Big Baboon Battles Bilski, Court Cites Morse Code

Debate over the patentability of process patents, particularly those having claims drawn to software inventions, continues to rage in the wake of the U.S. Supreme Court's decision to accept certiorari in Bilski.  The state of the law is in flux.  Portfolios of patents hang in the balance while patent lawyers across the U.S. extend time on pending applications, waiting to see what the Supreme Court will do in Bilski.  In Seattle, one can almost hear the wheels of software innovation screeching to a halt, as companies and investors decide whether it makes sense to invest in new software ideas, not knowing whether their investments will even be eligible for patent protection.

A particularly thorny issue raised by Bilski is the patentability of a process implemented by a machine, the so-called "machine prong" of Bilski's two-part test for patentability under 35 U.S.C. 101.  In application, "[a] claimed process involving a fundamental principle that uses a particular machine or apparatus would not pre-empt uses of the principle that do not also use the specified machine or apparatus in the manner claimed."  This begs the question, what software algorithm does not "pre-empt uses . . . that do not also use the specified machine or apparatus in the manner claimed?"  Put another way, what is it about the computer, computer network, system, or other "programed device," that makes software eligible for patent protection?

District Judge Stephen Wilson is wrestling with this issue in a case styled Big Baboon Inc. v. Dell, cv-09-1198 (USDC CD Cal.), where a small software company is pitted against Dell, HP, UPS, Fed Ex, Amazon, and others, alleging infringement of U.S. Patent Nos. 6,115,690 and 6,343,275, patents for "Integrated Business-to-Business Web Commerce and Business Automation."  At first glance, Claim 1 of the '690 patent seems to claim everything e-commerce: "[a]n automated end-to-end business process for product sales that uses a relational database management system, the process comprising the steps of  [inputting a payment record and generating an invoice] and qualifying user inputs using experiential constraints, based on the then-current state of the database as a whole."  Not so, says Big Baboon, which offers an interpretation of the claims that "incorporate[s] specially programmed computers using an integrated database structure ("schema") specifically programmed into a database management system."  This "integrated database management system," according to Big Baboon, is the "particular machine" that fully satisfies both section 101 and Bilski's machine prong.

Judge Wilson appears to be favoring Big Baboon's argument for now.  Recently, he asked for supplemental briefing, citing O-Reilly v. Morse, 56 U.S. 62 (1853), where the U.S. Supreme Court allowed Morse to patent his code as used via the telegraph.  In his original 1837 petition to the Commissioner of Patents, Morse described his fifth claim as "[a] dictionary or vocabulary of words, numbered and adapted to this system of telegraph." 56 U.S. at 82.  In an 1848 reissue, Morse's fifth claim changed to recite "the systems of signs, consisting of dots and spaced, and of dots, spaces, and horizontal lines, for numerals, letters, words, or sentences."  Id. at 86.  When the subject matter of Morse's fifth claim was challenged as not patent eligible, he responded by saying that it was "for telegraphic purposes; being an improved instrumentality in the art of telegraphing by electricity or galvanism."  Id.

Calling it a "remarkable body of dicta,"  Judge Wilson appears unpersuaded that "one may not patent a process that merely operates a piece of machinery."  See e.g. Boyden Power-Brake Co. v. Westinghouse, 170 U.S. 537, 557 (1898) ("where the process is simply the functionally or operative effect of a machine, the . . . cases are conclusive against its patentability.").

It will be interesting to see what develops. Suffice it to say that the Defendants take issue with Judge Wilson's description of this body of case law as "dicta," but it remains to be seen how this dispute over patent eligible software will be resolved.

In Re Bilski Decided

As many of you already know, the CAFC decided In Re Bilski this week. Some, including the PLI, claim that the decision spells the end of software patents. I completely disagree. In fact, the majority addressed the continued patentability of software specifically:

"although invited to do so by several amici, we [also] decline to adopt a broad exclusion over software or any other such category of subject matter beyond the exclusion of claims drawn to fundamental principles set forth by the Supreme Court."

The number of incorrect reports and predictions surrounding this decision is really quite remarkable. Bloomberg is reporting that "In today's ruling, the appeals court overturned a 1998 decision involving State Street Corp. that made clear that business methods are entitled to patent protection." Not so. I agree with Peter Zura, who states that "State Street remains good law ...." While it is true that Bilski curtailed the scope (and called into question the validity of) so called "pure business" method patents, the fundamental policy rationale of State Street remains good law (On this topic, the majority stated: "[i]n State Street, as is often forgotten, we addressed a claim drawn not to a process but to a machine.")

The Bilski decision dealt specifically with a method of hedging risks in commodities trading. Regarding these so-called "pure" business methods, the majority stated:

"[p]urported transformations or manipulations simply of public or private legal obligations or relationships, business risks, or other such abstractions cannot meet the test because they are not physical objects or substances, and they are not representative of physical objects or substances."

In order to be patentable after Bilski, the claimed method must meet the "machine or transformation" test. This test is not a physicality test – i.e., a claim can still be patentable even if it does not recite sufficient "physical steps." On the other hand, Bilski holds that "a claim that recites 'physical steps' but neither recites a particular machine or apparatus, nor transforms any article into a different state or thing, is not drawn to patent-eligible subject matter." Thus, a claimed process where every step may be performed mentally is unpatentable.

