
Dann v. Johnston, 425 U.S. 219 (1976) .................. 13
DealerTrack, Inc. v. Huber, No. CV 06-2335,
2009 U.S. Dist. LEXIS 58125 (C.D. Cal.
July 7, 2009) ...................................................... 36
Diamond v. Chakrabarty, 447 U.S. 303
(1980) ....................................... 7, 9, 14, 20, 21, 37
Diamond v. Diehr, 450 U.S. 175 (1981) .......... passim
Expanded Metal Co. v. Bradford, 214 U.S. 366
(1909) ....................................................... 4, 28, 29
Ex parte Atkin, Appeal 2008-4352, slip. op. at
18 (BPAI Jan. 30, 2009) ................................... 12
Ex parte Cornea-Hasegan, No. 2008-4742, slip
op. at 9-10 (BPAI Jan. 13, 2009) ...................... 35
iv
Ex parte Gutta, No. 2008-3000, slip op. at 5-6
(BPAI Jan. 15, 2009) ........................................ 35
Ex parte Hardwick, Appeal 2009-002399, slip
op. at 6-9 (BPAI June 22, 2009) ....................... 12
Ex parte Nawathe, No. 2007-3360, 2009 WL
327520, at *4 (BPAI Feb. 9, 2009) ................... 35
Festo Corp. v. Shoketsu Kinzoku Kogyo
Kabushiki Co., 535 U.S. 722 (2002) ................. 37
Fort Properties, Inc. v. American Master
Lease, LLC, 609 F.Supp.2d 1052 (C.D.
Cal. 2009) .......................................................... 13
Gottschalk v. Benson, 409 U.S. 63
(1972) ......................................................... passim
In re Abele, 684 F.2d 902 (C.C.P.A. 1982) .............. 12
In re Alappat, 33 F.3d 1526 (Fed. Cir. 1994) .......... 34
In re Bilski, 545 F.3d 943 (Fed. Cir. 2008) ..... passim
J.E.M. AG Supply v. Pioneer Hi-Bred
International, 534 U.S. 124 (2001)............. 20, 21
John R. Sand & Gravel Co. v. United States,
552 U.S. 130, 128 S.Ct. 750 (2008)................... 25
KSR v. Teleflex, 550 U.S. 398 (2007) ...................... 11
Moskal v. United States, 498 U.S. 103 (1990) ........ 21
Mountain States Telegraph & Telegraph v.
Pueblo of Santa Ana, 472 U.S. 237 (1985) ....... 21
Parker v. Flook, 437 U.S. 584
(1978) ........................................... 2, 10, 11, 22, 27
v
Patterson v. McLean Credit Union, 491 U.S.
164 (1989) .......................................................... 25
Shepard v. United States, 544 U.S. 13 (2005) ........ 25
State St. Bank & Trust Co. v. Signature
Fin.Group, Inc., 149 F.3d 1368 (Fed. Cir.
1998) .......................................................... passim
Tilghman v. Proctor, 102 U.S. 707 (1881) ........... 3, 20
TRW Inc. v. Andrews, 534 U.S. 19 (2001)............... 21
United States v. Dubilier Condenser Corp.,
289 U.S. 178 (1933) ........................................... 21
U.S. CONSTITUTION
US Const. art. I, § 8, cl. 8............................... 6, 14, 37
FEDERAL STATUTES
35 U.S.C. §100 ............................................. 17, 18, 19
35 U.S.C. §101 ................................................. passim
35 U.S.C. §102 ....................................................... 7, 9
35 U.S.C. §103 ................................................. 7, 9, 13
35 U.S.C. §112 ........................................... 7, 9, 13, 28
35 U.S.C. §273 ......................................... 4, 22, 23, 40
35 U.S.C.A. 1 (1954 ed.) .......................................... 19
vi
LEGISLATIVE HISTORY
145 CONG. REC. H6942 (daily ed. Aug. 3,
1999) .................................................................. 23
145 CONG. REC. S14717 (daily ed. Nov. 17,
1999) .................................................................. 23
H.R. 1908, 110th Cong. § 10 .................................... 25
H.R. 2365, 110th Cong.. ........................................... 25
H.R. REP. NO. 82-1923 (1952).............................. 7, 18
H.R. REP. NO. 106-287, pt. 1 (1999) ........................ 24
Patent Act of 1790, § 1 Stat. 109, 110 ..................... 15
Patent Act of 1793, § 1, 1 Stat. 318-323 ...... 15, 16, 17
S. 861, 110th Cong. § 303. ....................................... 25
S. 2369, 110th Cong. ................................................ 25
S. REP. NO. 82-1979 (1952) ........................................ 7
LAW REVIEW ARTICLES
Julie E. Cohen & Mark A. Lemley, Patent
Scope and Innovation in the Software
Industry, 89 Cal. L. Rev. 1 (2001) .................... 40
Giles S. Rich, The Principles of Patentability,
42 J. Pat. Off. Soc'y 75 (1960)........................... 39
vii
John A. Squires and Thomas S. Biemer,
Patent Law 101: Does A Grudging
Lundgren Panel Decision Mean That The
USPTO Is Finally Getting The Statutory
Subject Matter Question Right?, 46 IDEA
561 (2006) .......................................................... 42
INTERNET RESOURCES
Letter from Patti McClanahan, Managing
Director, SIFMA, to IRS (Jan. 31, 2008),
available at
http://www.regulations.gov/fdmspublic/co
mponent/main?main=DcumentDetail&o=
09000064803a89dd ........................................... 43
Letters from Arlen Specter, to Hon. Henry
Paulson, Secretary of Treasury (Feb. 1,
2008) (“Specter Letter”), available at
http://www.regulations.gov/fdmspublic/co
mponent/main?main=DocketDetail&o=09
00064803ba1a6 .......................................... 26, 39
A USPTO White Paper (ver. 1.43), available
at http://www.uspto.gov/
web/menu/busmethp/whitepaper.pdf ............... 33
MISCELLANEOUS
5 LIFE AND WORKS OF ABRAHAM LINCOLN,
Speeches and Presidential Addresses,
1859-1865 .......................................................... 38
viii
5 WRITINGS OF THOMAS JEFFERSON 75-76
(Washington ed. 1871) ..................................... 15
75 J. Pat. & Trademark Off. Soc'y 161 (1993) . 18, 19
PATENTS
U.S. Patent No. 871, patented Aug. 3, 1838,
entitled “Bank Note” ........................................ 31
U.S. Patent No. 1700, issued July 18, 1840,
entitled “Improvement in the
Mathematical Operation of Drawing
Lottery-Schemes” ............................................. 31
U.S. Patent No. 6,469 filed Mar. 10, 1849,
entitled “Buoying Vessels Over Shoals”........... 38
U.S. Patent No. 389,818, filed Jan. 19, 1888,
entitled “Complemental Accident
Insurance Policy” .............................................. 31
U.S. Reissue Patent No. RE11,270, filed July
21, 1892, entitled “Means For Insuring
Travelers Against Loss By Accident” ............... 31
U.S. Patent No. 883,380, filed Apr. 12, 1906,
entitled “Check” ................................................ 31
U.S. Patent No. 918,280, filed Aug. 15, 1907,
entitled “Fractional-Insurance Policy”............. 32
ix
U.S. Patent No. 1,045,331, filed July 19, 1911,
entitled “Cigar Container”................................ 32
U.S. Patent No. 1,150,708, filed Mar. 9, 1914,
entitled “Method of Marketing Trees” ............. 32
U.S. Patent No. 1,254,870, filed Sept. 9, 1916,
entitled “Means Used In Accounting” .............. 32
U.S. Patent No. 1,419,739, filed June 17, 1920,
entitled “Marketing Bag”.................................. 32
1
STATEMENT OF INTEREST OF AMICI CURIAE1
The various amici curiae sponsoring this
submission (“Amici Curiae”) reflect mid-sized and
smaller members of the financial service, e-
commerce, and computer-related industries. While
Amici Curiae do not advocate that the claims at
issue are entitled to be patented, each believe it is
important to maintain a strong patent system that
allows for all types of innovations that do not pre-
empt a fundamental principle to remain patent-
eligible subject matter. A detailed explanation of
each Amici Curiae is provided in Appendix A.
