Pursuant to the Board of Patent Appeals and Interference’s Standard Operating Procedure 2, the opinion below has been designated a precedential opinion.
Paper No. 78
UNITED STATES PATENT AND TRADEMARK OFFICE
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BEFORE THE BOARD OF PATENT APPEALS AND INTERFERENCES
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Ex parte CARL A. LUNDGREN
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Appeal No. 2003-2088
Application 08/093,516
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HEARD: April 20, 2004
——Before FLEMING, Chief Administrative Patent Judge, HARKCOM, Vice Chief Administrative Patent Judge, and HAIRSTON, JERRY SMITH, and BARRETT, Administrative Patent Judges
PER CURIAMDECISION ON APPEAL
This is an appeal under 35 U.S.C. § 134(a) from the rejection of claims 1, 2, 6, 7, 19-22, 32, and 35-40, all the claims pending in the application.
Claim 1 is representative of the subject matter on appeal and reads as follows:1. A method of compensating a manager who exercises administrative control over operations of a privately owned primary firm for the purpose of reducing the degree to which prices exceed marginal costs in an industry, reducing incentives for industry collusion between the primary firm and a set of comparison firms in said industry, or reducing incentives for coordinated special interest industry lobbying, said set of comparison firms including at least one firm, said primary firm having the manager who exercises administrative control over said primary firm's operations during a sampling period, wherein privately owned means not wholly government owned, the method comprising the steps of:
a) choosing an absolute performance standard from a set of absolute performance standards;
b) measuring an absolute performance of said primary firm with respect to said chosen absolute performance standard for said sampling period;
c) measuring an absolute performance of each firm of said set of comparison firms with respect to said chosen absolute performance standard for said sampling period, said measurement of performance for each firm of said set of comparison firms forming a set of comparison firm absolute performance measures;
d) determining a performance comparison base based on said set of comparison firm absolute performance measures by calculating a weighted average of said set of comparison firm absolute performance measures;
e) comparing said measurement of absolute performance of said primary firm with said performance comparison base;
f) determining a relative performance measure for said primary firm based on said comparison of said primary firm measurement of absolute performance and said performance comparison base;
g) determining the managerial compensation amount derived from said relative performance measure according to a monotonic managerial compensation amount transformation; and
h) transferring compensation to said manager, said transferred compensation having a value related to said managerial compensation amount.This is the second time this case has been appealed to the Board. In Appeal No. 96-0519, a merits panel reversed the examiner's rejection premised upon 35 U.S.C. § 101 (non-statutory subject matter) of the claims then pending. The panel stated "[w]e find that the claim language recites subject matter that is a practical application of shifting of physical assets to the manager. We note the remaining claims also recite the above practical application. Therefore, we find statutory subject matter." Paper No. 49, page 7. Dissatisfied with the outcome of the previous appeal, the Examining Corps filed a "Request for Reconsideration and Rehearing" (Paper No. 50, December 15, 1999) that lists two issues for reconsideration as follows:
1. Whether the invention as a whole is in the technological arts.
2. Assuming that the invention is in the technological arts, whether the claim transferring compensation to a manager is a practical application.Id., page 2.
Appellant filed a response to the Request for Reconsideration and Rehearing (Paper No. 51, January 13, 2000).
In an opinion (Paper No. 52) mailed March 13, 2001, an expanded panel of the Board remanded the application to the examiner for two reasons. First, the record did not reflect that the examiner had considered and evaluated appellant's response to the Request for Reconsideration and Rehearing, and second, the Office of the Deputy Commissioner for Patent Examination Policy had requested that the application be remanded to the jurisdiction of the patent examiner so that issues regarding "technological arts" and "practical application" could be further considered.
Following further prosecution before the examiner in which the examiner maintained a rejection under 35 U.S.C. § 101 (non‑statutory subject matter), appellant filed a second appeal to this Board (Paper No. 64, December 12, 2002), followed by his Appeal Brief (Paper No. 69, March 13, 2003). The examiner filed an Answer on May 1, 2003 (Paper No. 70), that was followed by a Reply Brief (Paper No. 72, June 20, 2003). Oral argument was held by an expanded panel on April 20, 2004, and the case was taken under advisement.DISCUSSION
We reverse the examiner's rejection under 35 U.S.C. § 101 (non-statutory subject matter). In reviewing the Examiner's Answer, we find the examiner refers the reader to Paper No. 60 for a statement of the rejection under § 101. We have reviewed Paper No. 60 and find that a rejection under this section of the statute is set forth on pages 4-8 thereof. The examiner states "both the invention and the practical application to which it is directed to be outside the technological arts, namely an economic theory expressed as a mathematical algorithm without the disclosure or suggestion of computer, automated means, apparatus of any kind, the invention as claimed is found non-statutory." Paper No. 60, page 7.
In reviewing the examiner's "Response to Argument" set forth at pages 3-8 of the Examiner’s Answer of May 1, 2003, we first note that the examiner states that "the part of the 35 U.S.C. § 101 rejection that asserted that claims 1, 2, 6, 7, 19-22, 32, and 35-40 fail to produce a useful, concrete, and tangible result is withdrawn."[1] By withdrawing this rejection, it can be concluded that the examiner has found that the process claims on appeal produce a useful, concrete, and tangible result.
Since the Federal Circuit has held that a process claim that applies a mathematical algorithm to "produce a useful, concrete, tangible result without pre-empting other uses of the mathematical principle, on its face comfortably falls within the scope of § 101," AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352, 1358, 50 USPQ2d 1447, 1452 (Fed. Cir. 1999), one would think there would be no more issues to be resolved under 35 U.S.C. § 101. However, the examiner is of the opinion that there is a separate test for determining whether claims are directed to statutory subject matter, i.e., a "technological arts" test.
Thus, the only issue for review in this appeal is, to use the examiner’s terminology, "whether or not claims 1, 2, 6, 7, 19-22, 32, and 35-40 are limited to the technological arts, as required by 35 U.S.C. § 101." Examiner's Answer, page 3.
35 U.S.C. § 101 provides: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.
As seen, claim 1 on appeal is directed to a process. Thus, one may wonder why there is any issue regarding whether claim 1 is directed to statutory subject matter. The issue arises because the Supreme Court has ". . . recognized limits to § 101 and every discovery is not embraced within the statutory terms. Excluded from such patent protection are laws of nature, physical phenomena and abstract ideas." Diamond v. Diehr, 450 U.S. 175, 185, 209 USPQ 1, 7 (1981). However, in this appeal, the examiner has not taken the position that claim 1 is directed to a law of nature, physical phenomena or an abstract idea, the judicially recognized exceptions to date to § 101. Rather, the examiner has found a separate "technological arts" test in the law and has determined that claim 1 does not meet this separate test.
The examiner finds the separate "technological arts" test in In re Musgrave, 431 F.2d 882, 167 USPQ 280 (CCPA 1970); In re Toma, 575 F.2d 872, 197 USPQ 852 (CCPA 1978); and Ex parte Bowman, 61 USPQ2d 1669 (Bd. Pat. App. & Int. 2001)(non-precedential). We have reviewed these three cases and do not find that they support the examiner’s separate "technological arts" test.
In Musgrave, the court reversed a rejection under 35 U.S.C. § 101 that the claims under review therein were non-statutory because it disagreed with the Board that "these claims . . . are directed to non-statutory processes merely because some or all of the steps therein can also be carried out in or with the aid of the human mind or because it may be necessary for one performing the processes to think." Musgrave 431 F.2d at 893, 167 USPQ 289. After so holding, the court went on to observe "[a]ll that is necessary, in our view, to make a sequence of operational steps a statutory 'process' within 35 U.S.C. § 101 is that it be in the technological arts so as to be in consonance with the Constitutional purpose to promote the progress of 'useful arts.' Const. Art. 1, sec. 8."
We do not view the court's statement in Musgrave in regard to the technological arts to have created a separate "technological arts" test in determining whether a process is statutory subject matter. Indeed, the court stated as much in Toma. The court first noted that the examiner in that case had "cited [inter alia, Musgrave] for the proposition that all statutory subject matter must be in the 'technological' or 'useful' arts... ." Toma, 575 F.2d at 877, 197 USPQ at 857. The court then stated that cases such as Musgrave involved what was called at that time a "mental steps" rejection and observed, "[t]he language which the examiner has quoted was written in answer to 'mental steps' rejections and was not intended to create a generalized definition of statutory subject matter. Moreover, it was not intended to form a basis for a new § 101 rejection as the examiner apparently suggests." Id. at 878, 197 USPQ at 857. We do not believe the court could have been any clearer in rejecting the theory the present examiner now advances in this case.
