Process Patentability by Sean

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Handbook Summary:

The basis for patentability comes from Section 101 of Title 35 of the United States Code which states: “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.” This may not be very helpful in actually determining if a process is indeed patentable however, since it is not easily apparent what constitutes a new and useful process. Generally, anything that describes a law of nature, a physical phenomenon, or an abstract idea is rejected. The most recent accepted test for patentability comes from the Supreme Court decision In re Bilski and is known as the machine-or-transformation test. This test looks at a process and makes it eligible for a patent if it is implemented with a particular machine or if it transforms an article from one state to another.

In order to qualify under the first option, the process needs to use a machine that is itself an inventive application of the principle that the process centers around. Patents will generally not be granted to processes that rely upon general purpose computers or the Internet in order to satisfy this requirement. The second portion of the test, which qualifies a process for patentability if it transforms an article, is not restricted to an actual physical transformation; in fact it may be non-physical. However, when it comes to the transformation of signals, there is some gray area, though it seems that signals representing physical events or relations are granted patentability while those that represent more abstract relations are rejected. One further point of note is that the “machine” used by the process may in fact be a manufacture or a composition of matter, as long as it is still and inventive application.

Policy Considerations:

In the 1952 Patent Act Congress stated that Section 101 of the U.S.C. was intended to include “anything under the sun that is made by man.” A principle, in the abstract, is a fundamental truth and cannot be patented as no one can claim an exclusive right. Further, any abstract idea in someone’s head would be impossible to patent because there would be no evidence to support the patent. An idea may prove useful or be the source of inspiration for an invention, but itself alone is not enough to justify a patent as it does not produce any new technology for the progress of society. Clearly it does not make sense to patent ideas because it would restrict the communication of information that the original intent of patent law was designed to promote. It was stated in Gottschalk v. Benson that the first telephone patents were not patents of the science behind the telephone, but the application and implementation of the science. Patenting scientific discoveries and truths will hinder progress because it is these discoveries that lead to new methods and devices that create progress.

A major problem arises out of processes such as computer programming and business methods because they are not tangible objects. They do not exist in the physical world and thus are seen as being more similar to abstract ideas than the machines and contraptions that had dominated the patent world before the 1960s. Stated in Benson, a huge logistical problem would also present itself from patenting computer programs. The Patent Office is required to research all patent applications against prior art, and without a classification technique and categorization of these new types of patents, they would not be able to filter through the enormous amount of material that would become patentable. The patenting of programs would be reduced to simple registration and ability to rule fairly would evaporate.

However, from the machine-or-transformation test it is clear that computer programs and formulas can indeed be part of a patent. In Diamond v. Diehr, the patent is on the machine which includes an algorithm, not the algorithm itself. The courts seemed to feel out the new technology of computer programs and allow those that were incorporated into processes that made sense to patent. They were then able to look back on these decisions and come up with tests that fulfilled the spirit of the law while accommodating new technology as it existed in the abstract realm. They soon understood that restricting all computer modeling and data processing would result in the extinction of new patents as these technologies came to dominate the economy. Not wanting to hinder the promotion of progress to which end patents are intended, they progressed slowly and over time a more clear understanding of how these computer programs would fit into patent law interpretation were developed.

Business methods originally fell under an exception to patentability of the same name, but this exception was in fact never used as grounds for dismissing a patent. Since the 1952 Patent Act, business methods have been subject to the same legal requirements for patentability as applied to any other process or method. In State Street, it was held that business methods are indeed patentable if they produce a “useful, concrete and tangible result.” The transformation of data, representing discrete dollar amounts, by a machine through a series of mathematical calculations into a final share price, constituted a practical application of a mathematical algorithm, formula, or calculation. The court backtracked on this ruling however and in Bilski they reversed this decision. Perhaps they considered that the law was not yet ready to handle the entirely non-physical realm within which the process operated. However in adopting the machine-or-transformation test, they made clear that this was not the only criteria to be considered, opening the door for further new interpretation as time goes by and the evolution of technology in the digital realm continues.