1 The parties have consented to the filing of this brief and
letters of consent have been filed with the Clerk. Pursuant to
Rule 37.6, no counsel for a party authored this brief in whole or
in part, and no counsel or party made a monetary contribution
intended to fund the preparation or submission of this brief.
No person other than Amici Curiae, its members, or its counsel
made a monetary contribution to its preparation or submission.
2
SUMMARY OF ARGUMENT
This Court’s precedent provides broad
guidelines on what constitutes patent-eligible
subject matter:
1.
the claimed subject matter must fall within
one of the four statutory categories of patent-
eligible subject matter–process, machine,
manufacture or composition of matter (or any
improvement thereof); and
2.
the claimed subject matter must not preempt
what the Bilski majority calls “fundamental
principles”2 – laws of nature, natural
phenomena, or abstract ideas.
See Diamond v. Diehr, 450 U.S. 175, 185 (1981)
(citing Parker v. Flook, 437 U.S. 584, 589 (1978) and
Gottschalk v. Benson, 409 U.S. 63, 67 (1972)).
While this Court has found certain safe
harbors that have met these broad guidelines, it has
also repeatedly refused, over centuries of such
precedent, to turn such safe harbors into rigid tests.
See, e.g., Flook, 437 U.S. at 589 n.9 (rejecting
argument 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,’”;
this Court “assume[s] that a valid process patent
may issue even if it does not meet one of these
qualifications of our earlier precedents.”) (citations
2 See In re Bilski, 545 F.3d 943, 952 n.5 (Fed.Cir. 2008), cert.
granted, 129 S.Ct. 2735 (2009).
3
omitted); Benson, 409 U.S. at 71 (rejecting argument
that “a process patent must either be tied to a
particular machine or apparatus or must operate to
change articles or materials to a ‘different state or
thing’” since “[w]e do not hold that no process patent
could ever qualify if it did not meet the requirements
of our prior precedents.”); Tilghman v. Proctor, 102
U.S. 707, 722 (1881) (“The patent law is not confined
to new machines and new compositions of matter,
but extends to any new and useful art or
manufacture. A manufacturing process is clearly an
art, within the meaning of the law.”) (quoted in
Diehr, 450 U.S. at 184 n.8).
Even the Bilski majority opinion by the
Federal Circuit below recognized that other efforts to
adopt rigid rules for determining whether a claim is
patent-eligible subject matter, like the so-called
“technological arts” test suggested by the U.S.
Patent and Trademark Office (“USPTO”) and other
tests, proved “inadequate” and “insufficient.” See
Bilski, 545 F.3d at 958-61.
While much of the majority decision correctly
describes this Court’s binding precedent in this area,
the Bilski majority nonetheless deviates from this
Court’s precedent and errs in the following
important respects, which Amici Curiae respectfully
submit that this Court should correct:
1.
In the Federal Circuit’s quest to find a “test or
set of criteria” to “govern” the USPTO and
courts in determining patent-eligibility, the
Bilski majority erroneously adopts as the
“governing test” a mechanical version of the
4
so-called “machine-or-transformation” test.
Bilski, 545 F.3d at 952, 956. Adoption of this
rigid rule has wreaked havoc on the stability
and reliability of hundreds of thousands of
issued patents (as evidenced by litigations
that have begun to sprout since Bilski) and
uncounted pending applications (as evidenced
by increasingly rigid rules coming out of
decisions of the Board of Patent Appeals and
Interferences (“BPAI”) at the USPTO). Amici
Curiae respectfully request this Court to quiet
title on meritorious inventions and refocus the
inquiry on whether the claimed invention is
novel, non-obvious, useful and sufficiently
well-defined, as contemplated by the Patent
Act.
2.
The Bilski majority also departs from this
Court’s precedent and the broad statutory
construction intended by Congress by ignoring
the statutory definition of “process” in the
Patent Act and engrafting extra-statutory
limitations on patent-eligible processes. Cf.
Bilski, 545 F.3d at 951 n.3. The majority
decision also erred in failing to address the
effect of the adoption of the prior user right
(35 U.S.C. §273) in response to State Street
Bank & Trust Co. v. Signature Financial
Group, Inc., 149 F.3d 1368 (Fed.Cir. 1998),
and Congress’ legislative acquiescence to the
Federal Circuit’s holding in that case.
3.
The Bilski majority’s blanket exclusion of
“electronic signals and electronically-
manipulated data” and “business methods,”
5
involving, e.g., manipulation of “legal
obligations, organizational relationships, and
business risks”–today’s “raw materials” of
innovation–from being patent-eligible subject
matter unless tied to a computer or some
other machine (see Bilski, 545 F.3d at 962) is
the result of a wooden analysis that is
contrary to this Court’s rationale in
developing the transformation prong of the
“machine-or-transformation” test. See
Expanded Metal Co. v. Bradford, 214 U.S. 366
(1909). While Amici Curiae agree that
definiteness requirements may preclude
claims directed to purely mental steps from
being patent-eligible subject matter, the
patent-eligibility test under 35 U.S.C. §101
should turn only on whether the claim
preempts an abstract idea or other
fundamental principle, not on what type of
transformation occurs.
4.
The majority decision, which in some respects
helped clarify this Court’s prior precedent in
Benson, nonetheless failed to adequately
clarify whether a distinction should be drawn
between a computer-implemented invention
that is implemented on a general-purpose
computer rather than on a specific-purpose
computer. Unfortunately, much confusion has
ensued at least at the BPAI and in the district
courts, where mechanical distinctions have
been drawn that are contrary to the
underlying principles set forth in Benson and
this Court’s other governing precedent. Amici
6
Curiae respectfully request that this Court
clarify that such distinctions are misplaced.
The role of patents related to financial
services, e-commerce, and computers in the U.S.
economy is vital. Such patents, when appropriately
awarded, encourage innovation and transparency,
and advance the Constitutional goal of “promot[ing]
the Progress of Science and useful Arts.” U.S. Const.,
art. I, §8, cl.8. This Court should resist temptation
to bow to the outspoken minority who would
undermine a system that our founding fathers
thought was so important that they included it in
Article I of the Constitution and enacted it into one
of its earliest public laws, and which has been
maintained ever since. Amici Curiae respectfully
submit that this Court should reaffirm the broad
scope of patent-eligible subject matter under §101.
7
ARGUMENT
In 1998, the Federal Circuit had the
forethought and insight to recognize that the
revolution in information technology and availability
of the Internet would radically change the way that
the world does business and that U.S. patent law
would need to adapt to this new technological and
commercial reality by confirming the availability of
patent protection for so-called “business method”
patents. First, in State Street, and later in AT&T
Corp. v. Excel Communications, Inc., 172 F.3d 1352
(Fed.Cir. 1999), the Federal Circuit followed this
Court’s lead in Diamond v. Chakrabarty to recognize
that patent-eligible subject matter should be broadly
construed to “include anything under the sun that is
made by man.” 447 U.S. 303, 308-09 (1980) (quoting
S. REP. NO. 82-1979, at 5 (1952); H.R. REP. NO. 82-
1923, at 6 (1952)). These decisions, an inevitable
evolution in patent law based on this Court’s binding
precedent, fostered a renaissance in patent law.
However, as more and more business-related
and computer-related patents were sought, the
USPTO started to become overwhelmed. A number
of “dubious quality” patents issued and were
litigated. Scrutiny from the press, Congress and this
Court ensued. At the core, the problems caused by
these patents were based on their failure to comply
with §§112, 102 and 103 of the Patent Act, rather
than by any real dispute over whether those patents
were patent-eligible subject matter.