We have also considered Ex parte Bowman, cited by the examiner. Bowman is a non-precedential opinion and thus, not binding.
Finally, we note that the Supreme Court was aware of a "technological arts test," and did not adopt it when it reversed the Court of Customs and Patent Appeals in Gottschalk v. Benson, 409 U.S. 63, 175 USPQ 673 (1972). As explained in Diamond v. Diehr, 450 U.S. 175, 201, 209 USPQ 1, 14 (1981) (Stevens, J., dissenting) (footnotes omitted):In re Benson, [441 F.2d 682, 169 USPQ 548 (CCPA 1971)] of course was reversed by this Court in Gottschalk v. Benson, 409 U.S. 63, [175 USPQ 673] (1972). Justice Douglas' opinion for a unanimous Court made no reference to the lower court's rejection of the mental-steps doctrine or to the new technological-arts standard. Rather, the Court clearly held that new mathematical procedures that can be conducted in old computers, like mental processes and abstract intellectual concepts, see id., at 67, [175 USPQ at 674‑675], are not patentable processes within the meaning of § 101. (Footnotes omitted.)
Our determination is that there is currently no judicially recognized separate "technological arts" test to determine patent eligible subject matter under § 101. We decline to create one. Therefore, it is apparent that the examiner’s rejection can not be sustained. Judge Barrett suggests that a new ground of rejection should be entered against the claims on appeal. We decline at this stage of the proceedings to enter a new ground of rejection based on Judge Barrett's rationale, because in our view his proposed rejection would involve development of the factual record and, thus, we take no position in regard to the proposed new ground of rejection. Accordingly, the decision of the examiner is reversed.
REVERSED
Michael R. Fleming, Chief Administrative Patent Judge
Gary V. Harkcom, Vice Chief Administrative Patent Judge
Kenneth W. Hairston, Administrative Patent Judge
JERRY SMITH, Administrative Patent Judge, dissenting.
I would affirm the examiner's rejection. One must understand at the outset that the examiner's rejection raises the question of whether there is a "technological arts" standard implicitly required within the constitutional mandate authorizing Congress to grant patents in order to promote the progress of the useful arts. For purposes of this dissent, the term "technological arts" should be construed to mean nothing more than a threshold nexus to some field of technology to fall within the constitutional mandate. Likewise, any reference to "science" should be interpreted to mean based on scientific principles, which renders a claimed invention as falling within the constitutional mandate.
The issue presented by the examiner is a new one. That is, one can scrutinize as many court decisions as one may like, but there is no decision out there which unequivocally holds that the claimed invention on appeal before us must be granted a patent. Likewise, there is no decision out there that unequivocally holds that the claimed invention on appeal must be denied a patent. Thus, in my view, the issue before us raised by the examiner is one of first impression.
The "technological arts" standard as used by the examiner is intended to represent a more modern term for the reference to "useful arts" in the Constitution. The Constitution authorized the Congress to award patents to inventors in order to promote the progress of the useful arts. While I do not question the power of Congress to pass laws to carry out this mandate, whatever law passed by the Congress cannot be applied in such a manner as to enlarge the constitutional mandate. Thus, any laws passed by the Congress to grant patents should be applied in a manner that is consistent with the constitutional mandate. My view of this mandate is that an invention must in some manner be tied to a recognized science or technology in order to promote the progress of the useful arts. Although a machine, manufacture, or composition of matter will rarely fail to meet the constitutional mandate, processes represent an especially troublesome type of invention. This is because almost anything can be claimed as a series of steps that technically can be considered a process, but the term process is so broad that it can be used to claim inventions that cover nothing more than human conduct or thought processes that are totally unrelated to any science or technology. Thus, I am not questioning the authority of the Congress to pass 35 U.S.C. § 101, but only the scope being given to the statute by the majority.
The majority is of the view that every invention is patentable unless it is nothing more than an abstract idea, a law of nature or a natural phenomenon, each of which has been held to be unpatentable by court decisions. These categories of nonstatutory subject matter did not come to us by Scripture, however, but instead, resulted from some enlightened individual raising the question of whether such subject matter should be patented. Inventions within these categories certainly can be claimed in a manner which technically comply with 35 U.S.C. § 101. The point is that there is no absolute law that says that every category of nonstatutory subject matter has been decided for all time.
I would affirm the rejection, therefore, not because it is directed to a method of doing business, but rather, because the process as claimed is not tied to any known science or technology. If the claim recited that the steps were performed by a computer, then I would agree that the claimed invention would at least have met the constitutional "technological arts" standard, although the claimed invention would still need to be analyzed under 35 U.S.C. § 101 for conventional compliance with that section of the statute. There is no science or technology associated with the claimed invention. It is interesting to note that the claimed invention could have been performed by the writers of the Constitution using only the knowledge available at that time. I find it ludicrous, however, to think that the writers of the Constitution would have found the idea of providing compensation to an executive, as claimed, to be something that would qualify for a patent.
As noted above, I believe the issue before us is one of first impression. I have not overlooked the holdings in any of the cases most related to this issue because there is no computer being claimed here so that the most related cases do not apply. In fact, all the "relevant" cases cited by the majority relate to inventions that either specifically recited machines or were clearly performed in an environment that was an accepted science or technology.
If the majority simply wants to take comfort in the idea that all categories of nonstatutory subject matter have been established, and no new categories will be considered, then I disagree. The majority's position that essentially anything that can be claimed as a process is entitled to a patent under 35 U.S.C. § 101 opens the floodgate for patents on essentially any activity which can be pursued by human beings without regard to whether those activities have anything to do with the traditional sciences or whether they enhance the technological arts in any manner.
Who should raise the question of whether inventions are properly within the constitutional mandate if not the agency charged with applying the statutes? The examiner's rejection is based on a fundamental position that the claimed invention does not fall within the constitutional mandate regarding inventions which may be patented. This is a very important constitutional question. Such constitutional questions cannot be answered by the Congress or even by this Board. The appropriate forum for deciding this question is the federal judiciary. Unfortunately, the federal judiciary cannot get jurisdiction of this issue unless someone takes the issue to it. The majority has ensured that, at least in this case and probably the foreseeable future, the entity best capable of deciding the constitutionality question will not get a chance to consider it. If it should turn out somewhere down the road that the federal judiciary decides that the "technological arts" requirement raised by the examiner is mandated by the Constitution, then it will mean that the invention on appeal before us as well as countless others will have improperly received patents. I cannot be concerned that an affirmance of the examiner's rejection may imply that many other previously issued patents should not have been granted. It cannot possibly be good public policy to continue to issue invalid patents just to be consistent with the past.
I expect that there will be an initial reluctance to accept this position because it is new. I only hope that this decision will open a public discourse on the topic of whether every process that technically falls within the scope of 35 U.S.C. § 101 automatically recites statutory subject matter. If this decision does nothing more than raise questions about the limits of nonstatutory subject matter that require the Congress to step in and clarify the limits of 35 U.S.C. § 101, then this dissent will have been worthwhile.
Although I would affirm the examiner's rejection as is, I also join Judge Barrett in making a new ground of rejection under 35 U.S.C. § 101. I join Judge Barrett in his exhaustive treatment of why the invention on appeal is unpatentable under 35 U.S.C. § 101.
Jerry Smith, Administrative Patent Judge
BARRETT, Administrative Patent Judge, concurring‑in‑part and dissenting‑in‑part.
The majority reverses the examiner's rejection on the narrow ground that there is no separate "technological arts" test under 35 U.S.C. § 101. That is, the majority holds that "technological arts" is the wrong test for statutory subject matter under § 101, but it does not state what the proper test should be and does not expressly say that the claimed subject matter is statutory. I concur with the majority's holding that there is no separate and distinct "technological arts" test. "Technological arts" has been said to be a modern equivalent of the "useful arts" in the U.S. Constitution, which, in my opinion, is fully circumscribed by the four categories of subject matter in § 101. However, I would enter a new ground of rejection for lack of statutory subject matter under § 101 based on different reasoning.
I dissent as to the majority's statement that "[a]s seen, claim 1 on appeal is directed to a process," apparently because it sets forth a series of method steps. In my opinion, not every claim to a series of steps constitutes a "process" under § 101. I also dissent as to statements in the opinion that imply that the sole test for statutory subject matter is the "useful, concrete and tangible result" test because the majority fails to acknowledge that this test was set out in the context of machine claims and machine‑implemented process claims, which are not present here. I also dissent from the implied conclusion that the claims recite a "useful, concrete and tangible result" just because the original Board decision in Appeal No. 96‑0519 held that "the claim language recites subject matter that is a practical application of shifting physical assets to the manager" (Paper No. 49, page 7), which conclusion has not been vacated, and because the examiner withdrew the rejection based on the failure of the claims to produce a useful, concrete, and tangible result. The examiner may have withdrawn this ground for the rejection simply because he felt that there was no way to overcome the Board's original statement. I do not agree that the claims recite a "practical application, i.e., 'a useful, concrete and tangible result,'" if that is the test.