History:

Prior to the invention of the computer and technologies involving large scale data storage and processing in the early 70s, the issue of what type of process was patentable was a fairly clear standard. But soon patents for computer programs and other sorts of processes to manipulate date began to be filed, and inevitably challenged in court. In 1978 in the case of Gottschalk v. Benson, a patent for converting binary-coded decimal numerals into pure binary numerals on a general purpose digital computer had been denied and the decision was being challenged. The court ruled the process claimed by the patent directed to a numerical algorithm and, as such, was not patentable due to being an abstract idea. Before this, the precedent was that any scientific truth or the mathematical expression is not a patentable invention, unless it was used to create a novel and useful structure. Despite upholding the decision to deny the patent, the court did state that they did not endorse wholly restricting computer programs from the realm of patentability.

In 1981, the Supreme Court considered the case of Diamond v. Diehr, where the issue at hand was a process of turning raw synthetic rubber into cured precision products. Key to the process were calculations made by a computer formula that determined when to open the rubber press. The court reiterated its earlier holding that mathematical formulas are not eligible for patent protection by themselves. But it viewed this process as a physical manifestation of such a formula and thus, despite containing a mathematical algorithm, it was not simply an abstract idea. Thus, if the invention as a whole meets the other requirements of patentability it is patent-eligible, despite including computer software.

In the case of Arrhythmia Research Technology Inc. v. Corazonix Corp. in 1992, another situation arose which further helped to formulate the law regarding patentable processes. In the decision of the court, they clarified the distinction between which processes containing natural laws or other abstract ideas were patentable, and which were not. Claims directed entirely to an abstract mathematical formula or equation, whether directly or implied, are not statutory under section 101. However claims to a specific process that is used or implemented in accordance with a mathematical algorithm will generally satisfy section 101. In application, this principle means that for an invention whose process contains steps or whose physical elements are described at least in part in terms of mathematical formulas, the formulas are considered in the context of total result of the claimed invention as a whole. This brought into practice the use of the Freeman-Walter-Abele test. This test first determined whether a mathematical algorithm is stated directly or indirectly in the claim. If so, it is determined next whether the invention as a whole is nothing more than the algorithm itself, or whether the algorithm is applied to or limited by physical elements or steps of the process. When the mathematical algorithm is applied in one or more parts of an otherwise statutory process claim, then the requirements of section 101 are met. This gave the ruling in the Diamond case more solid legal ground on which to stand in terms of determining whether patents containing abstract ideas or laws of nature qualified as patentable processes.

The State Street Bank & Trust Co. v. Signature Financial Group case of 1998 gave a ruling for the first time concerning the patentability of business models. In looking at the claimed business method of managing merged financial funds, the court stated that business methods could indeed be patentable and effectively threw out the “business method” exception. They said that as long as the process or method produces a “useful, concrete and tangible result," that it did fall under the requirements of Section 101. The most recent and defining ruling in terms of patentable processes occurred in the case of Bilski v. Kappos in 2008. This Supreme Court ruling established the machine-or-transformation test as a standard and went against the “useful, concrete and tangible result” criteria established by the Federal Circuit in State Street. The Supreme Court affirmed an earlier decision to reject a patent application for a method of hedging losses in one area of the energy industry by making investments in other areas of that industry, on the basis that the abstract investment strategy set forth in the application was just that, and simply did not constitute patentable subject matter. The Court also rejected an exclusion of all business method patents from eligibility, since the definition of "process" in Section 100(b) includes the word "method," which must in some way conform to business methods. This ruling broadened the business patents category and will likely make allowable more future patents on business methods.

Proposed Standard:

I am actually very impressed with the progress that the courts have made in adapting the U.S.C. to new technologies. Our government is designed to be slow and inefficient, but to produce the best possible result, and I think the courts have done just that. By slowly adapting the law to new technologies they have, in my mind, kept the realm of patentable subject matter reasonable, yet allowed for new and useful inventions to be protected at the same time. They understand that while each individual ruling may not be perfect, over time that they will gravitate towards the best possible standard. I personally think that the State Street method of examination will eventually reappear in some form later on, simply due to the direction that technology is headed.

What I would propose is for a new type of patent entirely that takes into account the differences that exist between the old fashioned, mechanical patents and new patents for programs or algorithms that do not exist in the physical world yet still can provide great benefit to society. These patents would last for much less time that the 20 years given to regular patents, because any program becomes obsolete long before then. If there were a better system for say, finding and eliminating viruses on personal computers, shouldn’t that be just as patentable as, say a machine for finding and removing rocks from harvested bales of potatoes? There are just as many innovators out there today as there were in the past, in fact the number has undoubtedly increased. But many of them do not use a machine shed or a garage as their palate, they use a computer. They should still be rewarded for their breakthroughs and their inventions should be protected.