For the half-year to 31 December 2014, the IPKat's regular team is supplemented by contributions from guest bloggers Rebecca Gulbul, Lucas Michels and Marie-Andrée Weiss.

Regular round-ups of the previous week's blogposts are kindly compiled by Alberto Bellan.

Tuesday, 14 May 2013

The wrong tool for the wrong job: time to keep the US courts away from patentable subject matter?

Like many of this weblog's readers, this Kat has long nurtured a fascination and deep admiration for the United States Federal judiciary.  Unlike the judges of the Court of Justice of the European Union, who rarely appear to be qualified to deal with regular commercial law issues and are generally quite reticent to articulate their views in public, their US counterparts -- from the Supreme Court downwards -- give the impression of being not merely qualified but indeed required to display their legal virtuosity, their deep understanding of the underlying issues and their cogent grasp of authority on every subject that ever there was.  It must be conceded that, collectively if not individually, they are mightily good at it too, for they are very convincing, particularly when there is no-one to argue with them.

This guest post, which makes no apology for its length (which patent enthusiasts will greatly appreciate), is premised on the proposition that, whatever else the US Federal judges may be good at, they should be kept from being allowed to interpret and thereby determine the scope of patentable subject matter. The author of this post is no mere sniper, taking pot-shots at a sitting target: he is Professor Norman Siebrasse, one of the most respected commentators on patent law anywhere in the continent of North America, a blogger in his own right (see Sufficient Description) and, most importantly from our point of view, a much-loved former guest Kat.  The subject of Norman's guest post here is the recent US decision in CLS Bank Int’l v Alice Corp 2011-1301 (Fed Cir 2013) en banc aff’g 768 F Supp 2d 221 (D.D.C. 2011). He writes:

The en banc decision of the US Federal Circuit in  CLS Bank v Alice Corp has showcased a fractured court, with five different opinions, three different approaches to assessing patentability, and a 5 - 5 split on whether the key claims are patentable subject matter. Judge Newman’s dissent provides an acerbic assessment of its practical implications: “With today’s judicial deadlock, the only assurance is that any successful innovation is likely to be challenged in opportunistic litigation, whose result will depend on the random selection of the panel.” [the IPKat suggests that readers stop at this point and think about the repercussions of this statement -- for business, for investment, for the efficacy of the patent system as a whole] This confusion is not surprising. I have argued that the US Supreme Court approach to patentable subject matter is hopelessly confused because it is wielding the wrong tool for the job; the USSC has consistently attempted to exclude fields of endeavour which it views as problematic, such as life forms (Funk Bros 333 US 127 (1948)), computers (Benson 409 US 63 (1972), Flook 437 US 584 (1978) and Diehr 450 US 175 (1981) ), and business methods (Bilski 130 S.Ct. 3218 (2010)), by using the rule that abstract ideas cannot be patented. The difficulty with this argument, as first pointed out by Frankfurter J, disagreeing with the majority reasoning in Funk Bros at 135, is that  “[e]verything that happens may be deemed ‘the work of nature,’ and any patentable composite exemplifies in its properties ‘the laws of nature.’ Arguments drawn from such terms for ascertaining patentability could fairly be employed to challenge almost every patent.” The consequence is arbitrariness, as patentability turns on whether a particular judge characterizes the invention as turning on an idea (as all inventions ultimately do), or as being a practical application of that idea (as in any well drafted claim).
At issue in CLS Bank were four related patents related to “a computerized trading platform used for conducting financial transactions in which a third party settles obligations between a first and a second party so as to eliminate ‘counterparty’ or ‘settlement’ risk.” (Lourie p 3). Method, system and product claims were at issue. The method claims were the most general, encompassing “A method of exchanging obligations. . . comprising the steps of: (a) creating a shadow credit record . . .(b) obtaining from each exchange institution. . .” (Claim 33 of the ‘479 patent, quoted by Lourie p. 23). The system claims captured the same concept, as implemented by computer: “A data processing system. . .comprising: a data storage unit . . .and a computer. . .” (Claim 1 of the ’720 patent, Lourie p 32). The product or media claims were in the so-called Beauregard format, to “computer readable storage medium having computer readable program code embodied” which would carry out the invention on a computer (Claim 39 of the ’375 patent, Lourie p 29).

