Federal Circuit Receives Amicus Briefs Re Business Method Patents and Patentable Subject Matter

April 7, 2008. Various entities filed amicus curiae briefs with the U.S. Court of Appeals (FedCir) in In re Bernand Bilski and Rand Warsaw, an appeal from the U.S. Patent and Trademark Office's (USPTO) Board of Patent Appeals and Interferences (BPAI), regarding patentable subject matter.

The BPAI's September 26, 2006, opinion [71 pages in PDF] affirmed the rejection of a claim for an invention that discloses a method of doing business, and not a tangible physical thing, on that grounds that it is not patentable subject matter under 35 U.S.C. § 101.

Section 101 provides, in full, that "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."

The Federal Circuit's 1998 opinion in State Street Bank and 1999 opinion in AT&T v. Excel Communications held that business methods can be patentable subject matter.

The BPAI described the claim:

"The invention relates to a method practices by a commodity provider for managing (i.e., hedging) the consumption risks associated with a commodity sold at a fixed price. It is disclosed that energy consumers face two kinds of risk: price risk and consumption risk (specification, p. 1). The proliferation of price risk management tools over the last 5 years before the filing date allows easy management of price risk (specification, p. 2). However, consumption risk (e.g., the need to use more or less energy than planned due to the weather) is said to be not currently managed in energy markets, which is the problem addressed by the invention (specification, p. 2)." (Parentheses in original.)

Claim 1 discloses:

"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) initializing 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 Federal Circuit requested in its February 15, 2008, order [2 pages in PDF] that parties brief the following issues for the Court's en banc review:

(1) Whether claim 1 of the 08/833,892 patent application claims patent-eligible subject matter under 35 U.S.C. § 101?

(2) What standard should govern in determining whether a process is patent-eligible subject matter under section 101?

(3) Whether the claimed subject matter is not patent-eligible because it constitutes an abstract idea or mental process; when does a claim that contains both mental and physical steps create patent-eligible subject matter?

(4) Whether a method or process must result in a physical transformation of an article or be tied to a machine to be patent-eligible subject matter under section 101?

(5) Whether it is appropriate to reconsider State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), and AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352 (Fed. Cir. 1999), in this case and, if so, whether those cases should be overruled in any respect?

Amicus briefs were due by April 7, 2008. Supplemental briefs of the parties were due by March 6, 2008. Oral argument is scheduled for 2:00 PM on May 8, 2008, in Courtroom 201.

The USPTO filed its en banc supplemental brief [PDF] on March 9, 2008, and the appellants filed their en banc supplemental brief [PDF] on March 6, 2008.

The American Intellectual Property Law Association (AIPLA) filed its amicus curiae brief [39 pages in PDF] on April 7, 2008, arguing that "this century is primed for the development of the Information Era. Operations that were performed on room-sized machines now are done on home computers. Hand-cranked mechanical computations are now performed on integrated circuit chips smaller than a fingernail. Frequently, there is no longer a physical structure responsible for these operations. One might describe them as ethereal or transient, effected by software in networks. Yet, this is the direction of today’s innovation."

"At the turn of the Twentieth Century, patent examiners had no idea what to do with many of the new electro-mechanical inventions arriving on their desks. Innovations such as the telephone were at first declared unpatentable subject matter. Similarly, and until recently, the PTO treated software and internet related applications in much the same way." (Footnote omitted.)

It continued that "Concerns that an invention is ``overbroad´´ or even preposterous should be addressed substantively under section 112, then under sections 102 and 103. Of course this approach to examination requires more work than merely barring the door with subject matter exclusions. But it is the only approach that stands true to constitutional and congressional intent."

The AIPLA wrote that "In the Information Era, as technology again ventures from the recognized into the unknown, under the time-tested mandates of the Constitution, innovation should be no less protectable than in previous eras of transition. "

It argued against overturning either State Street Bank or AT&T v. Excel Communications.

The Computer and Communications Industry Association (CCIA) filed an amicus curiae brief [44 pages in PDF] on April 7, 2008.

It argues that the holding of the Federal Circuit in State Street Bank should be "reconsidered and rejected". It argues that State Street Bank "upends the historically and constitutional limitation of patents to the technological arts" and has caused an "explosive spread of patents" that has "made a public spectacle of the patent system".

The CCIA also argued that AT&T. v. Excel Communications should be overturned. See also, CCIA release.

The American Civil Liberties Union (ACLU) filed an amicus curiae brief [22 pages in PDF] in which it wrote that "The patent claim in this case consists predominantly of speech and/or thought. The applicant's patent cannot be granted without violating the First Amendment. Existing patent doctrines, such as the abstract idea doctrine, can be interpreted to avoid the First Amendment issues. However, if the Court finds the patent can be granted despite those patent doctrines, it must necessarily reach the First Amendment issues. If it does so, it must find the patent valid." See also, ACLU release.

The Intellectual Property Owners Association wrote in its amicus curiae brief [PDF], filed on April 7, 2008, that "the proper, and long-standing, standard for determining whether a process is patent-eligible subject matter under § 101 is whether it is tied to a particular apparatus or operates to transform matter of any form into a different state or thing."

It added that both State Street Bank and AT&T v. Excel Communications "are consistent with that principle", but that the Federal Circuit should "clarify that those decisions did not depart from the historic standard for determining whether a process is patent eligible subject matter."

Bilski & Warsaw is represented by the The Webb Law Firm of Pittsburgh, Pennsylvania. See, Webb's web page with hyperlinks to its briefs, and earlier briefs in this case.

This case is In re Bernand Bilski and Rand Warsaw, U.S. Court of Appeals for the Federal Circuit, App. Ct. No. 2007-1130, an appeal from the U.S. Patent and Trademark Office's Board of Patent Appeals and Interferences.