A vocal minority now cries that this Court
should throw the baby out with the bath water–and
8
improperly restrict the scope of patent-eligible
subject matter–because some poor quality business
method patents have issued. This Court should
resist that temptation. Patents play an important
and useful role in our economy by fostering
innovation and adding to the public storehouse of
knowledge. So-called “business method” patents also
have, since the founding of our nation, played an
important role in our nation’s development and
economy. The development of the Internet and a
digital economy makes that role even more
important.
I.
GENERAL PRINCIPLES GOVERNING
PATENT-ELIGIBLE SUBJECT MATTER
BASED ON THIS COURT’S PRECEDENT
The inquiry into what constitutes patent-
eligible subject matter begins with the Patent Act,
which reads as follows:
Whoever invents or discovers any new
and useful process, machine,
manufacture, or composition of matter,
or any new and useful improvement
thereof, may obtain a patent therefor,
subject to the conditions and
requirements of this title.
35 U.S.C. §101.
Thus, when an invention falls within at least
one of the four enumerated categories of patent-
eligible subject matter – “process,” “machine,”
9
“manufacture,” or “composition of matter” – with but
three exceptions, such invention is patent-eligible
subject matter, and must be considered under the
other provisions of the patent law, e.g., 35 U.S.C.
§§102, 103, 112. See, e.g., Diehr, 450 U.S. at 185.
The only three exceptions are “laws of nature,
natural phenomena, and abstract ideas.” Diehr, 450
U.S. at 185 (“Excluded from such patent protection
are laws of nature, natural phenomena, and abstract
ideas.”); Chakrabarty, 447 U.S. at 309.
In Diehr, this Court recognized the difference
between an invention “of some practical method or
means of producing a beneficial result or effect,”
which is patent-eligible subject matter, and “the
result or effect itself,” which is not patent-eligible
subject matter. See Diehr, 450 U.S. at 182 n.7
(quoting Corning v. Burden, 56 U.S. (15 How.) 252,
267-68 (1854)).
Diehr concluded its analysis by confirming
that, although a claim to a mathematical formula in
the abstract is not patent-eligible subject matter
since it is merely an “abstract idea,” by contrast a
claim containing a mathematical formula could be
patent-eligible subject matter as follows:
On the other hand, when a claim
containing a mathematical formula
implements or applies that formula in a
structure or process which, when
considered as a whole, is performing a
function which the patent laws were
designed to protect (e.g., transforming
10
or reducing an article to a different
state or thing), then the claim satisfies
the requirements of §101.
Diehr, 450 U.S. at 192 (emphasis added).
Significantly, as the Federal Circuit
previously recognized in AT&T:
The ‘e.g.’ signal denotes an example, not
an exclusive requirement.
172 F.3d at 1358-59.
This list was not intended to be exhaustive, as
even the USPTO recognizes in its prior submission
to the Federal Circuit (USPTO Fed.Cir. Supp. Br. at
8, 25), and this Court confirmed in its precedent.
See Benson, 409 U.S. at 71; Flook, 437 U.S. at 589
n.9. Cf. Bilski, 545 F.3d at 956 n.12.
II.
THE
BILSKI MAJORITY
ERRONEOUSLY DEVIATED FROM
THIS COURT’S PRECEDENT
While Amici Curiae do not endorse the
patentability of the particular patent claim at issue
here, Amici Curiae believe that the Bilksi majority
at the Federal Circuit erred in several fundamental
ways that should be addressed and corrected by this
Court.
11
A.
The Bilski Majority Erroneously Adopted
the “Machine-or-Transformation” Test as
the Sole Governing Test
In seeking to find a “test or set of criteria” to
“govern” the USPTO and courts in determining
patent-eligibility, the Bilski majority erroneously
adopts as the “governing test” a mechanical version
of the “machine-or-transformation” test. See Bilski,
545 F.3d at 952, 956. This is the same type of error
that the Federal Circuit was chastised for making in
KSR International Co. v. Teleflex, Inc., after it
adopted the TSM test as a “rigid” rule limiting the
obviousness inquiry:
We begin by rejecting the rigid
approach of the Court of Appeals.
550 U.S. 398, 419 (2007).
As discussed in Section I, the “machine-or-
transformation” test is not “the” only way to
establish patent-eligible subject matter, but is
merely an exemplary safe-harbor recognized by this
Court. The proper test is whether the claimed
subject matter falls within one of the four statutory
classes of subject matter, and does not preempt a so-
called fundamental principle. As Diehr explained,
Flook and Benson “stand for no more than these
long-established principles.” 450 U.S. at 185.
Further, in attempting to apply this rigid rule,
the BPAI at the USPTO and lower courts have
ended up adopting even more rigid rules without
12
making an effort to consider the underlying rationale
that guided this Court’s decisions.
For example, the BPAI recently rejected a
claim for synthesizing speech signals, which
included computing steps, and in which two sets of
signals were transformed to produce speech
signals. The BPAI’s analysis fails to directly address
whether the claim merely preempts a fundamental
principle as this Court directs. Instead it applies a
wooden analysis of specific prior holdings from In re
Abele, 684 F.2d 902 (C.C.P.A. 1982), as discussed by
the Bilski majority, 545 F.3d at 962-63, to reject the
patent-eligibility of this claimed process, even
though it was not an abstract idea by any
means. See Ex parte Hardwick, Appeal 2009-
002399, slip op. at 6-9 (BPAI June 22, 2009). The
test set forth in Abele and its prior precedent (the so-
called “Freeman-Walter-Abele test”) was one of the
tests expressly rejected in Bilski, 545 F.3d at 958-59.
Similarly, the BPAI has sought to apply the
“machine-or-transformation” test as a rigid rule to
system claims, despite the Federal Circuit’s warning
that “[i]n State Street, as is often forgotten, we
addressed a claim drawn not to a process but to a
machine” Bilski, 545 F.3d at 960 n.18. See Ex parte
Atkin, Appeal 2008-4352, slip. op. at 18 (BPAI Jan.
30, 2009) (broadly applying Bilski to reject not only
method claims but systems claims, finding that the
system claims encompassed “any and all structures
for performing the recited functions” and therefore
the system claims were “at least as broad as method
claims ... which we have determined recite patent
ineligible subject matter under Bilski ”; Making this
13
determination even though the system claims were
more appropriately considered under §112 and also
rejected on that ground.).
Rigid application by courts of the “governing”
rule from Bilski has also resulted in other previously
approved claimed methods being found to no longer
be patent-eligible. For example, in Fort Properties,
Inc. v. American Master Lease, LLC, 609 F.Supp.2d
1052 (C.D.Cal. 2009), based on a wooden analysis of
the “governing” test, the district court invalidated
various issued method claims in a patent relating to
real estate transactions in which legal obligations
are transformed and evidenced by deed
shares. Again, the court did not address whether
the claim, which clearly claimed one of the four
statutory classes of subject matter–a process–fell
into one of the exceptions, e.g., was merely
preempting an abstract idea.
Regardless of whether these claims have other
failings, the adoption of the rigid “machine-or-
transformation” test in Bilski has resulted in courts
and the USPTO missing the point and using §101 as
a gatekeeper in a manner in which it was never
intended by the Patent Act as enacted by Congress
or interpreted by this Court to be used. Cf. Dann v.
Johnston, 425 U.S. 219, 221 (1976) (avoiding §101
issue in favor of §103 analysis).
14
B.
The Bilski Majority Erroneously Limits the
Definition of “Process” and Erroneously
Adopts a Rigid Version of the “Machine-or-
Transformation Test” Contrary To Clear
Congressional Intent
As this Court is well aware, it is the role of
Congress to set policy when it enacts statutes, the
role of the executive branch (including the USPTO)
to carry out the laws as enacted, and the role of the
courts (including this Court and the Federal Circuit)
to interpret the law. See, e.g., Chakrabarty, 447 U.S.
at 315. This Court does not (and the Federal Circuit
should not) set new policies, even if it disagrees with
the policies set by current statutes. Any problems
with those policies is the province of Congress.