I consider it the Board's duty to decide cases and to provide guidance to the Examining Corps in cases involving difficult legal questions. Thus, I disagree with the majority's decision not to state the test for statutory subject matter and not to state whether they consider the subject matter to be statutory. This application was filed July 16, 1993, and is the last of a series of continuation applications going back to November 1988. If the outcome of this case is not to issue the application, but to reopen prosecution on some other theory, then I do not think it is fair to the applicant, who has expended so much time, energy, and money in prosecution and waited so long for a decision, to not decide the case now. I consider this case important enough that I would enter a new ground of rejection under § 101 based on different reasoning so that the USPTO might receive some guidance from our reviewing court, the U.S. Court of Appeals for the Federal Circuit.
OUTLINE
THE INVENTION
THE REJECTION
THE ISSUE
LEGAL ANALYSIS OF STATUTORY SUBJECT MATTER
"Useful arts" ("technological arts") of U.S. Constitution
Statutory subject matter - 35 U.S.C. § 101
Statutory classes of § 101 define the "useful arts"
Historical definitions of statutory categories
Machine, manufacture, and composition of matter
Process
Subject matter not within any category
The judicially recognized exclusions
Laws of nature and physical phenomena
Abstract ideas
Two different views of exclusions
Machines and machine-implemented processes: The Federal Circuit's test in State Street Bank and AT&T
Pre-State Street
State Street and AT&T involved machines
Other discussions
Conclusions
Non-machine-implemented processes
Claims that read on statutory and nonstatutory subject matter are unpatentable
Conclusion
"Technological arts" test
Transformation of subject matter
Incidental physical limitations
Claims that cover only human activity
ANALYSIS
Claim interpretation
Possible tests
(1) Transformation
(2) Exceptions
(3) "Useful, concrete and tangible result"
(4) "Technological arts"
Analysis
CONCLUSION
THE INVENTION
The invention relates to a method of compensating a manager of a privately owned firm in an oligopolistic industry for the purpose of reducing incentives for industry collusion between the firm and other firms in the industry. Although the title of the application refers to a "Method and Apparatus," no apparatus is disclosed or claimed. An oligopoly is an industry structure with a relatively small number of competitors. In an oligopolistic industry structure, there is an incentive for collusion, either overt, covert, or tacit, by managers of the firms to restrict output and artificially raise the price of their products above the price which would result under conditions of perfect competition.
There are said to be two results of oligopolistic collusion: (1) there is a net decrease in the benefit to consumers who consume a good that is priced above the perfect competition price; and (2) there is a net increase in the profit received by the oligopolistic firms producing the goods. However, the net decrease in benefit to consumers is of greater magnitude than the net increase in profits to the firms. The difference between the net decrease in benefits and net increase in profits represents a welfare cost to society. Therefore, it is to the benefit of society to discourage oligopolistic behavior.
Through collusion, a group of managers in an oligopolistic industry can restrict output and raise profits so as to increase profits for all firms in the industry. The claimed invention is said to reduce the likelihood of oligopolistic collusion in an industry comprising two or more firms. The goal of reduced collusion is achieved by tying a manager's compensation to the relative standard of profitability of the firm as opposed to the absolute profitability of the firm.
Managerial compensation based on a relative performance measure (profitability) creates a "zero sum game" for managers of firms in the industry. That is, a manager may increase his or her compensation by increasing his or her firm's relative profitability, but an increase in relative profitability of one firm will necessarily cause a decrease in relative profitability of one or more of the other firms in the industry. In this model, if all managers of firms in the industry are compensated based on the relative profitability of their respective firms, there will be no incentive for collusion.
Claim 1 (seven times amended) is reproduced below.1. A method of compensating a manager who exercises administrative control over operations of a privately owned primary firm for the purpose of reducing the degree to which prices exceed marginal costs in an industry, reducing incentives for industry collusion between the primary firm and a set of comparison firms in said industry, or reducing incentives for coordinated special interest industry lobbying, said set of comparison firms including at least one firm, said primary firm having the manager who exercises administrative control over said primary firm's operations during a sampling period, wherein [the] privately owned means [is] not wholly government owned, the method comprising the steps of:
a) choosing an absolute performance standard from a set of absolute performance standards;
b) measuring an absolute performance of said primary firm with respect to said chosen absolute performance standard for said sampling period;
c) measuring an absolute performance of each firm of said set of comparison firms with respect to said chosen absolute performance standard for said sampling period, said measurement of performance for each firm of said set of comparison firms forming a set of comparison firm absolute performance measures;
d) determining a performance comparison base based on said set of comparison firm absolute performance measures by calculating a weighted average of said set of comparison firm absolute performance measures;
e) comparing said measurement of absolute performance of said primary firm with said performance comparison base;
f) determining a relative performance measure for said primary firm based on said comparison of said primary firm measurement of absolute performance and said performance comparison base;
g) determining the managerial compensation amount derived from said relative performance measure according to a monotonic managerial compensation amount transaction; and
h) transferring compensation to said manager, said transferred compensation having a value related to said managerial compensation amount.THE REJECTION
No references are applied in the rejection.
Claims 1, 2, 6, 7, 19‑22, 32, and 35‑40 stand rejected under 35 U.S.C. § 101 as being directed to nonstatutory subject matter.
The examiner's reasons for the rejection finally stabilized in the examiner's answer. The examiner states that there is a "two prong" test for statutory subject matter: first, the invention must be within the "technological arts" according to In re Musgrave, 431 F.2d 882, 167 USPQ 280 (CCPA 1970), In re Toma, 575 F.2d 872, 197 USPQ 852 (CCPA 1978), and the Board's decision in Ex parte Bowman, 61 USPQ2d 1669 (Bd. Pat. App. & Int. 2001) (nonprecedential and not designated for publication); and second, the invention must recite a "useful, concrete and tangible result" under State St. Bank & Trust Co. v. Signature Fin. Group, Inc., 149 F.3d 1368, 47 USPQ2d 1596 (Fed. Cir. 1998). The examiner asserts that the Court in State Street did not mention the "technological arts" test because it had already determined the subject matter to be in the technological arts (examiner's answer, pp. 5‑6). The examiner agrees that the claimed invention produces a "useful, concrete and tangible result" (answer, p. 3). The only reasoning maintained by the examiner is that the claimed subject matter is not within the "technological arts" because (answer, pp. 7‑8):[A]ll recited steps could be performed manually by a human as admitted by the Appellant on page 3 of paper no. 51 (filed January 13, 2000) when he stated, "While the calculations recited in Applicant's claimed invention may be carried out on a computer, they also may be carried out by hand calculation, using a hand-held calculator, a slide rule or any combination of such devices." However, the Examiner points out that even as disclosed in the specification, Appellant's invention is limited to steps performed manually by a human; there is no explicit contemplation of the integration of the technological arts anywhere in Appellant's claims or disclosure, thereby reinforcing the fact that Appellant's invention fails to "[p]romote the progress of science and useful arts," as intended by the United States Constitution under Art. I, § 8, cl. 8 regarding patent protection.
THE ISSUE
The issue is whether the subject matter of claim 1 is directed to a statutory "process" under 35 U.S.C. § 101.
The steps of claim 1: relate to an economic or game theory plan; do not recite any specific way of implementing the acts; do not expressly or impliedly recite any transformation of physical subject matter, tangible or intangible, from one state into another; do not recite any electrical, chemical, or mechanical acts or results; indirectly recite transforming data by a mathematical algorithm; do not require performance by a machine, such as a computer, either as claimed or disclosed; could be performed entirely by human beings; and do not involve making or using a machine, manufacture, or composition of matter. I do not believe the outcome is controlled by the Federal Circuit decisions in State St. Bank & Trust Co. v. Signature Fin. Group, Inc., 149 F.3d 1368, 47 USPQ2d 1596 (Fed. Cir. 1998) and AT&T v. Excel Communications, Inc., 172 F.3d 1352, 50 USPQ2d 1447 (Fed. Cir. 1999) because those cases involved transformation of data by a machine, such as a computer. This appeal involves a quot;non‑machine-implemented" process claim, i.e., the claim does not recite how the steps are implemented--the claim is broad enough to read on performing the steps without any machine or apparatus, although it also covers performing the steps with a machine.
