Patent Law Insights : Software Patent Lawyer & Attorney : Perkins Coie Law Firm : Intellectual Property & Technology Law

The Supreme Court will hear oral arguments tomorrow (Monday) in the Bilski case.  Many amicus briefs have been filed in the case, including briefs from Accenture, AIPLA, Borland Software, the Free Software Foundation, Intellectual Property Owners Association,  IBM, Microsoft, and Red Hat. 

Although the Bilski case is mostly about business methods (e.g., risk hedging), many have turned the case into a question of whether software is patentable.  I have my doubts that there are sufficient facts on the record in the Bilski case for the Supreme Court to opine on that particular issue (even the Federal Circuit deferred the issue as footnoted in their Bilski decision), but I have been surprised before.

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When does a general purpose computer become a "particular machine" as required by Bilski? 

Yesterday, I wrote that a California court had invalidated claims of DealerTrack's U.S. Patent No. 7,181,427. According to Judge Guilford's Order, DealerTrack had asserted claims 1, 3, and 4. The defendants moved for summary judgment arguing that the asserted claims are invalid in view of Bilski. DealerTrack implicitly conceded that its claims do not meet the transformation prong of Bilski's machine-or-transformation test by apparently failing to argue that point in its response to the defendants' summary judgment motion. The Order finds that the claims also do not meet the machine prong.  Because the claims meet neither prong, the Order found them to be invalid.

The Order begins its analysis by outlining the current law of the land that a general purpose computer executing a program is patent eligible. Next, the Order indicates that decisions of the Board of Patent Appeals and Interferences (BPAI) and the California decision in Cybersource v. Retail Decisions require more than a general purpose computer, thereby contravening In re Alappat (holding that a general purpose computer becomes a special purpose computer when it executes a program).

According to the Order, "[t]he ‘427 Patent does not specify precisely how the computer hardware and database are 'specially programmed,' and the claimed central processor is nothing more than a general purpose computer that has been programmed in some unspecified manner." (Page 7, lines 1-4.) The Order cites to an earlier Claim Construction Order that indicates that DealerTrack agreed to a broad reading of the relevant devices, clearly now to its detriment.

The Order states that "[t]he Court finds that none of these devices constitutes a 'particular machine' within the meaning of Bilski." (Order, page 6, line 28-page 7, line 1.) However, the Order does not cite to anywhere in Bilski as specifying what the "particular machine" ought to be. It goes on to state:

Under Bilski and the recent decisions interpreting it, the central processor in this case cannot constitute a "particular machine." Further, this Court’s claim construction order defined both the "remote application entry and data device" and "remote funding source terminal device" to include "any device," such as a personal computer or dumb terminal, and these devices clearly cannot constitute particular machines.

(Order, page 7, lines 4-9.) 

When does a general purpose computer become a "particular machine" as required by Bilski?  Can it become one?  No one seems to know yet.

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One way to eviscerate the value of a patent or portfolio of patents is to assert them unsuccessfully.

DealerTrack is a "provider of on-demand software and data solutions for the automotive
retail industry" and has a portfolio of four U.S. patents and at least five patent applications. As reported in the Wall Street Journal, the company announced today that a judge in the U.S. District Court of the Central District of California had declared a patent it was enforcing invalid in view of Bilski.  The company is planning to appeal.

I have not yet seen the judge's ruling, but the only two independent claims in the relevant patent are:

1. A computer aided method of managing a credit application, the method comprising the steps of:

• receiving credit application data from a remote application entry and display device;
• selectively forwarding the credit application data to remote funding source terminal devices;
• forwarding funding decision data from at least one of the remote funding source terminal devices to the remote application entry and display device;
• wherein the selectively forwarding the credit application data step further comprises:
  • sending at least a portion of a credit application to more than one of said remote funding sources substantially at the same time;
  • sending at least a portion of a credit application to more than one of said remote funding sources sequentially until a finding source returns a positive funding decision;
  • sending at least a portion of a credit application to a first one of said remote funding sources, and then, after a predetermined time, sending to at least one other remote funding source, until one of the finding sources returns a positive funding decision or until all funding sources have been exhausted; or;
  • sending the credit application from a first remote funding source to a second remote finding source if the first funding source declines to approve the credit application.