In this regard, since this country’s inception, a
fundamental policy of our government has been to
establish a patent system to promote the progress of
the useful arts. This policy was Constitutionally set,
when Congress was given the power to enact patent
laws:
To promote the Progress of Science and
useful Arts, by securing for limited
Times to Authors and Inventors the
exclusive Right to their respective
Writings and Discoveries;
U.S. Constitution Article I, §8, cl. 8.
This power was promptly exercised in 1790
when Congress enacted the first patent act, which
15
originally defined the scope of patent-eligible subject
matter as follows:
[A]ny useful art, manufacture, engine,
machine, or device, or any improvement
therein not before known or used.
Patent Act of 1790, 1 Stat. 109, 110, §1 (1790).
Shortly thereafter, in 1793, Congress revised
the scope of patent-eligible subject matter to read as
follows:
[A]ny new and useful art, machine,
manufacture or composition of matter,
or any new and useful improvement on
any art, machine, manufacture or
composition of matter, not known or
used before the application.
Patent Act of 1793, 1 Stat. 318-323, §1 (1793).3
This broad language has been left intact by
Congress in every subsequent patent statute, with
but small modifications in the Patent Act of 1952,
resulting in the current language of §101, which
read as follows:
Whoever invents or discovers any new
and useful process, machine,
3 Thomas Jefferson, the driving force behind early patent
policy, incorporated his philosophy that “ingenuity should
receive a liberal encouragement” into the patent acts. 5
WRITINGS OF THOMAS JEFFERSON 75-76 (Washington ed. 1871).
16
manufacture, or composition of matter,
or any new and useful improvement
thereof, may obtain a patent, subject to
the conditions and requirements of this
title.
35 U.S.C. §101.
The 1793 version included the term “arts”
instead of “process,” but the case law made clear that
the 18th Century meaning of the term “arts” was
intended to include “process”:
That a process may be patentable,
irrespective of the particular form of the
instrumentalities used, cannot be
disputed. ... A process is a mode of
treatment of certain materials to
produce a given result. It is an act, or a
series of acts, performed upon the
subject-matter to be transformed and
reduced to a different state or thing. If
new and useful, it is just as patentable
as is a piece of machinery. In the
language of the patent law, it is an art.
The machinery pointed out as suitable
to perform the process may or may not
be new or patentable; whilst the process
itself may be altogether new, and
produce an entirely new result. The
process requires that certain things
should be done with certain substances,
and in a certain order; but the tools to
17
be used in doing this may be of
secondary consequence.
Cochrane v. Deener, 94 U.S. 780, 787-788 (1877).
See also Diehr, 450 U.S. at 182 (“[A] process has
historically enjoyed patent protection because it was
considered a form of ‘art’ as that term was used in
the 1793 Act.”).
Indeed, the 1952 Act, when changing the
language, made clear both by its statutory terms and
its legislative history that “process” was to be
broadly construed.
In particular, the term “process” is statutorily
defined in broad terms as follows:
The term “process” means process, art
or method, and includes a new use of a
known process, machine, manufacture,
composition of matter, or material.
35 U.S.C. §100(b).
The Bilski majority mistakenly characterizes
this statutory definition of “process” as “unhelpful”
(Bilski, 545 F.3d at 951 n.3), rather than recognize
that it is an unrestricted definition that was
intended to be broad, not merely circular.
This point is made by the Committee Reports
accompanying the 1952 Act which confirm that
Congress intended statutory subject matter to be
very broad, when it stated:
18
The definition of “process” has been
added in section 100 to make it clear
that ‘process or method’ is meant, and
also to clarify the present law as to the
patentability of certain types of
processes or methods as to which some
insubstantial doubts have been
expressed.
H.R. REP. NO. 82-1923 at 6 (1952).
P.J. Federico, one of the authors of the 1952
Act, explained the rationale at the time as follows:
This language [of §101] (other than the
terminal phrase) closely follows the
wording of the corresponding part of the
old statute, with the exceptions that the
reference to plant patents has been
omitted for inclusion in another section,
and the word “process” is used in place
of the word “art” which appeared in the
old statute. The word “art” in the
corresponding section of the old statute
had been interpreted by the courts as
being practically synonymous with
process or method, and the same word
also appeared in several other sections
of the statute but with somewhat
different connotations (it still appears
in two other sections of the new code,
with different meanings). The word
“process” has been used in section 101
as its meaning is more rapidly grasped
than “art” which would here require
19
some interpretation. The first part of
the definition of process in section
100(b) states that the word “process”
means process or method, as these
words have long been interchangeably
used in patent law, and through same
superabundance of caution by someone
who feared that there might possibly be
some loss of a shade of meaning in
dropping the word “art”, it was restored
in the definition so that it reads “The
term ‘process’ means process, art or
method, ....”
35 U.S.C.A. 1 (1954 ed.), reprinted in 75 J. Pat. &
Trademark Off. Soc'y 161, 214 (1993).
Judge Newman in her dissent summed up the
Bilski majority’s error in failing to recognize that the
statutory definition of “process” is not limited and is
intended to be very broad as follows:
The definition of ‘process’ provided at
35 U.S.C. § 100(b) is not ‘unhelpful,’ as
this court now states, but rather points
up the errors in the court’s new
statutory interpretation. Section 100(b)
incorporates the prior usage ‘art’ and
the term ‘method,’ and places no
restriction on the definition. This
court’s redefinition of ‘process’ as
limiting access to the patent system to
those processes that use specific
machinery or that transform matter, is
20
contrary to two centuries of statutory
definition.
Bilski, 545 F.3d at 978 (Newman, J. dissenting)
(internal citations omitted).
This Court has always understood the broad
breadth that was intended to be applied to that term
as relating to patent-eligible subject matter. See,
e.g., Chakrabarty, 447 U.S. at 315 (noting that “[t]he
subject-matter provisions of the patent law have
been cast in broad terms to fulfill the constitutional
and statutory goal of promoting ‘the Progress of
Science and the useful Arts’ with all that means for
the social and economic benefits envisioned by
Jefferson” and that “[b]road general language is not
necessarily ambiguous when congressional objectives
require broad terms.”); J.E.M. Ag Supply v. Pioneer
Hi-Bred Int’l, 534 U.S. 124, 130 (2001) (“As this
Court recognized over 20 years ago in Chakrabarty,
447 U.S. at 308, the language of § 101 is extremely
broad.”); Diehr, 450 U.S. at 182; State Street, 149
F.3d at 1373.
For more than a century, this Court has made
clear that “[t]he patent law is not confined to new
machines and new compositions of matter, but
extends to any new and useful art or manufacture.
A manufacturing process is clearly an art, within the
meaning of the law.” Tilghman, 102 U.S. at 722,
quoted in Diehr, 450 U.S. at 184 n.8 (emphasis
added); see also Cochrane, 94 U.S. at 787-88 (“In the
language of the patent law, [a process] is an art.”),
quoted in Id. at 183.
21
Moreover, this Court recognizes that the use
of the term “any” in §101 demonstrates the broad
breadth that statutory subject matter is intended to
cover. See J.E.M., 534 U.S. at 130; Chakrabarty,
447 U.S. at 308 (In modifying the terms of §101 “by
the comprehensive ‘any,’ Congress plainly
contemplated that the patent laws would be given
wide scope.”).
Further, this Court has made clear “that
courts ‘should not read into the patent laws
limitations and conditions which the legislature has
not expressed.’” Chakrabarty, 447 U.S. at 308
(quoting United States v. Dubilier Condenser Corp.,
289 U.S. 178, 199 (1933)). See also, e.g., TRW Inc. v.
Andrews, 534 U.S. 19, 31 (2001) (“It is ‘a cardinal
principle of statutory construction’ that ‘a statute
ought, upon the whole, to be so construed that ... no
clause, sentence, or word shall be superfluous, void,
or insignificant.’” (citation omitted)); Moskal v.