The question of whether this type of non‑machine implemented subject matter is patentable is a common and important one to the U.S. Patent and Trademark Office (USPTO), as the bounds of patentable subject matter are increasingly being tested. In recent years, the USPTO has been flooded with claims to "processes," many of which bear scant resemblance to classical processes of manipulating or transforming compositions of matter and of functions performed by machines. The USPTO has learned the lessons from development of the law of machine-implemented processes, particularly when implemented on a general purpose digital computer. "Business methods" have long been considered statutory subject matter when performed by a machine. Technology Center 3600, Workgroup 3620, in the USPTO is entirely dedicated to "Electronic Commerce (Business Methods)" in Class 705, "Data Processing: Financial, Business Practice, Management, or Cost/Price Determination"; see www.uspto.gov/web/menu/pbmethod. The State Street and AT&T cases, often called "revolutionary," involved patented machines or machine-implemented processes that examiners have for some time regarded as nonexceptional. Perhaps encouraged by certain general language in these cases, however, a wide range of ever more general claims to "processes" come before the Office. Many, like the claimed process in the present case, are not limited to implementation via any particular technology or machine, nor do they result in any transformation or manipulation of physical subject matter. Are such "processes" patentable because they are "useful"? Other "process claims" involve what seem to be insubstantial or incidental manipulations of physical subject matter--e.g., the recording of a datum: are these patentable processes? Still other process claims involve human physical activity--methods of throwing a ball, or methods of causing a fumble. Are these process claims patentable? Must the examiners analyze such claims for compliance with the written description and enablement requirements, and search the prior art for evidence of novelty and nonobviousness?
I recognize that § 101 rejections are strongly disfavored by our reviewing court, the U.S. Court of Appeals for the Federal Circuit. Also, examiners find § 101 rejections difficult because it is hard to put reasons into words. It would be more administratively convenient for the USPTO to have a rule that all subject matter is statutory, so that it did not have to make § 101 rejections and could focus its efforts on examining claims for patentability over the prior art. However, that is not the law and, therefore, the USPTO must apply § 101 case law the best it can. I believe that the present claim involves the kind of subject matter that was never intended to be patentable.LEGAL ANALYSIS OF STATUTORY SUBJECT MATTER
Statutory subject matter is a complicated issue and the caselaw over the last 35 years has not been consistent in part due to broad pronouncements that, while sensible in the context of the facts of each case, proved to be ambiguous when applied to more general process claims. Therefore, the cases and tests cannot be completely reconciled. Nevertheless, the following is my analysis of statutory subject matter. In particular, I emphasize the sections dealing with "Process," "Abstract ideas," and "Claims that read on statutory and nonstatutory subject matter are unpatentable."
"Useful arts" ("technological arts") of U.S. Constitution
The origin of the United States patent laws is in the British Statute of Monopolies of 1623, 21 Jac. 1, ch. 3, which limited grants of monopolies to any "manner of new manufactures." United States v. Line Material Co., 333 U.S. 287, 330‑31 (1947) (Burton, J., dissenting). "The term 'manufactures' was broadly construed by the English courts as embracing 'not merely a vendible product of inventive skill, but also a method of applying physical forces to the production of physical effects' (i.e., processes as well as products)." 1 Donald S. Chisum, Patents § 1.01 (2001) (quoting 1 Willam Robinson, The Law of Patents for Useful Inventions 106 (1890)).
The considerations for the U.S. Constitution are discussed by Karl B. Lutz, Patents and Science, 18 Geo. Wash. L. Rev. 50, 53‑54 (1949):By the year 1787 it was being recognized even in Great Britain that the phrase "new manufactures" was an unduly limited object for a patent system, since it seemed to exclude new processes. Doubts were also being raised as to the advisability of continuing to grant patents to those who introduced new industries from abroad. Both of these questions were resolved in the United States Constitution by broadening the field from "new manufactures" to "useful arts," and by limiting the grants to "inventors" who made "discoveries" in such arts, thus excluding mere importers of foreign technology.
The U.S. Constitution was adopted by convention of States, September 17, 1787, and ratification was completed June 21, 1788. The Constitution authorizes Congress "To promote the Progress of ... useful Arts, by securing for limited Times to ... Inventors the exclusive Right to their ... Discoveries." U.S. Const., art. I, § 8, cl. 8. "This qualified authority ... is limited to the promotion of advances in the 'useful arts.'" Graham v. John Deere Co., 383 U.S. 1, 5, 148 USPQ 459, 462 (1966).
"[T]he present day equivalent of the term 'useful arts' employed by the Founding Fathers is 'technological arts.'" In re Bergy, 596 F.2d 952, 959, 201 USPQ 352, 359 (CCPA 1979), aff'd sub nom. Diamond v. Chakrabarty, 447 U.S. 303, 206 USPQ 193 (1980); In re Musgrave, 431 F.2d 882, 893, 167 USPQ 280, 289‑90 (CCPA 1970) (A series of operational steps is a statutory process if it is "in the technological arts so as to be in consonance with the Constitutional purpose to promote the progress of 'useful arts.'"); In re Prater (Prater I) 415 F.2d 1378, 1389, 159 USPQ 583, 593 (CCPA 1968) ("a process disclosed as being a sequence or combination of steps, capable of performance without human intervention and directed to an industrial technology--a 'useful art' within the intendment of the Constitution ..."), modified on rehearing, 415 F.2d 1393, 162 USPQ 541 (1969) (Prater II); In re Waldbaum (Waldbaum I), 457 F.2d 997, 1003, 173 USPQ 430, 434 (CCPA 1972) ("The phrase 'technological arts,' as we have used it, is synonymous with the phrase 'useful arts' as it appears in Article I, Section 8 of the Constitution."); Lutz, 18 Geo. Wash. L. Rev. at 54 ("The term 'useful arts,' as used in the Constitution and in the titles of the patent statutes [before the 1952 Patent Act] is best represented in modern language by the word 'technology.' This word is defined in Webster's New International Dictionary (2nd edition 1942) as: 'Any practical art utilizing scientific knowledge, as horticulture or medicine; applied science contrasted with pure science.' (3rd definition.)"). Another synonym is "industrial arts." See Robinson § 157 ("Every invention in the industial arts is either an operation [process] or an instrument [machine, manufacture, or composition of matter].").
"Technology" is defined as: "2a: applied science b: a technical method of achieving a practical purpose 3: the totality of means employed to provide objects necessary for human sustenance and comfort." Webster's New Collegiate Dictionary (G.&C. Merriam Co. 1977). "Science" is defined as:1a: possession of knowledge as distinguished from ignorance or misunderstanding b: knowledge attained through study or practice 2a: a department of systematized knowledge as an object of study <the ~ of theology> b: something (as a sport or technique) that may be studied or learned like systematized knowledge c: one of the natural sciences 3a: knowledge covering general truths or the operation of general laws esp. as obtained and tested through scientific method b: such knowledge concerned with the physical world and its phenomena : NATURAL SCIENCE 4: a system or method based or purporting to be based on scientific principles.
Id. The definition of "science" that applies is "natural science," not knowledge in general. The Constitution gave Congress the power "To promote the Progress of Science and useful Arts." "The term 'useful arts,' as used in the Constitution ... is best represented in modern language by the word 'technology.'" Lutz, 18 Geo. Wash. L. Rev. at 54. As described by Lutz:
The word "science," which comes from the Latin, scire, "to know" at the writing of the Constitution meant learning in general. Such a use is found in a letter by Thomas Jefferson in 1799, in which he referred to "government, religion, morality, and every other science."
Id. at 51‑52. "Natural science" is defined as "any of the sciences (as physics, chemistry, or biology) that deal with matter, energy, and their interrelations and transformations or with objectively measurable phenomena." Webster's. "Applied" is defined as "put to practical use; esp: applying general principles to solve definite problems." Id. "Engineering" is defined as "2: the application of science and mathematics by which the properties of matter and the sources of energy in nature are made useful to man in structures, machines, products, systems, and processes." Id. In my opinion, the definition of "engineering" best describes what is meant by "technology" and the "useful arts."
To further get a grasp on what is meant by "technology" I note a basic concept of the physical world. As explained in Gillespie et al., Chemistry 2 (Allyn and Bacon, Inc. 1986):We can describe the universe, and all the changes occurring in it, in terms of two fundamental concepts: matter and energy. Matter is anything that occupies space and has mass. Water, air, rocks, and petroleum, for example, are matter, but heat and light are not; they are forms of energy. The many different kinds of matter are known as substances. . . .