Judge Lourie wrote for five members of the Court, setting out his approach to the problem, and concluding that all claims were invalid as being directed to abstract ideas. A collective opinion for four other members of the Court – Chief Judge Rader, along with Judges Linn, Moore and O’Malley, set out a different approach, and held the system claims to be patentable subject matter. Chief Judge Rader and Judge Moore, applying the approach from the collective opinion, held the method and product claims not to be directed to patentable subject matter, agreeing with Judge Lourie in the result, though for different reasons. Judges Linn and O’Malley, applying the same method from the collective opinion, but construing the claims differently, held the method and product claims were patent-eligible. Judge Newman advanced a third approach, and held that all the claims were patentable subject matter. (A fifth opinion by Judge Moore, with Chief Judge Rader, and Judges Linn and O’Malley concurring, further explained why the system claims should be considered patentable; this was essentially a concurrence with that part of the collective opinion.) So, by the numbers, the Court was equally divided on the system claims, and held the method and product claims invalid by a 7 - 3 majority.

The result in this case was that all claims are invalid, as the equal division resulted in an affirmation of the decision below. More importantly for the law, there was no consensus on the proper approach.

The debate centred on three judicially created exceptions to the broad scope of patentable subject matter set out in §101: “‘[L]aws of nature, natural phenomena, and abstract ideas’ are excluded from patent eligibility.” (Lourie p 8). These exceptions to patentability, and particularly the rule against patenting of abstract ideas, have long been at the heart of the debate over the patentability of computer programs. The logic is that an algorithm is an abstract idea, and so if the inventive concept lies only in the algorithm, and there is no invention in implementing it on a general purpose computer, then claiming a program amounts to claiming an abstract idea.

Justice Frankfurter’s observation that all inventions turn on abstract ideas is now well-recognized (see eg Prometheus v Mayo 132 S.Ct. 1289, 1293), so the challenge is how to limit this principle that abstract ideas cannot be claimed. One approach, and the correct approach in my view, was succinctly stated by the Supreme Court of Canada in Shell Oil [1982] 2 SCR 536 summarizing a long line of English authority:

A disembodied idea is not per se patentable. But it will be patentable if it has a method of practical application.

That is, the only prohibition is on patenting of abstract ideas; there is no objection to an invention which rests on an abstract idea – as all inventions ultimately do – so long as it is claimed as a practical application of that idea. The difficulty with this position, at least in the US, is that it is not consistent with decisions such as Benson and Flook, which held claims to programs to be unpatentable notwithstanding that they were claimed as a practical application.

The policy rationale advanced in Benson is that it is would be wrong to allow a claim to “wholly pre-empt the mathematical formula,” as “in practical effect [this] would be a patent on the algorithm itself.” This, it is said, would impede innovation rather than promoting it. The legal difficulty with that argument is that it is inconsistent with a vast number of cases, stretching back to the nineteenth century litigation over Neilson’s patent for a hot blast furnace in which the rule against abstract claims was originally developed. (See here for a discussion of the origin of the rule.) Lord Justice Clerk Hope in a direction ultimately approved by the House of Lords, directed the jury that “a patent will be good, though the subject of the patent consists in the discovery of a great, general, and most comprehensive principle in science or law of nature, if that principle is by the specification applied to any special purpose, so as thereby to effectuate a practical result and benefit not previously attained” ((1843) 1 WPC 673, 683. Lord Hoffmann has more recently affirmed the same point in Kirin-Amgen [2004] UKHL 46 at [77]: 
Of course a patentee may in some cases be able to frame his claim to a product or process so broadly that in practice it will be impossible to use the information he has disclosed, even to develop important improvements, in a way which does not infringe.