United States, 498 U.S. 103, 109 (1990) (“[A] court
should ‘give effect, if possible, to every clause and
word of a statute.’” (citations omitted)); Mountain
States Tel. & Tel. Co. v. Pueblo of Santa Ana, 472
U.S. 237, 249 (1985) (“’[A] statute should be
interpreted so as not to render one part inoperative.’”
(citation omitted)).
It is this broad definition of the term “process”
that was applied by the Federal Circuit in State
Street and which was understood to be the definition
governing that term in the statutory construction
until the Bilski decision at issue here. The Federal
Circuit’s engrafting of new limitations on what
constitutes patent-eligible processes in Bilski is
22
contrary to the statute itself, to the congressional
intent, and to this Court’s precedent on the subject.
The only limitation on the definition of
“process” that this Court mandates is that a process
is not patent-eligible if it preempts “laws of nature,
natural phenomena, [or] abstract ideas,” in contrast
to claiming a practical application thereof. Diehr,
450 U.S. at 185 (citing inter alia Flook, 437 U.S. at
589 and Benson, 409 U.S. at 67).
The Federal Circuit in Bilski did not address
whether Congress in essence legislatively acquiesced
to the State Street decision when it adopted the prior
user rights for “methods of doing or conducting
business” (see 35 U.S.C. §273) in response to that
decision and has since considered, but did not adopt,
any other changes to the patent-eligibility standard.
While some of this Court’s members have expressed
doubt in the “useful, concrete and tangible results”
test, the test stated was consistent with
congressional intent (as the State Street decision
was written by Judge Rich, another author of the
Patent Act of 1952), and has support in this Court’s
precedent and §101, from which the test was
derived.
In particular, Congress made clear, following
the State Street and AT&T cases, that the patent
law contemplates “a method of doing or conducting
business” as a type of “method” that can be patent-
eligible subject matter in adopting the earlier
inventor infringement defense.
See 35 U.S.C.
§273(a)(3). Indeed, the legislative history for 35
23
U.S.C. §273 confirms that Congress contemplated
the State Street case and acted accordingly:
• 145 CONG. REC. H6942 (daily ed. Aug. 3,
1999):
Ms. LOFGREN ... In title II there is a
first inventor defense that is limited to
methods of doing or conducting
business, and I need to understand why,
what the impact of that would be and
why it merits our support ....
Mr. COBLE. Mr. Speaker, it is limited ...
to the State Street Bank case.
• 145 CONG. REC. S14717 (daily ed. Nov. 17,
1999):
As the Court [in State Street] noted, the
reference to the business method
exception had been improperly applied
to a wide variety of processes, blurring
the essential question of whether the
invention produced a “useful, concrete,
and tangible result.”
* * *
In order to protect inventors and to
encourage proper disclosure, this
subtitle focuses on methods for doing
and conducting business, including
methods used in connection with
internal commercial operations as well
as those used in connection with the
sale or transfer of useful end results–
24
whether in the form of physical
products, or in the form of services, or
in the form of some other useful results;
for example, results produced through
the manipulation of data or other
inputs to produce a useful result.
• H.R. REP. NO. 106-287, pt. 1, at 46-47 (1999):
[T]he first inventor defense is of
particular significance to [the financial
services] industry, and the industry
serves as a prime illustration of the
need for the defense. The State Street
decision has brought that industry
abruptly to the forefront of cutting-edge
patent law protection for subject matter
that previously had been thought to be
unpatentable. The State Street court
came down on the side of a very broad
scope of subject matter that qualifies for
patent protection. State Street clarifies
that the characterization of subject
matter as a method of doing business
does not render it unpatentable. One
consequence is that the “back office”
processes and methods that are
fundamental to the delivery of many
financial services, but transparent to
the end user of the services, are now
fair game for patent protection.
See also Pet. Open. Br. at 30-33.
25
Thus, at a minimum, the actions of Congress
are contrary to the wholesale view that a patent-
eligible process must be tied to a computer or some
other machine, and evidence that §101 should not be
as narrowly construed as advanced by the Bilski
majority. Cf. John R. Sand & Gravel Co. v. United
States, 552 U.S. 130, 128 S.Ct. 750, 756-57 (2008)
(refusing to overturn the precedents because “stare
decisis in respect to statutory interpretation has
‘special force,’ for ‘Congress remains free to alter
what we have done’”; “Congress has long acquiesced
in the interpretation [the Court has] given” (citations
omitted)); Shepard v. United States, 544 U.S. 13, 23
(2005) (explaining that there was not “sufficient
justification for upsetting precedent here” since the
issue was one of statutory interpretation, “and the
claim to adhere to case law is generally powerful
once a decision has settled statutory meaning. In
this instance, time has enhanced even the usual
precedential force, nearly 15 years having passed
since [the precedent] came down, without any action
by Congress to modify the statute ....” (citations
omitted and emphasis added)); Patterson v. McLean
Credit Union, 491 U.S. 164, 172-73 (1989)
(“Considerations of stare decisis have special force in
the area of statutory interpretation, for here ... the
legislative power is implicated, and Congress
remains free to alter what we have done.”).
Indeed, Congress’s failure to alter the scope of
patent-eligible subject matter in light of State Street,
despite having opportunities on multiple occasions to
consider various proposals (see, e.g., S. 2369, 110th
Cong.; H.R. 1908, 110th Cong. §10; S. 861, 110th
Cong. §303; H.R. 2365, 110th Cong.), is further
26
probative of the legislature’s intent on this subject.4
Cf. Bob Jones Univ. v. United States, 461 U.S. 574,
600-01 (1983) (finding congressional acquiescence in
the agency’s statutory interpretation based on
Congress’ failure to act on no fewer than thirteen
bills introduced to overturn the agency’s
interpretation during twelve years).
Additionally, in Diehr, this Court’s latest
binding pronouncement on this subject, this Court
recognized principles consistent with the “useful,
concrete and tangible results” test, which found its
roots in hoary Supreme Court precedent. In
addressing its concern over whether a process falls
within one of the three enumerated exceptions to
patent-eligible subject matter, i.e., “laws of nature,
natural phenomena, and abstract ideas” (see Diehr,
450 U.S. at 185), the Court recognized that a patent-
eligible process should be any “act, or a series of
acts” that produces “a beneficial result or effect,” as
defined by this Court in Diehr, 450 U.S. at 183-84
n.7 (quoting Cochrane, 94 U.S. at 787-788 and
Corning, 56 U.S. at 267-68). Further, this Court
went on to explain that it has long recognized that
4 In this regard, Senator Specter has already cautioned other
branches of Government against impinging upon Congressional
authority to regulate the appropriate scope of patent-eligible
subject matter. See, e.g., Letter from Arlen Specter, to Hon.
Henry Paulson, Secretary of Treasury (Feb. 1, 2008) (“Specter
Letter”),
available at
http://www.regulations.gov/fdmspublic/component/main?main=
DocumentDetail&o=09000064803ba1a6 (cautioning the IRS
against taking steps to regulate “tax strategy” patents because
“the proposed regulations have been developed without
consideration given to steps Congress is taking to address the
issue”).
27
patent-eligible subject matter includes “one or more
processes ... to produce a certain result or
manufacture” and that “[i]t is for the discovery or
invention of some practical method or means of
producing a beneficial result or effect, that a patent
is granted ....” Diehr, 450 U.S. at 184 n.7 (quoting
Corning, 56 U.S. at 267-68).
In addition, the “useful” requirement of the
“useful, concrete and tangible results” test set forth
in State Street is consistent with §101 which states
“[w]hoever invents or discovers any new and useful
process ....” 35 U.S.C. §101. Similarly, the “concrete
and tangible” requirement, i.e., the converse to
“abstract ideas,” is consistent with this Court’s
mandate that a patent-eligible process cannot claim
merely “laws of nature, natural phenomena, [or]
abstract ideas.” See Diehr, 450 U.S. at 185 (citing
inter alia Flook, 437 U.S. at 589 and Benson, 409
U.S. at 67).