When we refer to "structure" or "material" or "substance" we are talking about matter and things made up of matter. Energy is further defined at Chemistry 53:
The capacity to do work is called energy. Gasoline, for example, possesses energy because when it is burned, it can do the work of moving a car. We measure energy by the work done, and thus energy, like work, is measured in joules.
In practice, it is convenient to distinguish different forms of energy, such as heat energy, light energy, electric energy, and chemical energy. . . .Energy has physical existence because it is capable of doing work and of being measured, but is incorporeal. I submit that a fundamental property of "technology" is that it deals with the physical world, matter and energy, which are transformed and made useful to man in products and processes.
The Constitution was enacted at the beginning of the Industrial Revolution, which was both a series of technological and social innovations originating in England. The invention of the cotton-spinning jenny by James Hargreaves is usually pointed out as the first, major technological innovation of the Industrial Revolution. Prior to that time cotton had to be stretched out or spun into threads by a slow process, one thread at a time, by a machine called a spinning wheel. "Patented in 1767, the spinning jenny was a series of simple machines rather than a single machine, and it spun sixteen threads of cotton simultaneously. These two qualities: multiple machines in a single machine as well as a machine that was designed not just to speed up work, but to do the work of several laborers simultaneously, was the hallmark of all subsequent technological innovations." See www.wsu.edu:8080/~dee/ENLIGHT/INDUSTRY.HTM.
The spinning jenny and the water frame invented by Richard Arkwright circa 1769 allowed ten times as much cotton yarn to be manufactured in 1790 than had been possible twenty years before. The invention of the coal‑fired rotary steam engine by James Watt in 1782 allowed spinning factories to be located almost anywhere and powered the machines of the Industrial Revolution. In 1784, Henry Cort invented the puddling process for iron production, which allowed pig iron to be refined from coke (which is made from coal which is abundant in England) instead of charcoal (which is made from less available wood). See www.historyguide.org/intellect/lecture17a.html. Against this background, it is likely that the Drafters of the Constitution envisioned protecting tangible manufactured products and physical methods of making products, operating machines, and working with the manifestations of the physical world (matter and energy).
Statutory subject matter - 35 U.S.C. § 101
Congress has defined patentable subject matter in consistent terms for over 210 years. The first United States Patent Act in 1790 required that the applicant "have invented or discovered any useful art, manufacture, engine, machine, or device, or any improvement therein." Act of April 10, 1790, ch. 7, § 1, 1 Stat. 109. The language was amended three years later to require that the applicant "have invented any new and useful art, machine, manufacture or composition of matter, or any new and useful improvement [thereof]." Act of February 21, 1793, ch. 11, § 1, 1 Stat. 318. The order and form of the words "invent" and "discover" changed several times over subsequent acts, but the statutory classes remained unchanged until the Patent Act of 1952 changed "art" to "process" and defined "process" as "process, art or method." See 1 Patents § 1.01. A "process" had long been considered to be a "useful art." See Corning v. Burden, 56 U.S. 252, 267 (1854) ("A process, eo nomine, is not made the subject of a patent in our act of Congress. It is included under the general term 'useful art.'").
Section 101 of Title 35 U.S.C. sets forth the subject matter that can be patented: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.
"[N]o patent is available for a discovery, however useful, novel, and nonobvious, unless it falls within one of the express categories of patentable subject matter of 35 U.S.C. § 101." Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 483, 181 USPQ 673, 679 (1974). The statutory categories of § 101 define eligible (patentable or statutory) subject matter, i.e., subject matter that can be patented. The last phrase, "subject to the conditions and requirements of this title," makes it clear that § 101 is limited to the subject matter that can be patented. See S. Rep. No. 1979, 82d Cong., 2d Sess. 5 (1952), reprinted in 1952 U.S. Code Cong. & Admin. News 2394, 2399 ("A person may have 'invented' a machine or manufacture, which may include anything under the sun made by man, but it is not necessarily patentable under section 101 unless the conditions of the title are fulfilled."). The terms "new and useful" refer to conditions for patentability of subject matter that is eligible to be patented. "It may be useful to think of eligibility as a precondition for patentability, and of utility as one of the three fundamental conditions for patentability, together with novelty ... and nonobviousness ...." Robert L. Harmon, Patents and the Federal Circuit 40 (4th ed. Bureau of National Affairs, Inc. 1998). Thus, as a matter of terminology, subject matter that does not fall within one of the statutory classes is said to be "nonstatutory" or "unpatentable" subject matter, with utility being a separate requirement for patentability.
The § 101 terms "invents" and "discovers" are discussed in A.W. Deller, 1 Deller's Walker on Patents § 14 (2d ed. Baker, Voorhis & Co., Inc. 1964):The words "discover" and "discovery," as used in the Constitution and patent laws of the United States, do not have their broadest signification. In their primary and ordinary sense, they are not synonymous with "invent" and "invention." Webster in his dictionary defines the word "discover" in the following language:--"Discover differs from invent. We discover what before existed. We invent what did not before exist." Section 100 of Title 35 USC states that the term "invention" means invention or discovery. Webster's definition of invention is as follows:--"Invention differs from discovery. Invention is applied to the contrivance and production of something that did not before exist. Discovery brings to light that which existed before, but which was not known." A "discovery" in this sense is not the subject of a patent; and as stated in In re Kemper, [14 F. Cas. 286, 287 (1841),] "it will be found, by a careful perusal of the Constitution and laws of the United States upon the subject of patents for useful arts, etc., that it (discovery) is not there used in this sense, but always as synonymous with invention." No discovery will entitle the discoverer to a patent which does not in effect amount to the contrivance or production of something which did not exist before; or, in other words, to an invention. [Footnotes omitted.]
Not every discovery is patentable. See Morton v. New York Eye Infirmary, 17 F. Cas. 879, 884 (S.D.N.Y. 1862):
A discovery may be brilliant and useful, and not patentable. No matter through what long, solitary vigils, or by what importunate efforts, the secret may have been wrung from the bosom of Nature, or to what useful purpose it may be applied. Something more is necessary. The new force or principle brought to light must be embodied and set to work, and can be patented only in connection or combination with the means by which, or the medium through which, it operates.
Thus, the discovery of a law of nature, a principle of a physical science, or a natural phenomenon is not patentable because it existed before and is not an invention. It is only when the discovery or principle is utilized in an invention that is a "process, machine, manufacture, or composition of matter" under § 101 that it becomes eligible for protection. See Funk Bros. Seed Co. v. Kalo Inoculant Co., 333 U.S. 127, 130 (1948) ("He who discovers a hitherto unknown phenomenon of nature has no claim to a monopoly of it which the law recognizes. If there is to be invention from such a discovery, it must come from the application of the law of nature to a new and useful end."); Mackay Radio & Tel. Co., Inc. v. Radio Corp. of America, 306 U.S. 86, 94 (1939) ("While a scientific truth, or the mathematical expression of it, is not patentable invention, a novel and useful structure created with the aid of knowledge of scientific truth may be."); 1 Deller's § 14 (describing the example that discoveries about laws of nature, such as electric current, conduction of materials, and magnetism were not patentable, but the application of these laws and principles in the telegraph by Morse was patentable).
Statutory classes of § 101 define the "useful arts"
"Congress intended statutory subject matter to 'include anything under the sun that is made by man.'" Diamond v. Diehr, 450 U.S. 175, 182, 209 USPQ 1, 6 (1981) (quoting from S. Rep. No. 1979, reprinted in 1952 U.S. Code Cong. & Admin. News at 2399 ("A person may have 'invented' a machine or manufacture, which may include anything under the sun made by man, but it is not necessarily patentable under section 101 unless the conditions of the title are fulfilled.")). (The Senate Report does not mention "composition of matter" or "process.") "[T]he use of the four terms [process, machine, manufacture, and composition of matter] represent an effort to indicate the general industrial boundary of the single field of patentable invention. [Emphasis ours.] The first three terms, machines, manufactures and composition of matter, refer to physical things, while the fourth, process, refers to acts. Hence the general field may be considered as consisting of new things and new acts." Bergy, 596 F.2d at 974 n.11, 201 USPQ at 372 n.11 (citing Glasscock and Stringham, Patent Law 22 (1943)). The four categories define the "useful arts" ("technological arts") as discussed in 1 Patents § 1.01:The general purpose of the statutory classes of subject matter is to limit patent protection to the field of applied technology, what the United States constitution calls "the useful arts." Theoretical or abstract discoveries are excluded as are discoveries, however practical and useful, in nontechnological arts, such as the liberal arts, the social sciences, theoretical mathematics, and business and management methodology. This focus on technology explains the preoccupation of patent law with means. A patent can issue only for a new means of achieving a useful end or result. Those who articulate new problems or recognize new needs frequently make valuable contributions to society but cannot look to the patent system for reward unless they go on to find a new and specific process, machine, manufacture, or composition of matter that solves the problem or meets the need. [Footnotes omitted.]
