Yesterday, the U.S. Court of Appeals for the Federal Circuit handed down its long-awaited decision in In re Bilski to help clarify the appropriate test to determine whether or not certain types of inventions may be patentable subject matter under 35 U.S.C. § 101. The decision of In re Bilski focuses on a patent application filed in 1997 that claims a method for hedging risk in the field of commodities trading. While the subject matter of In re Bilski focuses on hedge funds, the implications of this decision as applying to method or process patent claims covers all types of patentable inventions, particularly methods of doing business. In summary, the CAFC selected the "machine-or-transformation" test as being the governing test for determining eligibility of patent application process claims.

By way of background, 35 U.S.C. § 101 reads as follows:

"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 subject matter of the Bilski application was originally rejected by the USPTO as merely manipulating an abstract idea and solving a purely mathematical problem, and because the invention was not implemented on a specific apparatus, the invention was not directed to the technical arts and therefore was deemed unpatentable.

The CAFC recognized that a claimed process is patent eligible if it is tied to a particular machine or apparatus, or if it transforms a particular article into a different state or thing. This "machine-or-transformation" test, as previously enunciated by the U.S. Supreme Court in various earlier decisions, was determined by the CAFC as being the governing test for determining patent eligibility of a process or method under 35 U.S.C. § 101.

In the present case, the applicants previously argued that their method of hedging risk was not limited to any specific machine or apparatus, so the "machine" aspect of the "machine-or-transformation" test did not apply. The CAFC, recognizing that no particular machine or apparatus was involved, decided not to elaborate upon "the precise contours of machine implementation," including whether or not the mere recitation of a computer within such a claim would be sufficient to tie the process to a machine. Upon application of the "transformation" aspect of the test, the CAFC held that the claimed method of hedging risk did not transform any article into a different state or thing, and therefore, the process claims were not drawn to patent-eligible subject matter.

The CAFC also stated that "we 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 that "the Supreme Court may ultimately decide to alter or perhaps even set aside this test to accommodate emerging technologies." However, and in conclusion, the CAFC stated that "we see no need for such a departure and reaffirm that the machine-or-transformation test, properly applied, is the governing test for determining patent eligibility of a process under § 101."

The CAFC then reviewed several other tests under 35 U.S.C. § 101 to determine whether or not they are valid and useful in light of the foregoing. While several tests were analyzed, one test of particular note (the "useful, concrete, and tangible result" test associated with methods of doing business in State Street Bank & Trust Co. v. Signature Financial Group (149 F.3d 1368, 1370 (Fed. Cir. 1998))) was discussed in detail, with the Court concluding that this particular test is insufficient for determining patent-eligible subject matter under § 101:

"But while looking for "a useful, concrete and tangible result" may in many instances provide useful indications of whether a claim is drawn to a fundamental principle or a practical application of such a principle, that inquiry is insufficient to determine whether a claim is patent-eligible under § 101. And it was certainly never intended to supplant the Supreme Court's test. Therefore, we also conclude that the "useful, concrete and tangible result" inquiry is inadequate and reaffirm that the machine-or-transformation test outlined by the Supreme Court is the proper test to apply." Thus, the test previously used to uphold patentability of a method of doing business is no longer recognized as sufficient. This will undoubtedly have an impact on the examination and allowance of future method of doing business patent applications.

In conclusion, the CAFC held that "[b]ecause the applicable test to determine whether a claim is drawn to a patent-eligible process under § 101 is the machine-or-transformation test set forth by the Supreme Court and clarified herein, and Applicants' claim here plainly fails that test, the decision of the Board is AFFIRMED."

CAFC Decision: LINK

(My personal thanks to Jay Taylor, Tom Walsh, and Mike Swift for their assistance with this blog article.)