C.
The Bilski Majority’s Restriction on
Patent-Eligible Transformations Is
Contrary to The Rationale of this Court’s
Precedent
The Bilski majority’s limitation on the types of
transformations that can be patent-eligible processes
(cf. 545 F.3d at 962-63) is also error and contrary to
the rationale of this Court’s precedent.
In particular, the rationale for the majority’s
blanket exclusion of “electronic signals and
electronically-manipulated data” and “business
28
methods,” involving, for example, manipulation of
“legal obligations, organizational relationships, and
business risks”–today’s “raw materials” of
innovation–as patent-eligible subject matter unless
tied to a computer or some other machine (see Bilski,
545 F.3d at 962) is contrary to the rationale used by
this Court in developing the transformation prong of
the “machine-or-transformation” test that the Bilski
majority seeks to apply. See Bradford, 214 U.S.
383-86. While definiteness requirements (§112) may
preclude claims directed to purely mental steps from
being patent-eligible subject matter, the patent-
eligibility test under §101 should not turn on what
type of transformation occurs.
This Court addressed a similar issue a
century ago in Bradford, when raw materials of a
mechanical nature raised issues regarding the scope
of patent-eligible subject matter which had
previously been contemplated in the context of
chemical processes.
In arguing against a narrow interpretation of
patent-eligible processes, the Respondent explained:
The doctrine that processes are
not patentable unless they involve
chemical reactions and elemental
changes is unjust and contrary to the
spirit of the Constitution and the intent
of the patent laws.
If it be conceded–and it cannot be
logically denied–that an exercise of the
inventive faculties can be involved in
the discovery of a combination of
29
functions, acts or operations, by which a
new and useful result is obtained, then
to deny the patentability of such
inventions is to establish a false
standard of patentability, and to
exclude a large class of meritorious
inventors from the protection of the
patent laws.
Bradford, 214 U.S. at 370 (Syllabus)(emphasis
added)(citations omitted).
In response to this compelling argument, this
Court held that it “did not intend to limit process
patents to those showing chemical action or similar
elemental changes” and that “an invention or
discovery of a process or method involving
mechanical operations, and producing a new and
useful result, may be within the protection of the
Federal statute, and entitle the inventor to a patent
for his discovery.” Bradford, 214 U.S. at 384-86.5
Similarly, patent-eligibility for today’s
building blocks, existing in the form of, for example,
legal obligations and financial transactions, should
not be foreclosed by rigid rules or “false standard of
5
Indeed, a rule which categorically proscribes human-
implemented methods from being patent-eligible subject matter
is contrary to long standing Supreme Court precedent. For
example, in reaching its decision in Bradford, this Court
approvingly quoted Walker on Patents as hornbook law: “valid
process patents may be granted for ‘operations which consist
entirely of mechanical transactions, but which may be
performed by hand or by any of several different mechanisms
or machines.’” Id. at 383 (citation omitted) (emphasis added).
30
patentability” like those that this Court refused to
adopt a century ago.
Judge Newman’s dissent below summarizes
this point:
The breadth of Section 101 and its
predecessor provisions reflects the
legislative intention to accommodate
not only known fields of creativity, but
also the unknown future. The
[Supreme] Court has consistently
refrained from imposing unwarranted
restrictions on statutory eligibility, and
for computer-implemented processes
the Court has explicitly rejected the
direction now taken. Nonetheless, [the
majority] now adopts a redefinition of
‘process’ in Section 101 that excludes
forms of information-based and
software-implemented inventions
arising from new technological
capabilities, [erroneously] stating that
this result is required by the [Supreme]
Court’s computer-related cases.
Bilski, 545 F.3d at 978 (Newman, J. dissenting).
The majority’s limited view that
transformations of legal obligations are somehow not
patent-eligible is also contrary to over two centuries
of patent practice at the USPTO. Indeed, long before
State Street, or even Diehr, the USPTO issued
countless patents directed to the so-called “liberal”
31
arts of “law” (like insurance and contracts) and
“marketing”:
•
U.S. Patent No. 871, “Bank Note” (issued Aug.
3, 1838) (directed to a process of “engraving,
printing or any way expressing the sum in
large letters, words or figures on the face of
the note ....”);
•
U.S. Patent No. 1700, “Improvement in the
Mathematical Operation of Drawing Lottery-
Schemes” (issued July 18, 1840) (claim
directed to a process of “making [lottery]
tickets [using an algorithm], diminishing the
number of tickets ... and regulating the
drawing ....”);
•
U.S. Patent No. 389,818, “Complemental
Accident Insurance Policy” (filed Jan. 19,
1888) (claims directed to a “complemental
insurance policy”);
•
U.S. Reissue Patent No. RE11,270, “Means
For Insuring Travelers Against Loss By
Accident” (filed July 21, 1892) (claims directed
to a “means for insuring travelers and others
against loss by accident”);
•
U.S. Patent No. 883,380, “Check” (filed Apr.
12, 1906) (claims directed to a “check having
on each face a contract portion and a series of
value designations”);
32
•
U.S. Patent No. 918,280, “Fractional-
Insurance Policy” (filed Aug. 15, 1907) (claims
directed to a “fractional insurance policy”);
•
U.S. Patent No. 1,045,331, “Cigar Container”
(filed July 19, 1911) (claims directed to a
“cigar container” that is described in the
patent as being “especially useful in
marketing cigars in original packages,” col. 1,
ll. 33-34);
•
U.S. Patent No. 1,150,708, “Method of
Marketing Trees” (filed Mar. 9, 1914) (claims
directed to a “method of preparing and
marketing trees”);
•
U.S. Patent No. 1,254,870, “Means Used In
Accounting” (filed Sept. 9, 1916) (claims
directed to a “triplicate invoice and receipt”);
•
U.S. Patent No. 1,419,739, “Marketing Bag”
(filed June 17, 1920) (claim directed to an
“open topped bag adapted for marketing”).
The significance of these examples lies not in
whether each individual patent was good or bad, but
in demonstrating that the concept of “patent-eligible”
subject matter has long recognized any “useful”
invention, regardless of whether the use was in a
“liberal” art (like law or marketing) or a
“mechanical” or “chemical” art.
In particular, the USPTO previously
explained in “A USPTO White Paper” entitled
“Automated Financial or Management Data
33
Processing Methods (Business Methods),” the
following:
Financial apparatus and method
patents date back to [the 1790s]. ... The
first fifty years of the U.S. Patent Office
saw the granting of forty-one financial
patents in the arts of bank notes (2
patents), bills of credit (1), bills of
exchange (1), check blanks (4);
detecting and preventing counterfeiting
(10), coin counting (1), interest
calculation tables (5), and lotteries (17).
Financial patents in the paper-based
technologies have been granted
continuously for over two-hundred
years.
A USPTO White Paper, at 2 (ver. 1.43), available at
www.uspto.gov/web/menu/busmethp/whitepaper.pdf.
The Bilski majority’s new judicial carve-outs
from the scope of patent-eligible subject matter
should be rejected again by this Court.
D.
This Court Should Clarify That a
Computer-Implemented Invention Which
Operates on a General-Purpose Computer
Is Nonetheless Patent-Eligible as Long as
It Does Not Preempt a Fundamental
Principle
Benson held that the claimed method of
converting a signal from “binary coded decimal” to
34
“binary” in a general-purpose digital computer of any
type was not patent-eligible subject matter. Benson,
409 U.S. at 64, 71-72. As the Bilski majority
recognized, “the claimed process operated on a
machine, a digital computer, but was still held to be
ineligible subject matter.” 545 F.3d at 955. Thus,
the determinative factor concerning patent-eligibility
was not whether the process was tied to a machine,
as called for by the “machine-or transformation” test,
but rather that a “fundamental principle [was] at
issue.” Id. The Benson Court found the claim
objectionable because it sought to, in essence,
preempt a fundamental principle for an entire field
of use, as the Bilski majority explained. See id.