The policy objection to the Benson reasoning is that the scope of the reward should be commensurate with the scope of the contribution.  As the US Supreme Court remarked in The Telephone Cases, if it were true that Bell’s patent granted him a practical monopoly, this would “show more clearly the great importance of his discovery, but it will not invalidate his patent” 126 US 1, 535.

The result of the inconsistency between the practical application test and the pre-emption reasoning has been arbitrariness. A court inclined to strike down a patent can emphasize the abstract nature of the underlying idea (Funk Bros, Benson, Flook),  while a court inclined to uphold it will emphasize the practical application, as in Diehr. The position of the Federal Circuit, picking up on Diehr, and exemplified by In re Alappat, 33 F 3d 1526 (Fed Cir 1994) (en banc) has been to apply the practical application test, leading to liberal granting of software patents, as well as to decisions such as State Street. (The USSC Bilski decision did nothing to clarify this mess, as it approved all the prior case-law, and the claims at issue were arguably invalid under either approach.)

The surprise in CLS Bank is that half the Federal Circuit, in Judge Lourie’s opinion, has finally come around to the USSC’s way of thinking. In his approach, subject matter patentability “turns primarily on the practical likelihood of a claim preempting a fundamental concept” (Lourie p 9; and see also p 15). A claim will avoid this objection only if there are “meaningful limitations that prevent the claim as a whole from covering the concept’s every practical application” (p 16). That the claim is directed to the invention as implemented by a computer is not a meaningful limitation if it is in such general terms as to cover every practical implementation. The difficulty with this, both as a practical matter for claims drafters and as a matter of policy, was pointed out by the Supreme Court of Canada in Burton Parsons [1976] 1 SCR 555: “If the patent is to have a practical value, it must cover all [implementations of the invention] which can yield the desirable result . . . [I]f, in order to guard against possible invalidity, some area is left open between what is the invention as disclosed and what is covered by the claims, the patent may be just as worthless as if it was invalid. Everybody will be free to use the invention in the unfenced area.”

In contrast to Judge Lourie’s opinion, the collective opinion carried on the Federal Circuit tradition of emphasizing the practical application test. Relying heavily on Diehr, the USSC decision most sympathetic to that position, the collective opinion notes at 28 that “it would seem that a claim embodying the machine itself, with all its structural and functional limitations, would rarely, if ever, be an abstract idea.” The opinion deals with the USSC’s heavy reliance on pre-emption by asserting in effect that when an invention is claimed as a practical application, it will rarely, if ever, pre-empt the idea itself (p 20, 21). Consequently, a claim to a general purpose computer programmed to implement an idea, as in this case, will normally be patentable, though Chief Judge Rader and Judge Moore felt that the method claims were unpatentable as claiming the abstract idea as such. If the collective opinion was to prevail, computer implemented inventions would continue to be generally patentable.

Judges Linn and O’Malley disagreed with Chief Judge Rader and Judge Moore only as to the proper interpretation of the method claims. They held that on the record, the computer-implemented limitations that were explicit in the system claims should also be read in to the method claims. Though they did not expressly address the point, it seems that if they had construed these claims as not being subject to these limitations, they also would have held them to be invalid as claiming abstract ideas (See p 10).

Judge Newman would apparently entirely reject the judicially created limitation on patenting of laws of nature, natural phenomena, and abstract ideas. “The court should return to these basic principles [of novelty, unobviousness, enablement, specificity, etc.], and abandon its failed section 101 ventures into abstraction, preemption, and meaningfulness.”