The U.S. Copyright Office recently highlighted a number of sections of the Prioritizing Resources and Organization for Intellectual Property Act (the “PRO-IP Act”) and their impact on the U.S. Copyright Act. As noted within the Copyright Office announcement (link below), the PRO-IP Act amends Section 410 of the Copyright Act to codify the doctrine of fraud on the Copyright Office during the copyright registration process. Section 506 was amended to provide for the forfeiture of any property that was used to commit or facilitate criminal offenses relating to copyrighted works. In addition, the PRO-IP Act creates an Intellectual Property Enforcement Coordinator (IPEC) to serve as an advisor to the President regarding domestic and foreign IP enforcement. Additional details on the impact of the PRO-IP Act on U.S. copyright law and practice, as well as a link to the PRO-IP Act itself, are provided below.

Copyright Office Announcement: LINK
PRO-IP Act: LINK

The USPTO recently announced that it has added the Danish Patent and Trademark Office (DKPTO) to its Patent Prosecution Highway (PPH) program. As noted in the USPTO announcement (link below), the DKPTO joins the Japan Patent Office, the United Kingdom Patent Office, the Canadian Intellectual Property Office, the Korean Intellectual Property Office, IP Australia, and the European Patent Office as PPH program members. According to the USPTO, “[t]he PPH was established to enable an applicant whose claims are determined to be allowable/patentable in the Office of first filing (OFF) to have the corresponding application filed in the Office of second filing (OSF) advanced out of turn for examination while at the same time allowing the OSF to exploit the search and examination results of the OFF.” Several exemplary situations where the PPH between the USPTO and the DKPTO may be available are provided in the link below.

USPTO Announcement (PDF): LINK

Last week, the USPTO announced that it has added the Korean Intellectual Property Office (KIPO) as the third participating foreign intellectual property office in its direct priority document exchange program. The KIPO, added as of October 14, 2008, joins the European Patent Office (EPO) and the Japan Patent Office (JPO) as current program participants. According to the USPTO announcement (link below), the addition of the KIPO to the program provides the USPTO with “the ability to begin electronically retrieving KIPO priority documents from the KIPO through the Priority Document Exchange (PDX) system,” and “[s]imilarly, the KIPO will also gain the ability to electronically retrieve U.S. priority documents from the USPTO through the PDX system.” Some noted exclusions to the program are that the USPTO cannot electronically exchange design patent applications and PCT international applications through the PDX system, and that the USPTO also cannot electronically receive non-U.S. priority application to which priority is claimed in a PCT international application. Additional details on this program are provided in the announcement below.

USPTO Announcement (PDF): LINK

The European Patent Office (EPO) recently announced that it has added to its online course offerings to broaden the scope of information publicly available to IP practitioners and those interested in the field. As referenced within the EPO announcement (link below), four new courses have been added, including those related to identifying Chinese patent documents online and obtaining full-text patent documents via EP4Weeks, with these and others being held within the next two months. These and other courses are available through the second link below (the “Patent event search: conferences, seminars, courses and other patent-related events” webpage within the EPO website) by selecting “online training” under the “Medium” drop-down window. These courses are offered free of charge through WebEx, but registration is required as the number of participants per course is limited.

EPO Announcement: LINK
Patent Event Search Webpage: LINK

Last week, the World Intellectual Property Organization (WIPO) announced that, through its Worldwide Academy, it was adding five new courses to its widely used distance learning program. According to the WIPO press release (link below), the five new courses cover arbitration/mediation procedure, general patenting, patent searches, basic patent drafting, and trademarks. The distance learning program, as referenced in the first link below, “aims to improve access to intellectual property-related educational materials,” taking “full advantage of state-of-the-art information technology and the Internet as an alternative to traditional training programs.” According to WIPO, over 86,000 people have taken online WIPO courses since their inception in 1999.

WIPO Press Release: LINK
WIPO Distance Learning Program Webpage: LINK
WIPO Worldwide Academy Webpage: LINK

The USPTO recently issued a warning to its trademark customers regarding “unsolicited communications” they may receive by companies offering trademark monitoring and document filing services. As noted within the USPTO warning (link below), “solicitations from these companies frequently display customer-specific information, including USPTO serial number or registration number and owner name,” but the companies who offer these services “are not affiliated or associated with the USPTO or any other federal agency.” These companies also charge fees above and beyond the fees charged by the USPTO, including various “service fees” in connection with electronic trademark document filings. According to the USPTO, its customers can be assured that such solicitations are not from the USPTO because the USPTO does not provide any such services to the public.