However, there has been much confusion
generated over the “general-purpose computer”
language used in Benson as compared to a so-called
“special-purpose computer.” See Benson, 409 U.S. at
65. For more than fifteen years, the law seemed to
have been settled by In re Alappat, 33 F.3d 1526
(Fed.Cir. 1994) (en banc), where the Federal Circuit
explained that “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.” Id.
at 1545. Yet, as Judge Newman explains in her
dissent, the Bilski majority’s holding again raises
“uncertainty” in this area:
[In the majority’s opinion, w]e aren’t
told when, or if, software instructions
implemented on a general purpose
computer are deemed “tied” to a
“particular machine,” for if Alappat’s
35
guidance that software converts a
general purpose computer into a special
purpose machine remains applicable,
there is no need for the present ruling.
For the thousands of inventors who
obtained patents under the court’s now-
discarded criteria, their property rights
are now vulnerable.
Bilski, 545 F.3d at 994-95 (Newman, J., dissenting).
This uncertainty has been further exacerbated
by the BPAI, which has drawn nonsensical
distinctions between general-purpose computers and
specific-purpose computers:
• Ex parte Gutta, No. 2008-3000, slip op. at 5-6
(BPAI Jan. 15, 2009) (rejecting under §101 a
claim reciting a “computerized method
performed by a data processor”);
• Ex parte Nawathe, No. 2007-3360, 2009 WL
327520, at *4 (BPAI Feb. 9, 2009) (rejecting
under §101 a claim reciting a “computerized
method” of inputting and representing XML
documents as insufficiently tied to “a
particular computer specifically programmed
for executing the steps of the claimed
method”);
• Ex parte Cornea-Hasegan, No. 2008-4742, slip
op. at 9-10 (BPAI Jan. 13, 2009) (rejecting
under §101 a claimed method for predicting
results of mathematical operations, finding
that “[t]he recitation of a ‘processor’
36
performing various functions is nothing more
than a general purpose computer that has
been programmed in an unspecified manner to
implement the functional steps recited in the
claims”).
This confusion has been further compounded
with district court decisions that have used this non-
sensical reasoning as a basis to declare computer
implemented claims which can operate on any
computer, but must perform specific delineated
steps, as being patent-ineligible. E.g., DealerTrack,
Inc. v. Huber, No. CV 06-2335, 2009 U.S. Dist.
LEXIS 58125, at *12-13 (C.D.Cal. July 7, 2009)
(finding the patent invalid under Bilski based on the
court’s findings that the patent did “not specify
precisely how the computer hardware and database
[were] ‘specially programmed,’ and the claimed
central processor [was] nothing more than a general
purpose computer that has been programmed in
some unspecified manner,” which “[u]nder Bilski
and the recent decisions interpreting it [could not]
constitute a ‘particular machine’”); Cybersource
Corp. v. Retail Decisions, Inc., No. C 04-03268, 2009
U.S. Dist. LEXIS 26056, at *20-21 (N.D.Cal. Mar.
26, 2009).
Such confusion and “uncertainty” would be
eliminated, however, if the inquiry for patent-
eligibility was appropriately focused on whether the
claimed subject matter falls within one of the four
statutory classes and whether it preempts a
fundamental principle.
37
In today’s world, where virtually every
special-purpose software is written to run on
general-purpose computers as we as a society desire,
this confusing distinction should be rejected once
and for all by this Court.
III.
BUSINESS- AND COMPUTER-RELATED
PATENTS ARE AN IMPORTANT AND
VALUABLE PART OF OUR ECONOMY
AND PROMOTE THE PROGRESS OF
THE USEFUL ARTS
Patents play an important role in promoting
the “progress” of the “useful Arts” and stimulating
innovation, and a patent system can promote such
progress in a variety of ways.
First, as this Court has recognized, it can
promote progress by rewarding innovation with
patent rights. See, e.g., Festo Corp. v. Shoketsu
Kinzoku Kogyo Kabushiki Co., 535 U.S. 722, 730-31
(2002) (“The patent laws ‘promote the Progress of
Science and useful Arts’ by rewarding innovation
with a temporary monopoly.” (quoting U.S. Const.
art. I, §8, cl. 8)); Chakrabarty, 447 U.S. at 307
(explaining that “[t]he Constitution grants Congress
broad power to legislate to ‘promote the Progress of
Science and useful Arts, by securing for limited
Times to Authors and Inventors the exclusive Right
to their respective Writings and Discoveries.’ Art. I,
§ 8, cl. 8” and that “[t]he patent laws promote this
progress by offering inventors exclusive rights for a
limited period as an incentive for their inventiveness
and research efforts”).
38
President Lincoln described the development
of a patent system as one of the three most
important developments in the world’s history “on
account of [its] great efficiency in facilitating all
other inventions and discoveries,” and explained:
Next came the patent laws. These
began in England in 1624, and in this
country with the adoption of our
Constitution. Before then any man
[might] instantly use what another man
had invented, so that the inventor had
no special advantage from his
invention. The patent system changed
this, secured to the inventor for a
limited time exclusive use of his
inventions, and thereby added the fuel
of interest to the fire of genius in the
discovery and production of new and
useful things.
Abraham Lincoln, Lecture on “Discoveries,
Inventions and Improvements,” delivered before the
Library Association of Springfield, Illinois, Feb. 22,
1860, reprinted in 5 LIFE AND WORKS OF ABRAHAM
LINCOLN, Speeches and Presidential Addresses,
1859–1865 13 (Marion Mills Miller ed., centenary
ed.) (1907).6
But this is not the only way patent systems
“promote progress.” Public disclosure in patents is
6 Besides being the sixteenth president of the United States, Mr.
Lincoln was the inventor on U.S. Patent No. 6,469, entitled
“Buoying Vessels Over Shoals,” (filed Mar. 10, 1849).
39
another important way that progress is promoted.7
Shortly after the 1952 Act was passed, Judge Rich
presented a series of lectures on the then-new Act,
which provides useful insight into the varying
purposes of patent laws. With respect to the role
our patent laws serve regarding “incremental
inventions” and “becom[ing] part of the technical
literature,” Judge Rich stated:
In the remote corners of the most
crowded arts, progress is made by the
proliferation of ideas, different and
unobvious ways of doing the same thing,
so that the reservoir of inventions fills
up. It should never be forgotten that
patented inventions are published and
become a part of the technical literature.
This publication itself promotes
progress in the useful arts and it is the
prospect of patent rights which induces
the disclosure and the issuance of the
patent which makes it available.
Giles S. Rich, The Principles of Patentability, 42 J.
Pat. Off. Soc’y 75, 83 (1960) (emphasis added).
These words of wisdom from almost half a
century ago ring particularly true when it comes to
software and financial service-related inventions.
Prior to State Street and the “great flood” of
7 As Senator Specter has recently explained:
U.S. patent policy has historically sought to
balance the goal of encouraging innovation with
the need for public disclosure.
Specter Letter, supra note 4, at 1.
40
“business method” patents, there was a dearth of
prior art available as to computer software and
financial service innovations.8
It is perhaps ironic that the greatest
complaint levied against these types of patents is
that so many applications–disclosing the previously
withheld secrets of these industries–are being
submitted to the USPTO, and are becoming part of
our public literature. Thus, the greatest complaint
against these types of patents is perhaps the
greatest justification for them.
One industry participant aptly explained how
in the financial service industry the need for patent
protection of financial service products and the
resulting benefits of transparency have evolved out
of State Street and its progeny:
Two additional factors seemed to
conspire further to drive financial
service firms to the patent office –
8 Congress addressed this void with the prior user right of §273
for patents which cover “a method of doing or conducting
business,” because prior to that time these industries did not
disclose what they did and how they did it. See Julie E. Cohen
& Mark A. Lemley, Patent Scope and Innovation in the
Software Industry, 89 Cal. L. Rev. 1, 13 (2001) (“prior art in
this particular industry may simply be difficult or, in some
cases, impossible to find because of the nature of the software
business”; “Unlike inventions in more established engineering
fields, most software inventions are not described in published
journals. Software innovations exist in the source code of
commercial products and services that are available to
customers. This source code is hard to catalog or search for
ideas.”).