(Sic.)

5. A computer aided method of managing a credit application, the method comprising the steps of:

• receiving credit application data from a remote application entry and display device;
• selectively forwarding the credit application data to a first remote funding source terminal device;
• wherein the selectively forwarding the credit application data step further comprises:
  • facilitating the first remote finding source terminal device to selectively forward the credit application to a second remote funding source terminal device if the funding source associated with the first remote finding source terminal declines to approve the credit application; and;
  • forwarding funding decision data from at least one of the first and second remote funding source terminal devices to the remote application entry and display device.

I do not yet know which claim(s) were asserted and/or invalidated. 

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The Supreme Court of the United States today granted certiorari in the Bilski case.  The primary question the Supreme Court has been asked to answer is:  whether the Federal Circuit's "machine-or-transformation" test is the appropriate test to determine whether a claimed process should be patentable subject matter.  To be valid, a claimed invention must (1) fall within one of the specified categories of patentable subject matter, (2) be novel, and (3) not be obvious.  This case deals with the first threshold issue of patentability. 

Although the original Bilski case involved a pure business method (i.e., not implemented in software), it is likely that the Supreme Court's decision could have an impact on software patents because many patent applications directed to software recite "method" or process claims.

A large number of patent practitioners and their clients will be watching this case closely.

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After losing at the Federal Circuit, Bilski filed its appeal with the U.S. Supreme Court.  Last week, the USPTO filed its Opposition to the appeal.  The Opposition quotes the following language from the Federal Circuit decision:

[W]e agree that future developments in technology and the sciences may present difficult challenges to the machine-or-transformation test, just as the widespread use of computers and the advent of the Internet has begun to challenge it in the past decade. *** And we certainly do not rule out the possibility that this court may in the future refine or augment the test or how it is applied. At present, however, and certainly for the present case, we see no need for such a departure.

(Pages 14-15 of the decision.)  However, the Opposition leaves out the following sentence from that passage:  "Thus, we recognize that the Supreme Court may ultimately decide to alter or perhaps even set aside this test to accommodate emerging technologies."

The Opposition makes a good argument on why Bilski is not the appropriate case for determining whether software is patent eligible.

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On March 27, Judge Patel in the Norther District of California extended the reach of Bilski well beyond the dicta in that case.  In Cybersource v. Retail Decisions (California Civil Case No. 3:04-cv-03268-MHP), Judge Patel ruled that "[a] method for verifying the validity of a credit card transaction over the Internet" that obtains "information about ... transactions that have utiliized an Internet address" does not satisfy the method-or-transformation test promulgated by Bilski.  She also ruled that Beauregard claims also must satisfy the machine-or-transformation test independent of reciting the storage of computer-executable instructions on a computer-readable storage medium.

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I just finished reviewing 18 BPAI decisions in software cases.  Most of the decisions rejected at least some claims under 35 USC 101 in view of Bilski. 

• Of these decisions, almost all raised 101 issues sua sponte. 
• Three decisions remanded 101 issues to the examiner whereas the rest just held that claims are unpatentable. 
• In almost all of the decisions, merely reciting a processor or computer in the preamble was insufficient. 
• In some cases, even system claims were rejected as merely corresponding to software components. 
• Many decisions also stated that merely executing a method on a general purpose computer is not sufficient to overcome the "machine" requirement of Bilski's machine-or-transformation test. 

The board appears to be looking for recitations of a special purpose machine or device and thereby appears to ignore prior case law.  If you are appealing a software case to the BPAI, you may want to review these decisions to see if your claims will withstand a sua sponte patentability rejection if you are not prepared to further appeal beyond the BPAI.
 

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