As Judge Moore noted at p 3, “Our court is irreconcilably fractured over these system claims.” Judge Lourie attempted to create an appearance of consensus, saying “seven of the ten members, a majority, of this en banc court have agreed that the method and computer-readable medium claims before us fail to recite patent-eligible subject matter. In addition, eight judges, a majority, have concluded that the particular method, medium, and system claims at issue in this case should rise or fall together in the § 101 analysis” (Lourie fn 1). To the extent that this is intended to imply that the system claims must be invalid because there is agreement that they must stand or fall with the method claims, which a majority held to be invalid, this is disingenuous. Judge Lourie held that the claims stand or fall together as a matter of principle: “we must look past drafting formalities and let the true substance of the claim guide our analysis” (Lourie p 30). Judges Linn and O’Malley did not hold that the substance of the invention was determinative of patent-eligibility; on the contrary, they emphasized that the question turned on a proper construction of the claims. The result was the same for all the claims only because, properly construed, they all embodied “the same meaningful limitations” (Linn & O’Malley p 2). And Judge Newman held that all stand or fall together because she entirely rejected the analytical premise of the Lourie opinion. The collective opinion accordingly concluded that “Accordingly, though much is published today discussing the proper approach to the patent eligibility inquiry, nothing said today beyond our judgment has the weight of precedent.” The judgment itself, per curiam, was two sentences holding only that the method and product claims are not patentable subject matter, and “An equally divided court affirms the district court’s holding that the asserted system claims are not directed to eligible subject matter under that statute.” In other words, the Court is so hopelessly divided that it could not even agreed on what has been decided.

The key to escaping from the resultant morass is found in the dissenting opinion of Judges Linn and O’Malley at 13, responding to the concern raised by amici that software patents inhibit innovation:

We do not discount Amici’s concerns, we just disagree with what they ask us to do to quell them. Congress can, and perhaps should, develop special rules for software patents. . . .  While Congress may, this court may not change the law to address one technological field or the concerns of a single industry. Thus, whatever the merits of such concerns, the answer is not to rewrite the law by broadening the abstract ideas exception to § 101.

It may be that innovation is impeded by software patents – or business method patents or gene patents – but that question is one for the legislature, not the courts. (I make this argument in a recent article).

The lesson here, as I see it, is that the question of patentable subject matter can no longer be left to the courts, or at least not to the US courts. At one time it was reasonable to suppose that a satisfactory resolution might be achieved through the common law method of incremental judicial decision. After both the USSC Bilski decision and now CLS Bank, which have created more confusion, rather than less, it seems evident that this strategy has failed.
Katnote: a follow-up post, taking in the recent decision of the Court of Appeal for England and Wales in HTC v Apple, will be posted tomorrow evening.

25 comments:

MaxDrei said...

US American commentators are pleased to disparage the EPO criterion "technical charcter" as being hopelessly vague. But I think it a better yardstick (specially after thousands of EPO Decisions in DG3) than their own "abstract". Perhaps then tomorrow's piece on Apple/HTC can include observations on the "established law" of the EPO (which I thought the UK Supreme Court was minded to follow), and the tools the EPO uses, namely: technical character, technical feature, technical effect. I wish this because my impression is that Lewison LJ just doesn't "get" how the EPO decides Art 52 eligibility, Art 54 novelty and Art 56 inventiveness.

It is the EPO's Problem and Solution Approach to Art 56 EPC obviousness that is the fount of its "technical" litmus test. England refuses to have anything to do with EPO-PSA so cannot use the "technical" scalpel. The USA can't use "technical" because it has to issue patents on anything under the sun within the "useful arts" and no American judge is brave enough to tell the American people that new, enabled and inventive business methods are not "useful".

שרון said...

Not that I entrirely disagree with the main points of this post, but the differnce between the so-called "practical application" test and State Street's "tangible concrete and useful result" test seem to evade me - this seems to only shift the question as to what is "practical" other than provide a head-on decent criterion (similar problem of 'technical', arguably).

Anonymous said...

As I see it, the big problem is the ability of specific areas of technology to outrun any general definition of "invention". Even the greatest of all definitions of "invention", the "manner of manufacture" definition of the Statute of Monopolies as interpreted by the Australian High Court in NRDC's Application, groans a bit. As the original post said, the time may have come when certain aspects of technology (such as computer-implemented inventions and biotech) need their own specific custom-made rules.

Anonymous said...

