Intellectual Property Law

Ten years ago, the U.S. Court of Appeals for the Federal Circuit ushered in an era of expanded patentability when it issued its decision in State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998).  The State Street panel held that patent laws do not strictly bar the patentability of ?business methods? and overruled the district court?s summary judgment of invalidity of Signature?s patent claiming a data processing system for implementing an investment structure.  Since State Street, a number of patents claiming a business method or process have issued, many of which have stirred controversy among practitioners and commentators.  Change may be at hand, however, as the Federal Circuit has taken the unusual step of deciding sua sponte to hear en banc the PTO?s denial of an application for a business method patent and has raised the possibility of overruling all or part of the State Street decision.

Section 101 of the Patent Act makes patentable ?any new and useful process, machine, manufacture, or composition of matter.?  The boundaries of what constitutes a patentable process under section 101 has vexed courts and practitioners for years.  The court in the State Street case put to rest one unsettled subject ? whether business method patents are by nature unpatentable ? by holding that such processes are governed by the same patentability standards under section 101 ? and under sections 102, 103 and 112 ? as all other inventions. 

The court?s confirmation of the appropriateness of business method patents sparked a flood of applications on business method inventions, a significant number of which eventually resulted in issued patents, which led to further uncertainty as to how far the patentability standard could be stretched.  In September 2007, the Federal Circuit declared that there are limits, as it affirmed the PTO?s rejection of an invention claiming a method for the mandatory arbitration of disputes arising out of certain legal documents in In re Comiskey 499 F.3d 1365 (Fed. Cir. 2007).  The court held that the business method patent in question did not contain patentable subject matter because it consisted only of a mental process standing alone.  According to the court, a process that relies on a mental process can be patentable only if it is combined with one of the other elements of section 101 ? i.e., machine, manufacture or composition of matter.

Which brings us to In re Bilski.  The PTO refused to issue a patent to the inventor of a business method patent relating to ?[a] method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price,? finding the process unpatentable under section 101.  A three-judge panel heard the applicant?s appeal in October 2007, but before that panel issued a decision, the court took the unusual step of ordering an en banc hearing on the patentability issue. The court?s order directed the parties to brief five issues, including (i) ?what standard should govern in determining whether a process is patentable subject matter under section 101?; (ii) ?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?; and (iii) whether it is appropriate to reconsider and/or overrule State Street.  The court set the en banc hearing for May 8, 2008.

The patent bar will be watching closely ? as will the IP Blawg.  We?ll keep you posted.
Today?s Blogger:  Bob Sloss