The Impact of Bilski v. Kappos on Prosecution and Litigation

1. The Impact of Bilski v. Kapposon Prosecution and Litigation Jennifer Kuhn: Moderator Robert Kowert: Meyertons, Hood, Kivlin, Kowert & Goetzel P.C. Brian Nash: Bracewell & Giuliani

2. What’s next for process patents?

3. A Brief History of Bilski • Bilski claimed: • 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.

4. Bilski History cont. • Bilski’s claims denied by examiner for failure to satisfy 35 U.S.C. section 101. BPAI affirmed. • Court of Appeals for the Federal Circuit affirms en banc, setting new standard for determining patentability of process claims. • Passing “machine or transformation” test is required for method claims to be patentable. • Judge Rader dissents from majority opinion, but concurs in result. • Claims fail because they are “abstract.”

5. Bilski History Continued • Supreme Court affirms, but rejects Federal Circuit’s new standard. • Majority opinion by Kennedy is limited. Excludes Parts II-B-2 and II-C-2. Scalia dissents from those sections. • Stevens (joined by Ginsberg, Breyer and Sotomayor) concurred in the result, but not the opinion. • “Method of doing business is not a ‘process’ under section 101.” • Breyer dissent (part II joined by Scalia): concrete and tangible is not sufficient for patentability.

6. Bilski History Cont. • “The machine-or-transformation test is not the sole test for deciding whether an invention is a patent eligible ‘process.’” Bilski, slip op. at 8. • “Applying the broader statutory definition of ‘process,’ the ‘machine-or-transformation’ test is a sufficient, but not necessary test to determine the patentability of a process patent under [section 101.]” Amicus brief at 3.

7. Bilski history cont. • “[Section] 100(b) already explicitly defines the term ‘process.’ See Burgess v. United States, 553 U.S. 124, 130 (2008) (‘When a statute includes an explicit definition, we must follow that definition.’”) Slip op. at 7. • “In addition to requiring statutory terms to be interpreted consistently throughout a statute, this Court accords a special status to statutory definitions: ‘When a statute includes and explicit definition, we must follow that definition, even if it caries from that terms ordinary meaning.’ Stenberg v. Carhart, 530 U.S 914, 942 (2000). Amicus brief at 7.

8. Bilski History cont. • “In patent law, as in all statutory construction, ‘[u]nless otherwise defined, ‘words will be interpreted as taking their ordinary contemporary, common meaning.’’” Slip op. at 6. • “[W]hen faced with an issue of statutory construction in a patent case, as here, this Court should look not only to its patent law precedent, but also its non-patent precedent.” Amicus brief at 2. • “According to this Court’s precedent, terms used in statutes receive their ordinary meaning, or their settled common law meaning, if the term has such an ‘established meaning.’” Amicus brief at 9.

9. Bilski History continued. • “A conclusion that business methods are not patentable in any circumstances would render section 273 meaningless. This would violate the canon against interpreting any statutory provision in a manner that would render another provision superfluous.” Slip. op at 11. • “The Federal Circuit’s ‘machine-or-transformation test’ also violates another statutory interpretation rule found in the Supreme Court’s non-patent precedent: a statutory interpretation should not render another section of the same statute superfluous.” Amicus brief at 12.

10. Bilski History cont. • Breyer (with Scalia joining as to Part II) • Part I: Agrees with Stevens that business methods are not patentable • Part II: Reiterates certain portions of the other opinions, and then states: “Although the machine or transformation test is not the only test for patentability, this by no means indicates that anything which produces as ‘useful, concrete and tangible result….is patentable.”

11. Question 1:Is it 1981 all over again? • Are we left with only the law expressed in the Supreme Court’s prior opinions? • Diamond v. Diehr, 450 U.S. 175 (1981) • Parker v. Flook, 437 U.S. 584 (1978) • Gottschalk v. Benson, 409 U.S. 63 (1972)

12. Question 1, cont. • Did any Federal Circuit case law survive? • Justice Kennedy directed us to the “scholarly opinions” of the Federal Circuit in his oral statement. • In re Comiskey, 554 F.3d 967 (Fed. Cir. 2009) • In re Nuijten, 500 F.3d 1346 (Fed. Cir. 2007) • In re Alappat, 33 F.3d 1526 (Fed.Cir.1994) • In re Warmerdam, 33 F.3d 1354 (Fed. Cir. 1994)

13. Question 2: Are there any special procedures or regulations at the PTO following the Bilski decision • June 28th, 2010 internal PTO memo instructed examiners to use the machine or transformation test and to reject claims that did not meet the test “unless there is a clear indication that the claim is not directed to an abstract idea.”