MaxDrei has it right. The technical character test is the far more sensible approach to deal with these issues. This was the approach favored by 4 concurring justices in the Bilski case. Unfortunately, they could not get a 5th vote. Maybe CLS will present the opportunity for the Supreme Court to get it right (but it will, in part, depend on whether the advocates before the court have the courage to suggest this approach which, as European, is politically disfavored now in the U.S.)

MaxDrei said...

Dear Readers, I have now read through the judgement and have a comment or two.

Pauline Newman comes up with challenging stuff, as ever. She asks whether 35 USC 101 is the proper vehicle for testing whether a particular technical advance is patentable. Folks, note "technical".

At bottom, this case is about claim construction. Is the subject matter in issue that of the ordinary meaning of the independent apparatus, method and System claims or is it something much more specific, namely what is shown in drawing Figure 16? there is means plus function language in the claim. The claim is to be interpreted in the light of the specification. The name of the game is the claim. Does the claim construction process yield a broad claim, or a Claim to the Fig 16 Picture?

For fans of "Yes Minister" this CAFC work is magisterial, impressive and very funny. It constantly defers to the wisdom of its omnipotent master, even while it presents to the master the accumulated wisdom of the master's own earlier utterances. Just as Jim Hacker's brows grow ever more furrowed, one can imagine the same happening to the brows of any SCOTUS Justice when reading through this brilliant work.

I liked the quote to Werner Heisenberg, explaining that you can hand down as many definitions as you like but still, at bottom, you will inevitably have to rely on "some concepts that are taken as they are, unanalysed and undefined". So it is, with "technical".

Anonymous said...

MaxDreie has it wrong.

brave enough to tell the American people that new, enabled and inventive business methods are not "useful".

Sorry - this man has no clue, and the fact that the patent offic eis located under the Secrteary of Commerce won't help him understand.

MaxDrei said...

As to what "useful arts" are in the Constitution of the USA we could look at the en banc 1985 decision of the CAFC in the Paulik case, where the court explains that, actuually, the concept known way back then as "useful arts" is today known as "technological Innovation".

So the CAFC is right there with the EPO on this issue.

Anonymous said...

MaxDrei,

Thank you for proving that you have no clue. Have you read the Paulik case you wish to cite? Do you know it's authority is non-existent even if it did discuss what you say it discusses?

MaxDrei said...

I don't cite Paulik for its "authority" just as an indicator of what the CAFC en banc thought back then. I understand it is free to contradict itself today, if it pleases, but come on, how much more do we know now, compared with what the CAFC knew in 1985, about what the notion of "useful arts" meant to the Founding Fathers in their day, long, long ago?

An anon above (You? I don't know)supposed that "useful arts" must include business methods because it is the SS for COMMERCE that takes responsibility for the USPTO. With the greatest of respect, that is no more logical than the argument that: All dogs have tails. That animal has a tail. Therefore it is a dog.

Anonymous said...

MaxDrei, your cite is errant. I noticed at patently-o that you are actually using a secondary source for the citation. Where did you find that source?

Anonymous said...

Also, the better authority that the useful arts of the U.S. contain business methods would be the Supreme Court decisions, and the fact that the U.S. Congress explicitly recognized business method patents.

Is this really a question?

MaxDrei said...

Anonymous, my source is the current issue of OUP's Journal of Intellectual Property Law and Practice, the piece by Bradstreet. But I posted that info already on Patently-O so you know that already.

Yes of course SCOTUS is scrupulous not to exclude from eligibility everything that might fall under the rubric "Business method". This for the reasons I have already given on Patently-O and because if Europe grants Claims to some business methods then the USA will want to keep the door open too. Categorical exclusions are not very clever when you can't anticipate what will fall tomorrow within the notion of "invention" or "useful arts", "science" or "technology" or "useful arts". But beware the undistributed middle. Just because business methods are not excluded from eligibility, in toto, as a class does not mean that every business method under the sun is eligible. See the EPO jurisprudence for that: the EPC explicitly excludes methods of doing business but the EPO routinely grants claims that would constitute in most people's eyes a business method.