"Thus patent law rewards persons for inventing technologically useful applications, instead of for philosophizing unapplied research and theory." In re Alappat, 33 F.3d 1526, 1553, 31 USPQ2d 1545, 1565 (Fed. Cir. 1994) (en banc) (Archer, C.J., concurring in part and dissenting in part).
Historical definitions of statutory categories
It is useful to define the § 101 categories of "process, machine, manufacture, or composition of matter." "These terms may not be read in a strict literal sense entirely divorced from the context of the patent law." Id. (citing, inter alia, In re Schrader, 22 F.3d 290, 295‑96 & n.11, 30 UPSQ2d 1455, 1459‑60 & n.11 (Fed. Cir. 1994)).
Machine, manufacture, and composition of matter
The three product classes of machine, manufacture, and composition of matter have traditionally required physical structure or substance. "The term machine includes every mechanical device or combination of mechanical powers and devices to perform some function and produce a certain effect or result." Corning v. Burden, 56 U.S. at 267; see also Burr v. Duryee, 68 U.S. 531, 570 (1863) ("A machine is a concrete thing, consisting of parts or of certain devices and combinations of devices."). In modern parlance, electrical circuits and devices, such as computers, are referred to as machines. "Manufactures" and "compositions of matter" are defined in Diamond v. Chakrabarty, 447 U.S. at 308, 206 USPQ at 196‑97:[T]his Court has read the term "manufacture" in accordance with its dictionary definition to mean "the production of articles for use from raw or prepared materials by giving to these materials new forms, qualities, properties, or combinations, whether by hand‑labor or by machinery." American Fruit Growers, Inc. v. Brogdex Co., 283 U.S. 1, 11 (1931). Similarly, "composition of matter" has been construed consistent with common usage to include "all compositions of two or more substances and ... all composite articles, whether they be results of chemical union, or of mechanical mixture, or whether they be gases, fluids, powders or solids." Shell Development Co. v. Watson, 149 F. Supp. 279, 280 (D.C. 1957) (citing 1 A. Deller, Walker on Patents § 14, p. 55 (1st ed. 1937). [Parallel citations omitted.]
The statutory categories of "machine, manufacture, or composition of matter" broadly cover every possible "thing" that can be made by man. Included are living things made by man. See Diamond v. Chakrabarty, 447 U.S. at 313, 206 USPQ at 199 (man‑made micro-organism falls within § 101: Congress recognized that "the relevant distinction was not between living and inanimate things, but between products of nature, whether living or not, and human‑made inventions."); J.E.M. Ag Supply, Inc. v. Pioneer Hybrid Int'l, Inc., 534 U.S. 124, 145, 60 USPQ2d 1865, 1874 (2001) (newly developed plant breeds fall within § 101). Structure and materials made by man clearly fit the definition of "technology." While a machine and a manufacture can only be made by man, a composition of matter can be made by man or naturally occurring.
Process
The most difficult category to define is a "process." A "process" is broadly defined in the dictionary as "a series of actions or operations conducing to an end." Webster's. Any series of actions or operations is a process within the dictionary definition. However, not every method or process in the dictionary sense is a patentable "process" under §§ 100(b) and 101 within the "useful arts" ("technological arts"). See Gottschalk v. Benson, 409 U.S. at 64, 175 USPQ 674 ("The question is whether the method described and claimed is a 'process' within the meaning of the Patent Act."); Parker v. Flook, 437 U.S. 584, 588 n.9, 198 USPQ 193, 196 n.9 (1978) ("The statutory definition of 'process' is broad.... An argument can be made, however, that this Court has only recognized a process as within the statutory definition when it either was tied to a particular apparatus or operated to change materials to a 'different state or thing.'"); id. at 589, 198 USPQ at 197 ("The holding [in Gottschalk v. Benson] that the discovery of that method could not be patented as a 'process' forecloses a purely literal reading of § 101."); Musgrave, 431 F.2d at 893, 167 USPQ at 289‑90 (a series of operational steps must be in the technological arts to be a statutory process); In re Sarkar, 588 F.2d 1330, 1333, 200 USPQ 132, 137 (CCPA 1978) ("Though every set of steps, of whatever nature, may properly be labeled a 'process,' § 101 ('Whoever invents') limits the patent system to invented processes ... [and] inventions which Congress is constitutionally empowered to make are tangible embodiments of ideas in the useful, or technological, arts.... Thus, a series of steps is a 'process' within § 101 unless it falls within a judicially determined category of nonstatutory subject matter exceptions."); John Hogg Austin, The Patentable Invention, 18 J. Pat. Off. Soc'y 738, 748 (1936) ("The statutory classification, considered in its totality, limits 'art' [now 'process'] by interpretation to the industrial methods of the artisan according to the general character of the other three classes."); A.H. Walker, The Law of Patents § 3 (5th ed., Baker, Voorhis & Co. 1917) ("The word 'art' [now 'process'] also has a narrower meaning in the patent laws than it has in the dictionaries. In the latter its significance is 'the use of means to produce a result.' In the patent laws it covers only a certain limited meaning of the word process.").
Section 100(b) of Title 35 U.S.C. defines "process" to mean "process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material." The definition of "process" to mean "process, art or method" makes it clear that the terms are synonymous. See S. Rep. No. 1979, reprinted in 1952 U.S. Code Cong. & Admin. News at 2409‑10. "When Congress approved the addition of the term 'process' to the categories of patentable subject matter in 1952, it incorporated the definition of 'process' that had evolved in the courts" (footnotes omitted); Schrader, 22 F.3d at 295, 30 UPSQ2d at 1459, which included this definition from Cochrane v. Deener, 94 U.S. 780, 788 (1877): "A process is . . . an act, or series of acts, performed upon the subject matter to be transformed and reduced to a different state or thing." See Diamond v. Diehr, 450 U.S. at 185, 209 USPQ at 7 ("Analysis of the eligibility of a claim of patent protection for a 'process' did not change with the addition of that term to § 101. Recently, in Gottschalk v. Benson, ... we repeated the above definition recited in Cochrane v. Deener, adding: 'Transformation and reduction of an article "to a different state or thing" is the clue to the patentability of a process claim that does not include particular machines.'"). The transformation definition has frequently been misunderstood to require transformation of an object or article. See Schrader, 22 F.3d at 295 & 295 n.12, 30 UPSQ2d at 1459‑60 & 1459 n.12 (noting imperfect statements requiring object or article in 1 William C. Robinson, The Law of Patents for Useful Inventions § 159 (1890) and Gottschalk v. Benson, 409 U.S. 63, 175 USPQ 673 (1972)). However, the "subject matter" transformed does not need to be a physical (tangible) object or article or substance, but can be physical, yet intangible, phenomena such as electrical signals or electromagnetic waves. See Schrader, 22 F.3d at 295 n.12, 30 USPQ2d at 1459 n.12 ("In the Telephone Cases, 126 U.S. 1 ... (1887), the Court upheld the validity of a claim directed to a method for transmitting speech by impressing acoustic vibrations representative of speech onto electrical signals. If there was a requirement that a physical object be transformed or reduced, the claim would not have been patentable.... Thus, it is apparent that changes to intangible subject matter representative of or constituting physical activity or objects are included in this definition"); In re Ernst, 71 F.2d 169, 170, 22 USPQ 28, 29‑30 (CCPA 1934); Prater I, 415 F.2d at 1387‑88, 159 USPQ at 592 (discussing the Telephone Cases); 2 A.W. Deller, Patent Claims (2d ed. 1971), § 379 (process claims do not require transforming physical matter: "Another line along which the field of process claims has been extended by judicial approval is the production of power, light, heat, sound, electricity and by‑products of their regulation, such as telephonically transmitted speech."). This misunderstanding may be the reason why "transformation of subject matter" has not been accepted as the test for statutory subject matter of "process" claims.
