Patent Office Says No to Supreme Court and Software Patents

Last Updated Jul 7, 2010 6:59 PM EDT

Last week, the Supreme Court finally issued its long-awaited ruling on the Bilski case. The court said no to Bernard Bilski and Rand Warsaw's 13 year-long attempt to get a patent on automated price-change hedging in the energy market, but said that business method patents incorporated into software were still potentially allowed. The U.S. Patent and Trademark Office, however, apparently wasn't too keen on the ruling.

An internal memo, dated June 28, 2010 and signed by Acting Associate Commissioner for Patent Examination Policy Robert Bahr, directs patent examiners to continue using the so-called machine-or-transformation test as a firm way to rule out many business method patent applications, even though the Supreme Court explicitly de-emphasized the authority of the test and how it could be used. Bahr Bilski Memo Under the machine-or-transformation test, a business method (read as software) must be tied to a particular machine, rather than run on a general machine like a computer, or transform something from one state into another. The subject of the transformation can be data, but, as you might expect, transformation can largely be in the eye of the beholder.

The PTO has faced a major management problem for years: the flow of patents in vastly exceeds its capacity to process them. Additional money and headcount haven't really helped, so over the last few years, the PTO seemed to try raising hurdles to discourage applications. Given the volume of software patent applications, reducing them would clearly help slow the incoming volume, which is something the patent office would love to do.

And that's exactly what Bahr's memo seems to be doing. Here's the excerpt in question:

Examiners should continue to examine patent applications for compliance with section 101 using the existing guidance concerning the machine-or-transformation test as a tool for determining whether the claimed invention is a process under section 101. If a claimed method meets the machine-or-transformation test, the method is likely patent-eligible under section 101 unless there is a clear indication that the method is directed to an abstract idea. If a claimed method does not meet the machine-or-transformation test, the examiner should reject the claim under section 101 unless there is a clear indication that the method is not directed to an abstract idea. If a claim is rejected under section 1010 on the basis that it is drawn to an abstract idea, the applicant then has the opportunity to explain why the claimed method is not drawn to an abstract idea.
The memo adds that the PTO is reviewing the Bilski decision and will develop further guidance.

The problem is that the memo stresses the machine-or-transformation test as a fairly bright line test of patentability. The Supreme Court's Bilski decision paints a far less definite role for the test:

The machine-or-transformation test is not the sole test for patent eligibility under §101. The Court's precedents establish that although that test may be a useful and important clue or investigative tool, it is not the sole test for deciding whether an invention is a patent-eligible "process" under §101. In holding to the contrary, the Federal Circuit violated two principles of statutory interpretation: Courts " 'should not read into the patent laws limitations and conditions which the legislature has not expressed,' " Diamond v. Diehr, 450 U. S. 175, 182, and, "[u]nless otherwise defined, 'words will be interpreted as taking their ordinary, contemporary, common meaning,' " ibid. The Court is unaware of any ordinary, contemporary, common meaning of "process" that would require it to be tied to a machine or the transformation of an article.
Furthermore, the memo stresses what is almost a presumption of guilt by requiring the applicant to prove why an idea is patentable, rather than following existing case law that says the examiner must present "a prima facie case of unpatentability," as stated in the U.S. Court of Appeals patent case, In re Oetiker.

"Some see the memo as a temporary fix until the Patent Office can devise a new clear test. "They're trying to look for a solution," says independent software patent attorney Raymond Van Dyke. "In the interim ... they're going to leave it up to us whether something is abstract or not."


Image: Flickr user psd, CC 2.0.
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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.