Rader CJ admonishes us to read the Statute, and decide on the basis of its wording". It uses "useful arts" as the litmus test of eligibility.

Anonymous said...

Not sure I understand what you mean by "undisturbed middle."

Also, as I indicated, U.S. is clear that useful arts includes business methods. You seem to be trying to make a distinction without a difference as what you say regarding "in toto, as a class" applies universally. As you appear to follow patently-o, this is most clear in the "medical methods" exchanges there.

Again, is this really a question? There does not appear to be, for U.S. law, any reason to focus on business methods for special treatment - in sharp contrast to EPO jurisprudence.

Anonymous said...

MaxDrei,

I am sorry I was not specific enough. Let me try again. Where did you get the OUP article itself? It seems odd to have such a secondary reference simply about - almost as odd as the reference being plainly incorrect in what it says is present in the decision.

MaxDrei said...

anon, I too have no idea what is the "undisturbed middle". What i wrote was "undistributed". See the link below, to Wikipedia:

http://en.wikipedia.org/wiki/Undistributed_middle

Perhaps when you have read that, you will grasp what I write, that just because the US Statute is devoid of any exclusion of business methods in explicit terms does not force the conclusion that every business method under the sun is eligible under the AIA. Candidate methods still have to be a contribution to the "useful arts" and not all business methods are.

As to Bradstreet, those who run this blog have connections to the OUP. I rely on them to enlighten you on the current content of the OUP's JIPLP.

The undisturbed middle. intriguing as a concept. thanks for that, and for prompting me to continue to peddle my views in this public forum.

Anonymous said...

Please excuse the typo - I would have thought an international forum would have more leniency towards such things.

Pointing me to a webpage that deals with formalistic logic is unhelpful. I am not asking others - please don't duck the question. You are the one who cited a reference for something that that reference does not contain. I was curious as to the logic of your legal thinking. Ducking now only compounds the tendency to question your viewpoint.

Your initial reference does not speak to the point at hand, which leaves me wondering how to apply ANY logic you are now presenting.

Further, you are either misapplying law if you are attempting to apply law by syllogism, or misapplying the logic (creating a fallacy to begin with, only to then knock it down).

You apply 101 in a straight forward manner.

You then apply the exceptions, again in a straight forward manner.

This is true regardless of the labeling of the method - be it a business method, a medical method, or any type of method. This is also true for the other categories, such as compositions. A composition clearly falls to one of the main categories of eligible subject matter. But you still must apply the exceptions, no matter what type of composition you have.

This two-step application of law is applied to all categories and any sub-categories of those initial categories, without regard to formal syllogism. Your error is not understanding that a two-step process is in play.

You are trying too hard to be too clever by half, as the saying goes.

Anonymous said...

I see now - unfortunately, that article is behind a paywall and I cannot read it.

But this does show an error on dependency on secondary sources when the original material is easily available.

Sorry, but I have little tolerance for those who would be snide on small matters (such as a typo) and err on large matters (such as the main point of a post).

MaxDrei said...

At this point, Readers, anon and I have reached pretty much the same impasse we are at on the Patently-O blog. So I'll stop now.

Anonymous said...

The same impasse?

Not likely.

The same showing of your posting a legal point without proper support?

Sure.

Nice to see that your ability to run away from a conversation is not limited to one forum. There is something to be said of consistency (hobgoblins and little minds, etc).

Reinier Bakels said...

The CAFC made some fundamental mistakes. There is a role indeed for § 101 (like art. 52) since that is the only absolute criterion (as opposed to novelty and non-obviousness that are measured relative to the "state of the art"), and it requires a certain quality, independent from the non-obviousness criterion. Pre-empting a fundamental principle is the wrong yardstick: patents that d not pre-empt anything and can be circumvented easily have no value.