In my opinion, the Supreme Court's definition of a statutory "process" as requiring that the steps operate to physically transform physical subject matter (matter or some form of energy) to a different state or thing succinctly describes the fundamental characteristic of "technology" and a process in the "useful arts" ("technological arts"). This definition is consistent with the meaning given to "arts" during the first 100 years of our patent system. See Robinson §§ 157‑172 and "process" cases summarized in Gottschalk v. Benson. An "art" (now "process") historically referred to methods performed by new and known machines, methods of manufacture (making and treating machines, manufactures, and compositions of matter), and methods of controlling natural forces, not just any series of steps without regard to whether it produces some physical effect. See Robinson § 166 ("But though an art embraces so wide a field of inventive skill, it includes only such operations as are capable of producing physical effects."). Moreover, the Supreme Court's test is relatively objective compared to other tests because it is possible to identify and discuss the physical subject matter (matter or form of energy) being transformed and the physical steps used to transform it. For example, a thermodynamic process for converting heat into some other form of energy, such as mechanical force or motion is patentable even though heat, force, and motion are not tangible objects. A method that does not operate on matter or some form of energy in the physical universe is not "useful" to mankind in the technological sense of the Constitution's "useful arts." Nonstatutory methods include disembodied plans and schemes: for becoming rich, for a system of government, for the more efficient conduct of business, for a way of giving a discount, for playing games (e.g., bidding in bridge or betting in poker), for budgeting, for marketing products, etc. Not all physical acts perform a statutory transformation, e.g., a method of negotiating a contract, while it might involve physical acts, such as talking and writing, only transforms the rights and obligations of the parties.
The general statement in Sarkar that "a series of steps is a 'process' within § 101 unless it falls within a judicially determined category of nonstatutory subject matter exceptions," 588 F.2d at 1333, 200 USPQ at 137, taken in isolation, is admittedly inconsistent with our position that a series of steps must first meet the transformation of subject matter definition to be considered a statutory "process." The term "exceptions" is normally used to refer to subject matter that would be within one of the four categories of § 101 "but for" some exceptional condition, as will be discussed infra. The general statement in Sarkar is considered to be dicta, because it is contradicted by the court's own analysis, which identifies two statutory requirements--that patentable processes be "invented," and that they be "tangible embodiments of ideas in the useful, or technological, arts." 588 F.2d at 1333, 200 USPQ at 137. Perhaps the transformation test and the exception test are the same. I think a more accurate statement is found in In re Pardo, 684 F.2d 912, 916, 214 USPQ 673, 677 (CCPA 1982): "[A]ny process, machine, manufacture, or composition of matter constitutes statutory subject matter unless it falls within a judicially determined exception to section 101." This statement says that subject matter must be within one of the categories before it is tested to determine whether it falls within an exception, which allows the interpretation that a series of steps must first qualify as a "process" under § 101. In my opinion, whether a series of steps initially falls within the statutory class of a "process," applying the Supreme Court's definition of transformation of subject matter, should be treated as a separate issue from whether it is within an exception.
Machine‑implemented methods (processes tied to a particular machine or apparatus) are generally considered to be statutory subject matter. This is consistent with the transformation of subject matter definition because machines carry out physical transformations on tangible objects and substances, such as in manufacturing operations, and on nontangible physical phenomena, such as the conversion of electrical signals or the conversion of heat into other forms of energy (thermodynamics). Moreover, the performance of physical operations by a machine is clearly the kind of subject matter which was intended to be protected by the "useful arts" ("technological arts") as evidenced by the fact that the Constitutional provision was enacted in the context of the Industrial Revolution when the productivity of machines was being improved and machines were replacing manual operations. However, although there is always some form of physical transformation of electrical signals into a different state or signal within a computer, transformation of data by a known machine (e.g., a new use of a known general purpose digital computer) has evolved into a special case because of mathematical algorithms, which will be discussed in connection with State Street and AT&T, infra.
It is possible that exceptions exist to the requirements that a "process" must be tied to a particular machine or apparatus or must operate to change subject matter to "a different state or thing." See Gottschalk v. Benson, 409 U.S. 63, 71, 175 USPQ 673, 676 (1972), rev'g In re Benson, 441 F.2d 682, 169 USPQ 548 (CCPA 1971) ("It is argued that a process patent must either be tied to a particular machine or apparatus or must operate to change articles or materials to a 'different state or thing.' We do not hold that no process patent could ever qualify if it did not meet the requirements of our prior precedents."); Parker v. Flook, 437 U.S. at 588 n.9, 198 USPQ at 196 n.9 ("The statutory definition of 'process' is broad.... An argument can be made, however, that this Court has only recognized a process as within the statutory definition when it either was tied to a particular apparatus or operated to change materials to a 'different state or thing.' See Cochrane v. Deener, 94 U.S. 780, 787‑888, 24 L.Ed. 139. As in Benson, we assume that a valid patent may issue even if it does not meet one of these qualifications of our earlier precedents. 409 U.S. at 71, 93 S.Ct., at 257."). However, great care should be taken before abandoning or creating exceptions to a definition which has proven useful over many years.
The Federal Circuit stated that a "'physical transformation' ... is not an invariable requirement, but merely one example of how a mathematical algorithm may bring about a useful application," AT&T, 172 F.3d at 1358, 50 USPQ2d at 1452. However, the court noted that "the claims require the use of switches and computers," 172 F.3d at 1355, 50 USPQ2d at 1449, and transformation of data by a machine inherently requires a physical transformation. Thus, the statement in AT&T was not necessary and is dicta. Transformation of data by a machine is a special case. The court in AT&T might have been saying that statutory subject matter does not require "physical transformations" performed externally to the machine, such as using the calculated results to control a system. Cf. State Street, 149 F.3d at 1375, 47 USPQ2d at 1602 (Claim 1 is "statutory subject matter, even if the useful result is expressed in numbers, such as price, profit, percentage, cost, or loss.").
A statutory "process" is not limited to the means disclosed for performing it. As stated in Cochrane v. Deener:That a process may be patentable, irrespective of the particular form of the instrumentalities used, cannot be disputed. If one of the steps of a process be that a certain substance is to be reduced to a powder, it may not be at all material what instrument or machinery is used to effect that object, whether a hammer, a pestle and mortar, or a mill. Either may be pointed out; but if the patent is not confined to that particular tool or machine, the use of the others would be an infringement, the general process being the same. A process is a mode of treatment of certain materials to produce a given result. It is an act, or a series of acts, performed on the subject-matter to be transformed and reduced to a different state or thing.
94 U.S. at 787‑88. See also Prater I, 415 F.2d at 1388, 159 USPQ at 592 ("[A] process is not limited to the means used in performing it." (Emphasis omitted.)). Indeed, it is possible for a statutory "process" to be performed manually. In In re Tarczy-Hornoch, 397 F.2d 856, 158 USPQ 141 (CCPA 1968), which overruled the "function of a machine" rejection of process claims, Judge Rich discussed the history of the doctrine and noted that even the "function of a machine" rejection did not apply where the process could be performed manually or by different apparatus. For example, "Walker on Patents, 4th ed. § 3, states that valid process patents may be granted for 'operations which consist entirely of mechanical transactions, but which may be performed by hand or by any of several different mechanisms or machines,'" id. at 864, 158 USPQ at 147, and "[t]he Expanded Metal and Waxham processes could have been performed in some manual fashion or by apparatus different from that disclosed by the patents," id. at 864, 158 USPQ at 148. It is implicit, however, that a statutory "process" still requires a physical transformation of physical subject matter (matter or energy) to a different state or thing if it is not tied to a particular machine. See Gottschalk v. Benson, 409 U.S. at 70, 175 USPQ at 676 ("Transformation and reduction of [subject matter] 'to a different state or thing' is the clue to patentability of a process claim that does not include particular machines.").
There is usually no difficulty identifying the physical transformation of subject matter even where no specific structure is recited. For example, a step of "mixing" two chemicals to produce a manufacture or composition of matter is a physical chemical and/or mechanical act, regardless of whether it is performed by a machine or a human. Other times, it will be more difficult to determine whether there is a transformation. In my opinion, the physical transformation of physical subject matter to a different state or thing, as required by a statutory "process" under § 101, is evidenced by chemical (including biotechnical), electrical (including computer), or mechanical (i.e., physical forces applied by a machine or a human to matter or energy) steps, i.e., physical transformation steps so as to be within the "useful arts." See Corning v. Burden, 56 U.S. at 267 ("But where the result or effect is produced by chemical action, by the operation or application of some element or power of nature, or of one substance to another, such modes, methods, or operations are called processes."); Expanded Metal Co. v. Bradford, 214 U.S. 366, 385-86 (1909) (process not limited to chemical actions, but includes electrical and mechanical operations); 2 Patent Claims, Chapter XXIV on "Process Claims," §§ 381‑383 (chemical, mechanical, and electrical processes). Cf. In re Iwahashi, 888 F.2d 1370, 1374, 12 USPQ2d 1908, 1911 (Fed. Cir. 1989) ("[E]very step-by-step process [under § 101], be it electronic or chemical or mechanical involves an algorithm in the broad sense of the term.... This is why the proscription against patenting has been limited to mathematical algorithms...."). "A manufacturing process is clearly an art [process], within the meaning of the law." Tilghman v. Proctor, 102 U.S. 707, 722 (1881). Operations of a machine are also processes. See Tarczy‑Hornoch, 397 F.2d at 866, 158 USPQ 149 (overruling the "function of an apparatus" doctrine). Not all physical actions cause a transformation of physical subject matter (matter or energy), e.g., "negotiating a contract," "convening a meeting," etc. Of course, not every step must perform a physical transformation, only the claim as a whole must perform a statutory transformation.