USPTO Warning: LINK

Last week the USPTO announced a measure to improve trademark quality by providing a mechanism for trademark applicants to alert the trademark office as to potential inconsistencies among the applicant’s trademark portfolio. This new procedure begins with the submission of a Request for Consistency Review, when, according to the USPTO announcement (link below), “a substantive or procedural issue (excluding any issues involving identifications of goods and services) has been addressed in a significantly different manner in different cases, subject to the following provisions: (1) the request is based on co-pending applications or an application and a registration owned by the same legal entity or a successor in interest (e.g., assignee); (2) the registration(s) involved was issued less than one year prior to the date of the request; (3) at least one of the applications in the request is in a pre-publication status at the time of the request; and (4) the allegedly inconsistent treatment has already occurred.” It is specifically noted that this mechanism is only available to the trademark applicants and not to any third-parties. Additional information regarding this new initiative is provided in the link below, including details on the specific steps an applicant must take to utilize this new program.

USPTO Announcement: LINK

By Jay Gordon Taylor

In an artful job of issue dodging and a narrowly focused reading of the Patent Act, the Court of Appeals for the Federal Circuit (CAFC) has dodged the key issue in Aristocrat Technologies Australia PTY Ldt. v. International Gaming Technology, i.e., whether the United States Patent and Trademark office (PTO) has the statutory authority to revive abandoned patent applications for mere "unintentional" abandonment rather than the apparent statutory authority of "unavoidable" abandonment, and delivered an astonishing decision that makes it impossible for anyone to ever challenge patents issued from improperly revived patent applications. Thus, once the PTO revives a patent application, regardless of whether PTO had any statutory authority whatsoever to do so, any patent that issues from that application can remain as an impediment to competition and commerce, without any possible challenge.

In arriving at this decision, the court put on its horse blinders and read 35 U.S.C. §282 (2) of the statue as only allowing defenses specified in Part II of the act that are a "condition for patentability." Thus, the CAFC panel (Newman, Bryson and Linn) concluded, because "improper revival" of an application is not listed as a condition of patentability in Part II of the Act, i.e., §§ 101, 102 & 103, it cannot be a defense under §282 (2). Similarly, the CAFC panel concluded that §282 (4) ("any other act or fact made a defense by this title") did not apply because there was no provision in the patent act that specifically made "improper revival" a defense. The CAFC panel had to distinguish Quantum Corp. v Rodine, PLC, 65 F.3d 1577 (Fed. Cir. 1996) which held that violation of 35 U.S.C. § 305 which prohibits enlarging the scope of patent claims by reissue, was a defense, even though that section does not specifically make it a defense, because, the court decided, to hold otherwise would render that prohibition of § 305 "meaningless." The CAFC panel concluded that the concerns addressed in Quantum did not apply to the Aristocrat case because they could "discern no legitimate incentive … to improperly revive…" an abandoned patent application. Apparently the CAFC panel believes that attempting to get the earliest possible filing date to avoid possibly invalidating prior art is not an incentive to an applicant to attempt to improperly revive an abandoned application. For judge Bryson, such a conclusion is understandable as his prior experience is in criminal law with the Justice Department and U.S. Attorney's Office, but Justices Linn and Newman should know better as they have had patent prosecution experience prior to going on the bench. As will be discussed below, there was every incentive to attempt to revive the original application in the Aristocrat case as it could not, due to 35 U.S.C. §102 (b), be refiled as a new application.

