Posts Tagged “business method patents”

I have never liked so-called business methods patents (in fact, I dislike a majority of “methods” patents). Today the Supreme Court hand down its ruling on the Bilski case, upholding the USPTO’s rejection of Bilski’s patent application on “101” grounds. That is, the PTO rejected the application because the claimed invention did not address a patentable subject. Specifically the Court ruled that Bilski’s application was an attempt to patent an abstract idea – a catagory that has long been ruled not subject to patenting.

Many people, myself included, had been hoping that the Supreme Court would address the patentablity of software and business methods at a broader level since there has been much huffing and puffing on the topic of should business methods as a class and should software as a class be patent eligible. Unfortunately we will have to wait until, perhaps, the Congress acts since the Court explicitly said it:

… declines to impose limitations on the Patent Act that are inconsistent with the Act’s text. The patent application here can be rejected underour precedents on the unpatentability of abstract ideas.The Court, therefore, need not define further what constitutes a patentable “process”…

In effect, the Court said that if Congress didn’t like the way the PTO was defining a patentable process then Congress can amend the patent statutes.

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Thought I’d pass along a link to eWeek contributor Jim Rapoza’s commentary on the “in re Bilski” ruling. While Jim conflates trolls, obviousness, and the real topic of Bilski (business methods/software), it’s still worth a quick read.

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With last week’s announcement of the CAFC’s decision in in re Belski you might asked an Emily Litella question, “Who is Ray Bilski and why is the court deciding what’s in him?”. Emily, upon learning that it’s a court case “in re” Bilski would have said “Never mind”, but for us it’s worth thinking about.

Bilski was at the wrong place at the wrong time with the wrong “invention”. On April 10, 1997 (yes, 11.5 years ago) Bernard Bilski and Rand Warsaw filed a patent application for method of hedging risk in commodities trading – that is, a business method. Claim 1 read:

 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

The PTO rejected this application as not being directed to patentable subject matter.  The CAFC concurred with this decision. So, after previously opening the door to a flood of business method patents with the so called State Street decision, the CAFC has tried to jam the door at least partially closed.

I’ve never been a fan of “methods” claims in general and of business methods claims in particular. Bilski, it seems, is the poster child for everything wrong with these patent applications.

First, the very basis of the US patent system is the Constitutional phrase: “Congress shall have power … to promote the progress of science and useful arts…” Frankly, I doubt the founders would consider hedging risk in commodity trading part of science and the useful arts.

Second, the patent law drafted on the basis of this power lists the patentable invention subject matter to be a “useful process, machine, manufacture, or composition of matter.” Now I may be old fashioned, but I think a patentable process has to be more than just an activity that can be described by a series of steps; everything we do can be broken down into a series of steps – A method of blogging comprising the steps of a) logging on to a blog site, b) placing fingers on a computer keyboard, c) initiating a series of keystrokes wherein the keystrokes form known words, wherein further the words are sequenced and punctuated in accordance to the know rules of a pre-selected language. You get the idea!

So what is the test of process patentability? According to the Bilski decision, there is a two-part “machine-or-transformation test” for eligibility of process claims. First, eligibility may be demonstrated if a claim “is tied to a particular machine or apparatus.” Second, and alternatively, eligibility may be shown if a claim “transforms a particular article into a different state or thing.” Also note that the “tie” to a machine or apparatus must be a meaningful limitation in the claim.

I would have preferred to see methods of performing business/financial operations per se be declared unpatentable as not being part of science or the “useful arts”, as was urged by some.

The bottom line for most of my clients is “very little impact”, since I focus on hardware/device IP, but if you are in the financial or software industries, a consultation with your IP attorney may be in order.

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Greg Aharonian of the Internet Patent News Service wrote:

“[part of the buzz about] the Bilski case is predictions that the Court of Appeals of the Federal Circuit (CAFC) will somehow greatly reduce, if not eliminate, business method patents.” …

“[T]he real underlying issue [with business method patents] is, “processing financial information”, in particular where the result of the method is “information”, such as a signal to buy/sell a stock, an amount of money to compensate a manager, an agreement to purchase something, etc.”

Greg goes on to ask: “Can “information” be the patentable result of a process?This appears to be the proverbial $64,000 question, but the real issue is in the process itself.

I think the inherent difficulty we have with business method patents comes from a squeamishness about patenting that which one could accomplish by “thinking” (as well as the trivial act of recording the results of one’s thinking). Given enough time and mental capacity we could think through all the calculations in a business method or we could sort through a database to pull out the related data. We have an uneasy feeling when we are told we can’t legally buy a stock because we observe/calculate a particular ratio of market parameters, even if the significance of that ratio was not clear to us until it was published in a patent. This wariness should not be affected by the complexity of the calculation; patents are not about matters of scale. Even the most complex calculation could, given time and resources, be accomplished by a human.

In October I discussed a case that confirmed that a human thought process can’t be patented. And the “Leapfrog” case taught us that updating an existing device through the use of digital technology does not merit a patent. Combining the logic of these two CAFC decisions suggests that using a computer to substitute for a human thought process shouldn’t be patentable either.

We worry about business method patents because many (most? all?) of the “business methods” are processes that use a computer’s processing power to substitute for our brains. It is not a question of whether the output of the business method is new information or merely reorganized information [although philosophically it’s an interesting question for sure] but rather a question of whether the transformation process itself can be controlled by the first person to “invent” the process, where the process is basically a mental/thought process, perhaps implemented on a computer.

There are other “inventions” that can’t be patented. Generally we call them discoveries – naturally occurring minerals, for example, or laws of nature (F=ma). Einstein could not have obtained a patent on E=mc^2. Is it not analogous to decline to grant a patent on the recognition that a particular financial ratio is a buy or sell sign for a stock?

The line between invention and discovery is admittedly blurry. Does one invent a financial ratio or has that ratio always existed, waiting to be discovered? I’m inclined to believe that most business methods are the latter and those that aren’t discoveries fail to rise to a level of invention worthy of being awarded patent protection.

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