Actually US courts were o nthe right trch when they found that in addition to § 101, 102 and 103 the requirement of § 112 must be met. This is somewhat confusing though since § 112 is in the chapter "application for patent", giving the rules for application. Indeed the effect of § 112 is indirect: inventions that cannot be described in the way required by § 112 logically are not patentable under § 101. That rule makes sense: it only allows knowledge to be patented that can be carried out by any "person having ordiary skill in the art" (aka PHOSITA). Note the words "carried out" (which is more than "applied": one can not "carry out" a scentific fact), the word "any" and the word "ordinary".
Thus a clear distinction is made between on the one hand the (non-patentable) "upstream" knowledge that is the output of scientists and the input of inventors, and on the other hand the (patent-eligible) knowledge that is the output of invetors and the input of the PHOSITA.

In this dichotomy, business methods are like science rather than inventions, since a (genuine) business method is executed by a business-person that is more like an inventor than a PHOSITA.

Art. 52 EPC is clearer than the peer 35 USC § 101, but the interpretation that "as such" is the opposite of "technical" is an awkward mistake. Like a Britsh judge once said it is a "restatement of the problem in more imprecise terminology". And it leads to a complete mess for allegedly "mixed" inventions, involving both technical and non-technical elements. The present day perception that the technical contribution must be tested under art. 56 (non-obviousness) is preposterous: something that once was (non-)technical will always remain (non-)technical, regardless of the "state of the art". As German writers have noted (Von Helleld, Klaiber), the present EPO interpretation of the EPC in this respect plainly violates the EPC. In particular in a German perception a "contra legem" interpretation is abslutely unacceptable.

Anonymous said...

Reiner,

Your line of reasoning was rejected by the U.S. Supreme Court in the Prometheus case.

I think that you also are confusing "patentable" and "patent-eligible." You then apply that confused dichotomy to "business methods," and I note that you attempt to redefine that category with the "(genuine)" remark, followed by an odd use of PHOSITA.

I would further note that you have a certain "locked in time" view that will lead to trouble with understanding U.S. law, particularly the phrase 'useful arts' and the relationship of that phrase to patent eligible subject matter. I would point out that even while business methods (whether or not you deem them 'genuine') have been allowed by the U.S. Patent Office throughout its history, the likes of Deming amongst others have contributed to make business methods much like any other 'field' that rightfully belongs under the patent eligible umbrella - for the U.S. - I will leave the EPO interpretation battle to my non-U.S. counsel.

Reinier Bakels said...

Anonymous, thank you for your comments.

Frankly, I am not completely sure what statement in the Prometheus decision would reject my line of reasoning. No, I do not confuse "patentable" with "patent-eligible". I restrict myself to § 101 (patent-eligibility). For me, § 112 is merely a clue. There are more reasons only to allow patents for subject-matter that can be sufficiently described for any PHOSITA. For instance, that is the IMHO the only way that the scope of the patent can be delimited reasonably precisely, preventing the patent to become a "hunting licence".

Re business methods: I fully subscribe to the statement in State Street that business methods are no category at all, or at least an ill-defined category. Basically, that is your perception as well, if I am correct. Still there is - in my opinion - a kind of business method that should not be patent-eligible. That is indeed what the SCOTUS said in Bilski. But it is utterly problematic to say that "abstract" business methods are not patent-eligible. So I ventured the designation "genuine" business method for the latter type of business methods. They require business acumen, and cannot be carried out by any PHOSITA. Protecting this type of business method is like protecting against competition, which runs counter the basic principles of a free market economy. A writer like Cooper Dreyfuss has explained that "free riding" is not a problem for this type of inventions, basically for the same reason: more is needed that the mere skills of a PHOSITA to make a profitabe business.

In CLS v. Alice, the essence is to run a business using a trusted third party in a particular way. The purpose of patents is not to "reward" any useful idea, but to promote innovation see the costitution), providing protection (only) if and when needed. There is no policy reason IMHO why no competitive business should be allowed to offer similar service. Similar businesses can coexist, and typically they will offer slightly different services to differentiate them from competition.