41
adoption of internet-based technologies
to interact with clients and new
regulations demanding financial, tax
and accounting transparency. While the
internet transformed many companies
and even entire industries, few
industries felt the effects more
dramatically than financial services.
Aside from effectively replacing the
telephone, the internet fundamentally
transformed the back office as well. Far
from just a matter of automation, firms
took pains to think through their entire
value chains and re-engineer how they
did business with their clients. Entire
new processes and systems were being
invented at a break-neck pace and the
effects on the industry and the economy
were breathtaking .... Of course,
virtually inherent with the rise of the
internet, there was a concomitant loss
of the ability to effectively maintain
trade-secrets protection, and therefore,
less of an ability to retain proprietary
rights in all the inventive activity the
internet became unleashed.
Second, particularly in the area
of new financial products, transparency
became essential as a result of U.S.
Treasury and IRS regulations designed
to combat a growing problem with
corporate tax shelters. Under the
regulations, any financial structure
offered having U.S. tax consequences
42
was subject to being registered as a
corporate tax shelter if the client or
potential client was bound to confidence
regarding the structure. Accordingly,
confidentiality agreements were
regarded as a regulatory kiss-of-death
for such offerings and trade secret
protection as a predominant form of
intellectual property protection
disappeared virtually overnight. Thus,
a regulatory push for transparency
coupled with an internet-fueled pull for
process re-engineering dictated the
solution – have it both ways – that is,
keep rights proprietary and at the same
time embrace transparency: seek a
patent.
John A. Squires and Thomas S. Biemer, Patent Law
101: Does A Grudging Lundgren Panel Decision
Mean That The USPTO Is Finally Getting The
Statutory Subject Matter Question Right?, 46 IDEA
561, 565 (2006) (emphasis added).
Others in the financial service industry have
also emphasized the importance of patents to the
industry in a submission in response to a proposed
IRS Regulation that would discourage so-called “tax
strategy” patents as follows:
Beginning in the late 1990’s,
patent issues became of increasing
importance in the financial services
industry primarily as a result of
information technology advances,
43
deployment of those technologies by
SIFMA [Securities Industry and
Financial Markets Association]
members and new legal precedent
confirming an expansive U.S. patent
regime. From the outset, SIFMA and
its predecessor organizations have been
active voices in advocating for a patent
system that achieves and maintains a
balance between the rights of patent
holders and the public’s right to access
fundamental structures, and that
promotes interoperability between the
complex technologies comprising much
of the financial services industry and
financial market infrastructure.
Letter from Patti McClanahan, Managing Director,
SIFMA, to IRS (Jan. 31, 2008), available at
http://www.regulations.gov/fdmspublic/component/m
ain?main=DocumentDetail&o=09000064803a89dd
(emphasis added).
The role of patents related to financial
transactions, e-commerce and internet related
activities in the economy is important. Such
patents, when deserved, should be awarded to
encourage innovation, transparency, and add to the
public warehouse of knowledge.
44
CONCLUSION
While the Bilski majority did restate much of
the relevant law on patent-eligible subject matter
correctly, Amici Curiae respectfully submit that the
majority deviates from this Court’s precedent and
Congress’s mandate as discussed herein. The
appropriate analysis for determining patent-
eligibility of processes should not be limited to
applications that are either tied to a computer or
other machine or require a strict physical
transformation. A process under §101 is “an act or
series of acts” which does not preempt a
“fundamental principle.” This Court should reject
any effort to create a rigid short-hand analysis or
other “governing” test.
Respectfully submitted,
Charles R. Macedo
Counsel of Record
Anthony F. Lo Cicero
Norajean McCaffrey
AMSTER, ROTHSTEIN &
EBENSTEIN LLP
90 Park Avenue
New York, NY 10016
(212) 336-8000
Counsel for Amici Curiae
August 6, 2009
A-1
APPENDIX A
DESCRIPTION OF AMICI CURIAE
The various amici curiae sponsoring this
submission (“Amici Curiae”) reflect mid-sized and
smaller members of the financial service, e-
commerce, and computer-related industries. While
Amici Curiae do not advocate that the claims at
issue are entitled to be patented, as reflected by the
present submission, each of these Amici Curiae
believe it is important to maintain a strong patent
system that allows for all types of innovations that
do not pre-empt a fundamental principle to remain
patent-eligible subject matter.
Double Rock Corporation is an industry leader
in providing cash management services and
technology solutions to the banking, broker-dealer,
qualified plan and retail markets. The principals of
Double Rock developed an innovative product known
as “insured deposits,” which provides financial
institutions, including broker dealers and asset
managers, with the ability to offer customers FDIC-
insured, interest bearing demand accounts, with
unlimited checking. Over the past decade, Double
Rock has developed many improvements for systems
and methods used to implement these and other
financial service products. These and other financial
products are offered by its affiliates, LIDs Capital
LLC, Intrasweep LLC and Access Control
Advantage, Inc. Double Rock's subsidiary, Island
Intellectual Property LLC, owns and manages
Double Rock's patent portfolio for its insured deposit
products. Without the promise of patent protection,
A-2
it would be difficult for Double Rock, as a relatively
smaller player in the financial service industry, to
invest in these innovative products.
eComp Consultants is an intellectual property
consulting and litigation support firm providing
professional services in the areas of internet,
telecommunications, and information technology.
eComp Consultants consists of a collaborative staff
of senior industry experts and executives to provide
technology research, expert reports, deposition, trial
testimony.
eComp Consultants specializes in
advising attorneys and their clients on the technical
aspects of patent infringement and portfolio
valuation. eComp Consultants has a vested interest
protecting the value of intellectual property and
ensuring that patent law is forward looking and
promoting innovation in all areas.
Pipeline Trading Systems LLC operates the
Pipeline Alternative Trading System (ATS) that
enables institutions and brokerage firms to quickly
and efficiently trade blocks of NYSE-listed
companies, NASDAQ stocks, ADRs, and Exchange
Traded Funds. Pipeline’s block execution system
increases control, saves time and empowers the
institutional trader to achieve unmatched execution
performance on large orders. The Algorithm
Switching Engine™ revolutionizes access to dark
and displayed liquidity, predicting on a minute-by-
minute basis the best algorithm to implement the
trader’s instructions. Its patent-pending predictive
technology minimizes market impact while accessing
significant sources of liquidity.
A-3
Rearden Capital Corporation is an investment
company in a wide range of innovative technology.
The principal of Rearden is an inventor on multiple
issued patents and pending applications in a wide
variety of subject matters ranging from systems and
method for e-commerce, to renewable energy
systems, communication devices, among other
technologies. Rearden has a strong belief that the
patent system equalizes the small inventors and
allows them an opportunity to contribute to the
storehouse of human knowledge with less resources.
Craig Mowry is an independent inventor and
filmmaker living in New York. Mr. Mowry has
developed a wide range of inventions that are the
subject of many pending patent applications and
issued patents.
His inventions for interactive
communication are revolutionary systems and
methods which will improve the avenues for
connecting internet users with relevant information
and people of interest. These innovations will also
allow the individual to participate in the visuals and
programming seen by other people, around the
world. His unique technology and methods for
building these bridges through multi-media
platforms rely on patent protection in funding and
enabling their creation and ongoing improvement.
PCT Capital, LLC, is an advisory and asset
management firm focused on an emerging
intellectual property (IP). PCT Capital recognizes
that in the last 30 years, there has been a shift from
a labor-driven economy to a knowledge-based
A-4
economy and that intangible assets such as IP have
overtaken traditional capital assets such as real
property, plant and equipment. As a result, PCT
Capital’s IP advisory team provides services to help
companies (directly or via venture, private equity,
buy-out and turn-around funds who invest in them)
create, acquire, manage, dispose and monetize IP
assets.