To further buttress its position, the CAFC panel likened "improper revival" to "procedural lapses" during prosecution which the CAFC purportedly had previously excluded as a defense in Magnivision, Inc. v. Bonneau Co., 115 F.3d 956 (Fed. Cir. 1997). Apparently, the panel concluded that the lack of statutory authority for the Patent Office to take an action is a mere "procedural lapse." Query, would the CAFC find that the PTO's extension or restoration of a patent term beyond that allowed by statutory authority to be a mere "procedural lapse" that is beyond judicial review if challenged in litigation? Moreover, in Magnivision, "procedural lapses" were not even at issue (reference thereto merely dicta), and were not held to be excluded as a defense. Rather, in Magnivision, the issue was whether defendant's repeated references at trial before the jury to "procedural irregularities" allegedly committed by the patent examiner in not recording a telephone interview call with patentee's patent counsel during prosecution prejudiced the jury's decision in the case. The court concluded that because there was no requirement in the rules for the examiner to make a record of the call and the patentee's counsel had filed a record of the call as required by the rules, the lower courts allowance of repeated references to such "procedural irregularities" by the examiner was improper and prejudiced the jury. Additionally, the court found a jury instruction referencing "procedural irregularities" was also improper and prejudicial and ordered a new trial. It is submitted that there is a vast difference between the issue of whether the Patent Office has the statutory authority to revive an abandoned application and the issue of whether repeated unjustified prejudicial comments about an examiner's actions prejudiced a jury. I may be missing something, but I thought it was established law that if a government agency does not have the statutory authority to take an action, such action is null and void. A government agency simply cannot legally operate outside the bounds of its statutory authority.

Another issue not addressed by the CAFC panel in the Aristocrat case is that under the statute, one of the conditions of patentability under §102 is "(c) he has [not] abandoned the invention." While an abandonment of an application is not necessarily an abandonment of the invention because the applicant can possibly refile the application and only loses the priority date, there are circumstances where abandonment of an application effectively abandons the invention as well. For example, if the applicant abandons an application more that one year after the first public use or sale in the United States or the first publication of the invention, all rights to the invention in the United States are effectively abandoned because the application cannot be refiled. In the Aristocrat case, the PCT application was first published on January 21, 1999. The notice of abandonment was mailed on June 13, 2000, more that a year later. Thus, if the applicant could not revive the original application, all rights to the invention in the United States are bared under §102(b) and a patent for the invention could never be acquired. Certainly, in this case, the issue of proper revival is relevant to one of the conditions of patentability, i.e., whether a non-abandoned application was filed less than one year after the first publication. Thus, the issue of whether the Patent Office had the statutory authority to revive the application is directly relevant to whether or not there was an abandonment of the invention, one of the conditions of patentability.

By analogy, under 35 U.S.C. § 151 failure to timely pay the issue fee for an allowed application is regarded as an abandonment of the application which can only be revived by paying a late fee and making a showing that the late payment was "unavoidable." Thus, under the Aristocrat holding any improper revival by the PTO of such an abandoned application under a standard other than the statutory "unavoidable" standard is beyond judicial review in a patent infringement case as it is a mere "procedural lapse" and not a listed in Part II as defense to the validity of the improperly issued patent. However, who else other than a defendant to a patent infringement case would ever challenge whether that patent should have been allowed to issue? Such a result appears absurd but fully within the Aristocrat holding.

Perhaps the motivation for the CAFC panel's decision was to avoid a holding that would place a large number of issued patents at risk. The PTO has been using the "unintentional" standard to revise patent applications for many years, statutory authority or not, and undoubtedly there are many patents that have issued from applications revived under the "unintentional" standard that would be at risk of being invalidated. However, reaching a desired result is hardly justification for dodging a fundamental issue and failing to interpret and correctly apply the law. This is a decision that screams for en banc review, and failing that, Supreme Court review.

Jay Taylor is a Partner with Ice Miller LLP focusing his efforts on patent, trademark, copyright, and trade secret litigation.

1. On Monday, President Bush honored the 2007 recipients of the National Medal of Science and the National Medal of Technology & Innovation at the White House in a program broadcast live via the White House website. The award recipients included six individuals and two companies, and involved inventions ranging from packet-switched communication networks to hereditary metabolic disorders to global entrepreneurship.

2. The USPTO has recently announced that it has entered into a Statement of Enhanced Mutual Cooperation with the Japan Patent Office (JPO) to further promote the current relationship between the two offices. This particular statement “memorializes the existing cooperation between the two offices and further enhances the mutual cooperation on work sharing and international harmonization of patent and trademark matters, affirming the importance of this cooperative relationship.”