Reinier Bakels said...

@ MaxDrei: the EPO technical character test actually violates the law, since it often apparenly requires a dissection of the application into technical and non-technical elements. The EPO struggles for decades now to overcome that objection, like a shift fom technical elements to technical skills and a move from art. 52 to art. 56, assessing the technical contribution of the inventive step. Well, subject-matter that once was technical, always remains technical, so a test under art. 56 is inappropriate, since that test relates to the "state of the art" = may give different results over time, as the "state of the art" develops. I aso recall the "Ticketmaster" decision and Von Hellfelds brilliant analysis in GRUR about features that ought to be ignored but cannot be since omitting would result in a non-functioning system. Well, this is similar to the US problem of "insignificant post-soution acitivity", a concept almost developed in the same timeframe in Germany (Dispositionsprogramm, 22/6/1976), and exactly two years later in the US (Flook, 22/6/1978). Is anything ever "insignificant", given the fact that no elements are allowed that do not have a role in the probem solution?

Perhaps more seriously, there is no legal ground to require a technology test (at least not the kind of technology test applied by the EPO). The previous argumente of the requirement of a technical description as an argument has rightly be identified as a "counsel of dispair" by a British court, and the words "in all fields of technology" inserted in art. 52 EPC2000 (in force since late 2007) should be read literally (according to the law of treaties), and the literal meaning of "all" IMHO is "none excluded". That is at least the meaning in art. 27(1) TRIPS, where the phrase comes from.

Anonymous said...

Reiner,

Thanks for the comments.

However, I will take issue with your characterization of Bilski with "a kind of business method that should not be patent-eligible. That is indeed what the SCOTUS said in Bilski."

That would be incredibly incorrect, and quite in fact is the reason that Stevens lost his majority position.

The Holding of Bilski was based only on "abstract," having nothing whatsoever to do with "business methods."

Stevens would have done differently, except he ran into the direct words of the US Congress that explicitly allows business method patents. He simply did not have enough power on the Court to so directly re-write the law.

Having said that, I have no doubt that there are some business methods that are not patent eligible. Just as there are some medical methods that are not patent eligible (for example, the aforementioned Prometheus methods). Just as there are some [ANY type] methods that are not patent eligible. The presence of the one does not can cannot lead to a categorical ban.

Lastly, I reject your "provding protection (only) if" stance on patent protection directly on its face. Such a narrow "but for" view is not supported in law or fact. There are plenty of policy reasons - including the very language used by Congress - for having a broad patent base. For those who truly understand that innovation is not linear (see the British televsion series Connecitons), a "but-for" policy does not comport with how innovation happens.

As you (the royal you, I do understand) have the desire to change the law to limit its applicability, you are the side that must make a convincing stand (one I have not seen in policy, law or fact).

MaxDrei said...

To Reinier Bakels: sorry but I do not understand your intellectual wanderings. Patents are for non-obvious, new and enabled solutions to objective technical problems. Article 52 eligibility should be decided on an absolute basis, that is, not relative to the state of the art as it just happened to be on any particular day.

Attorneys, paid by corporate Clients determined to acquire a portfolio of patent rights, in whatever field of business they inhabit, will never stop pushing the envelope of patent-eligibility and patentability. I have no Problem with that. Society, however, has to decide whether or not to push back. I think it should.

The EPO (bravo) is pushing back. I don't know a fairer and more practical litmus test than its "technical character" for Art 52 and its "technical problem" for Art 56.

A very great number of people have an axe to grind, an axe to cut down the mighty (for them, the over-mighty) EPO. I suspect you are one of them. I'm with the folks who would hold to the EPO approach until somebody comes up with a practical alternative, an alternative that holds out the promise to work more fairly (as between the Inventor and the public) and with more legal certainty. There always will be legal uncertainty at the margin. At the envelope, every case will be a 50:50 case in which both sides expect to win. you cannot fairly criticise the EPO for that sort of uncertainty.

Where is that alternative Reinier? Where?

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