14. Question 2: New rules cont. • 75 Fed. Reg. No. 143, 42922-26, Interim rules published July 27, 2010. Applies to all applications. Numerous factors to consider include: • Particularity of elements. • Whether machine’s involvement is extra-solution or field of use. • Whether claim is so abstract it would cover all solutions.

15. Question 3: Have any trends emerged in BPAI or District Court cases post-Bilski? • Board decisions immediately following Bilski affirmed rejections, with updated analysis: • -Ex parte Fellenstein et al, 2009-006595 • Ex parte Caccavale et al, 2009-006026 • Ex parte Proudler, 2009-006599 • Ex parte Birger et al, 2009-006556 All four cases required computers for implementation.

16. Emerging trends, cont. • Notably, these were all examiner rejections on 103 grounds that the Board found were superseded by threshold 101 failings. • Board may be looking for particularity and specificity of the machines used in method claims. It is not sufficient to claim implementation of a method on “a computer system” or “the internet.”

17. Emerging Trends, cont. • Ultramercial LLC v. Hulu, LLC et al, C.D. Cal. Motion to Dismiss granted based on Bilski on Aug. 13, 2010. • Claims at issue directed to requiring viewing of advertisements before viewing free media on line. • Court dismissed, stating that the claims were not tied to any particular machine, and that “the internet” was too abstract to meet the requirements of section 101. • Too early to determine a trend. • Awaiting decisions in Accenture Global Servs. GMBH v. Guidewire Software Inc., (D. Del.); and Perkinelmer, Inc. v. Intema, Ltd. (D. Mass.). • Judge Gertner (D. Mass) said of Perkinelmer: ”When this case reaches the stage of summary judgment, the patentability of a process for integration of prenatal screening data from more than one trimester will surely present an intriguing question. See generally Bilski v. Kappos, No. 08-964 (U.S. June 28, 2010).”

18. Question 3: What will likely be the first case from the Federal Circuit post-Bilski? • Possibly Research Corp. Tech v. Microsoft, argued June 9, 2010 • Claimed method for half-toning gray-scale images • Not stayed prior to Supreme Court decision • No additional briefing requested • Panel was Rader-Newman-Lourie. Rader and Newman both dissented from en banc decision. • Possible that a Newman dissent could keep this case from being the first post-Bilski Federal Circuit decision

19. Other pending section 101 Fed. Cir. cases, stayed for SC Decision. • CyberSource Corp. v. Retail Decisions, Fed. Cir. App. No. 2009-1538 (financial transactions). • Fort Properties v. American Master Lease, Fed. Cir. App. No. 2009-1242 (stayed) (contractual obligations). • DealerTrack Inc. v. Huber, Fed. Cir. Apps. Nos. 2009-1566 & 1588 (financial transactions). • FuzzySharp Techs. Inc. v. 3D Labs. Inc., Ltd., Fed. Cir. App. No. 2010-1006 (3D graphics). • Every Penny Counts Inc. v. Bank of America Corp., Fed. Cir. App. No. 2009-1442 (financial transactions). • Association for Molecular Pathology v. USPTO, Fed. Cir. App. No. 2010-1406 (isolating and comparing DNA sequences). • Prometheus Labs. 581 F. 3d 1336 (Fed. Cir. 2009) (blood tests for levels of claimed compound). • Classen Immunotherpies, Inc. v. Biogen IDEC, 304 F. Appx. 866 (Fed. Cir. 2008) (vaccines).

20. Question 4: Does the Bilski decision favor a particular area of technology? • Decision explicitly approves patentability of “business methods” by harmonizing section 273 with section 101. • Levels the playing field for certain types of method claims. • Not limited to “business method” patents: Prometheus Labs., Inc. v. Mayo Collaborative Servs., (Fed. Cir. App. no. 2008-1403). Two patents at issue are directed to “optimizing therapeutic efficiency” of a claimed pharmaceutical compound. Patents claim testing blood for presence of claimed compound, and recalibrating the drug dosage based on the results.

21. Question 5: How will Bilski affect how you draft claims for prosecution? • Software per se vs. true hardware in the body of the claim. • Claims directed to signals unlikely to be successful. •  For "medium" claims, today's magic word at the PTO is "non-transitory.” • For apparatus claims, include clear hardware components in the body of the claim. •  Machine-or-transformation test is generally still the standard.

22. Question 5 cont.: How will Bilski affect how you select claims and assert defenses in litigation? • A return to pre-Bilskien banc approach. • As a plaintiff: shore up your machine-or-transformation basis if you can. • As a defendant, the Stevens and Breyer dissents provide a lot of ammunition for attacking business method patents.

23. Question 6: Will this decision make it more likely that you will cite non-patent case law, if appropriate? • This decision, and eBay decision show how non-patent precedent can sway the Court when appropriate. • Common law issues • Equitable issues • Here, statutory interpretation issues. • Myopic, Federal-Circuit-only approach can be limiting.