"Of course, a claimed process wherein all of the process steps may be performed entirely in the human mind is obviously not tied to any machine and does not transform any article into a different state or thing. As a result, it would not be patent-eligible under § 101."

Given the conventions of most "software" patent claims drafted within the last decade, including claims drawn to "computer readable medium," "computer systems," and other similar claims including claims to "computer networks," the vast majority of these patents remain unaffected by Bilksi ... for now. The Supreme Court has yet to weigh in on this issue.

BPAI Raises Stakes for In Re Bilksi and the Future of Software Patents

An excellent article by John Duffy, professor of law at George Washington University Law School, explains that two recent decisions from the USPTO's Board of Patent Appeals and Interferences (BPAI), Ex parte Langemyr (May 28, 2008) and Ex parte Wasynczuk (June 2, 2008) substantially raise the stakes for all interested parties in the Federal Circuit's en banc review of In re Bilski, a decision set to review the scope of patentable subject matter under 35 USC section 101.

I think this article, and others like it will lead the Federal Circuit to come to the right conclusion in the Bilski case, and that is patentable subject matter under 101 should not be restricted. Instead, the better way to curtail software patents lacking in any creativity or innovation is to reject them as obvious under 35 USC section 103. Prior art searching capabilities for software have improved and will continue to improve. Moreover, mandatory second reviews, peer review systems, and the like are proving effective at making sure that only the most innovative software patents are allowed to issue.

The effects of curtailing patentable subject matter to exclude software innovation and require physical transformations or a ties to a "particular computer" will be extremely damaging to existing businesses and the long-term impact in software innovation will be palpably negative: there will be little incentive to build a business around software innovation if the Federal Circuit curtails the scope of patentable subject matter under section 101.

Washington State Patent Law Association Files Amicus Brief in Bilski

On April 4, 2008 the Washington State Patent Law Association (WSPLA) filed an amicus brief in support of Petitioner Bernard L Bilksi and Rand A Warsaw in the case currently under en banc consideration by the CAFC, In re Bilksi. My earlier posts on this case can be found here and here.

WSPLA's brief was signed by Michael Swope over at Woodcock Washburn. Also on the brief were Grzegorz S Plichta (Woodcock Washburn), Dale Bar, President of WSPLA and lawyer at Lee and Hayes, and Peter J Knudsen, IP counsel for Nastech Pharmaceutical Co., Inc.

Dennis Crouch over at Patently O, has a good summary of all Amicus Briefs filed in the case.

AIPLA Submits Amicus Brief in Bilski Case, Arguing for Broad Patentable Subject Matter

Here is a Link to the AIPLA Brief in the Bilski case. My post on this case is found here.

This is from the AIPLA post on the case:

AIPLA on April 7, 2008, filed an amicus brief with the en banc Federal Circuit, arguing that it is improper to apply the subject matter categories at 35 U.S.C. §101 narrowly to require that a process claim must be implemented by an apparatus in order to be patent-eligible under Section 101. In re Bilski, en banc Fed. Cir., No. 2007-1130.
According to the brief, Section 101 broadly encompasses anything under the sun made by man, and is limited only by the judicially-developed exclusions for laws of nature, physical phenomena, and abstract ideas. The brief maintains that this formulation provides a flexible rubric that promotes disclosure and adapts to yet unforeseen technologies, while retaining the safeguard against overbreadth in the traditional patentability requirements of novelty, non-obviousness, and sufficient disclosure to the public.

Business Method Patents To Be Reviewed En Banc

The Federal Circuit decided to review the patentability of business methods en banc in the case In re Bilski. The en banc order presents the following 5 questions:

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?

For more coverage of this developing story, see Dennis Crouch's Patently-O post here, and Peter Zura's 271 blog post here.

I've also posted on the topic of patentable subject matter here, and was counsel of record for the Federal Circuit Bar Association in that group's amicus brief to the U.S. Supreme Court in Labcorp v. Metabolite Labs. We argued for the petition for certiorari to be dismissed as improvidently granted, and that is what eventually happened in that case. (See this link for some good coverage of the Labcorp case from UW Law School's CASRIP ("Center for Advanced Study and Research on Intellectual Property") Newletter.)

I think this decision by the Federal Circuit, i.e. to take up the issue of patentable subject matter en banc, could potentially eliminate (or delay), any grant of certiorari by the Supreme Court on this topic. Some speculate that the Supreme Court will grant certiorari in In re Nuijten, another section 101 case where the CAFC--over the dissents of Judges Linn, Newman, and Rader--declined to consider patentable subject matter en banc. The CAFC's timing here may fortuitously avoid the Supreme Court stepping in to re-write the law of patentable subject matter in connection with In re Nuijten. Based on the comments of Justices Breyer and Stevens at the February 2007 oral argument in the ATT v. Microsoft case, at least these Justices seem ready and willing to take a hard new look at the scope of patentable subject matter under section 101. The questions raised by the CAFC's order in In re Bilski could have easily come from Justices Stevens or Breyer, so it will be interesting to see how this issue develops and whether the CAFC can assuage concerns voiced by Justices Breyer and Stevens.