Ex parte Bilski (Software Patents)
Despite the fairly clear message of previous Federal Circuit cases including, in particular, AT+T Corp. v. Excel, the U.S. Patent and Trademark Office has been particularly hostile against anything that looks like a business method patent application. They even have a two tier review. If an examiner is inclined to allow a business patent application, another examiner reviews the decision. There is a disincentive for the first examiner to allow an application, due to the fear of being criticized. Allowance rates are at near record lows. Applicants having business method patent applications, and even some applicants having software patent applications, are facing long, drawn out, expensive prosecutions. The USPTO is likely reacting to bad publicity generated by the allowance of the Amazon One-Click patent, as well as to PR campaigns and lobbying efforts.
Bilski’s patent application is Serial No. 08/833,892 and relates to commodity trading. Claim 1 is representative and recites:
1. 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) initiating 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.
No hardware is required to perform the steps. This is thus what would be called a “pure” business method patent application.
During prosecution, the Examiner used a rejection similar to that used unsuccessfully in the Lundgren case, and stated that “the invention is not directed to the technological arts.”
To reduce the risk of ending up with the same result as in the Lundgren case, the Board of Appeal took the position that Bilski was claiming an “abstract idea”:
“The Board held in Lundgren that the ‘technological arts’ test is not a separate and distinct test for statutory subject matter. Although commentators have read this as eliminating a ‘technology’ requirement for patents, this is not what was stated or intended.”
The Bilski Board also stated that:
AT+T involved a machine-implement process. Machines are physical things that nominally fall within the class of a “machine” in section 101, and the machine-implemented methods inherently act on and transform physical subject matter, such as objects or electrical signals, and nominally fall within the definition of a process under section 101. No machine is required by the present claims. Until instructed otherwise, we interpret State Street and AT+T to address the ‘special case’ of subject matter that nominally falls within section 101, a general purpose machine or machine-implemented process, but which is nonetheless unpatentable because the machine performs an ‘abstract idea.’
This is another case to watch.