However, as with any test, "[t]he line between a patentable 'process' and an unpatentable 'principle' is not always clear." Parker v. Flook, 437 U.S. at 590, 198 USPQ at 197. Incidental physical limitations, such as data gathering, field of use limitations, and post-solution activity, although they may involve physical transformations, are not enough to convert a nonstatutory "abstract idea" into a statutory "process." See "Incidental physical limitations," infra. A claim may contain a data gathering step that requires a physical transformation, but if the claim "as a whole" is not directed to a physical transformation, the claim will not be statutory subject matter. See, e.g., In re Grams, 888 F.2d 835, 12 USPQ2d 1824 (Fed. Cir. 1989) (sole physical step of "performing said plurality of clinical tests on the individual to measure the values of the set of parameters" did not convert it to a statutory process). The test is based on the claim "as a whole."
The statutory subject matter problem arises when a claimed series of steps is not tied to a particular machine or apparatus, and it cannot be determined that the steps of the claim as a whole are physical process steps transforming subject matter (matter or a form of energy) to a different state or thing.
Subject matter not within any category
Some man-made subject matter fails to fall within any of the statutory categories. See In re Warmerdam, 33 F.3d 1354, 1361, 31 USPQ2d 1754, 1760 (Fed. Cir. 1994) (data structure per se of claim 6 is not in one of the categories of § 101); In re Bonczyk, 10 Fed. Appx. 908 (Fed. Cir. 2001) (non-precedential) ("fabricated energy structure" does not correspond to any statutory category of subject matter). Music, art, and literature, if claimed as such, do not fit into any of the statutory categories because they are not physical things or acts. Another example seen in the USPTO is a claim to a computer program per se, i.e., a claim reciting solely a program comprising a set of computer instructions for performing certain functions, instead of a series of steps performed on a computer. The instructions are not physical things which would qualify as a machine, manufacture, or composition of matter, and the claim is not recited as a series of steps as a process. Thus, a computer program per se is not statutory subject matter because it does not fall within any statutory class. See In re Chatfield, 545 F.2d 152, 159, 191 USPQ 730, 737 (CCPA 1976) (Rich, J., dissenting) ("It has never been otherwise than perfectly clear to those desiring patent protection on inventions which are new and useful programs for general purpose computers (software) that the only way it could be obtained would be to describe and claim (35 U.S.C. § 112) the invention as a 'process' or a 'machine.'"); In re Lowry, 32 F.3d 1579, 32 USPQ2d 1031 (Fed. Cir. 1994) (memory containing a stored data structure was statutory subject matter, which has been interpreted to mean that programs stored on a physical medium are statutory subject matter as a "manufacture").
A series of steps which is not tied to a particular machine or apparatus, and which does not transform physical subject matter to a different state or thing, does not meet the statutory definition of a "process" and is not patentable subject matter. It should not be necessary to address whether such a process which does not meet the definition also fits within one of the judicially recognized exclusions.
The judicially recognized exclusions
"Congress intended statutory subject matter to 'include anything under the sun that is made by man.'" Diamond v. Diehr, 450 U.S. at 182, 209 USPQ at 6. "This Court has undoubtably recognized limits to § 101 and every discovery is not embraced within the statutory terms. Excluded from such patent protection are laws of nature, physical phenomena and abstract ideas." Id. at 185, 209 USPQ at 7. Note the Supreme Court's use of the term "[e]xcluded"; the three categories are often referred to as "exceptions." "Phenomena of nature, though just discovered, mental processes, and abstract intellectual concepts are not patentable as they are the basic tools of scientific and technological work." Gottschalk v. Benson, 409 U.S. at 67, 175 USPQ at 675. "Laws of nature, physical phenomena and abstract ideas" are the only three exclusions recognized by the Federal Circuit. There is no separate exclusion for mathematical algorithms. See Alappat, 33 F.3d at 1543, 31 USPQ2d at 1556 ("[The Supreme Court] never intended to create an overly broad, fourth category of [mathematical] subject matter excluded from § 101."). There is also no "business method" exception. See State Street, 149 F.3d at 1375, 47 USPQ2d at 1602 ("We take this opportunity to lay this ill‑conceived ['business method'] exception to rest.").
The judicially recognized exclusions may be understood as tools to ensure that the proper weight be given to both the "whoever invents or discovers any new and useful" phrase and the four statutory categories of "process, machine, manufacture, or composition of matter" of § 101. These phrases are the statutory means by which Congress delimited the Constitutional authorization to promote the progress of the "useful arts" ("technological arts"). The "invents or discovers" requirement excludes subject matter that existed in nature prior to the purported invention, while the statutory categories ensure that patents issue only for practical applications, not "abstract ideas." As stated in Sarkar, 588 F.2d at 1333, 200 USPQ at 137:Though every set of steps, of whatever nature, may properly be labeled a "process," § 101 ("Whoever invents") limits the patent system to invented processes. Sets of steps conducted entirely by nature are not subject to patenting; they are not invented by man. Sets of steps occurring only in the mind have not been made subject to patenting because mental processes are but disembodied thoughts, whereas inventions which Congress is constitutionally empowered to make patentable are tangible embodiments of ideas in the useful, or technological, arts. See In re Waldbaum, 457 F.2d 997, 1003, 59 Cust. & Pat. App. 940, 173 USPQ 430, 434 (1972) (commenting on the synonymity of useful arts and technological arts).
Mathematical exercises, or methods of calculation, are within the myriad of mental processes of which the human mind is capable. Though they may be represented by written formulae, symbols, equations, or "algorithms," mathematical exercises remain disembodied. They may not, therefore, cross the threshold of § 101. . . .
Thus, a series of steps is a "process" within § 101 unless it falls within a judicially determined category of nonstatutory subject matter exceptions.
See also In re Walter, 618 F.2d 758, 770, 205 USPQ 397, 409 (CCPA 1980) (pure mathematics is not an art or technology).
Laws of nature and physical phenomena
Of the three exceptions, "laws of nature, physical phenomena and abstract ideas," "laws of nature" and "physical phenomena" are not patentable because the discovery of a law of nature, a principle of physical science, or a natural phenomenon is not an invention made by man. "Thus, a new mineral discovered in the earth or a new plant found in the wild is not patentable subject matter. Likewise, Einstein could not patent his celebrated law that E=mc2; nor could Newton have patented his law of gravity. Such discoveries are 'manifestations of ... nature, free to all men and reserved exclusively to none.'" Diamond v. Chakrabarty, 447 U.S. at 309, 206 USPQ at 197 (citing Funk Seed Co. v. Kalo Co., 333 U.S. at 130, 76 USPQ at 281). See also Robinson § 135 ("In one sense, the word 'principle' denotes the physical force employed by an invention. The other appellations given to this force are very numerous, and most of them are wholly inappropriate. It has been called 'an elementary truth,' 'a priniciple of science,' 'a property of matter,' 'an element of matter,' 'a law of nature,' the root and ground of science;' ...." It cannot be patented for the three following reasons:): § 136 ("Firstly, a principle, considered as a natural physical force, is not the product of inventive skill."; § 137 ("Secondly, a principle, considered as a natural physical force, is the common property of all mankind."); and § 138 ("Thirdly, a principle, considered as a natural physical force, is not a complete and operative means."). And, as to living subject matter, Congress recognized that "the relevant distinction was not between living and inanimate things, but between products of nature, whether living or not, and human‑made inventions." Id. at 313, 206 USPQ at 199. "Laws of nature" and "physical phenomena" may also represent inherent properties, e.g., the discovery that certain plants have a chemoprotective effect against cancer. "Laws of nature" and "physical phenomena" are often expressed using mathematical formula, such as E=mc2. It is arguable that certain mathematical principles describing real world truths, such as the Pythagorean theorem, represent a law of nature as well as an abstract idea.
"Laws of nature" and "physical phenomena," if drafted as such, usually do not fit within a statutory category; e.g., a claim to "E=mc2, where E is energy, m is mass, and c is the speed of light" does not fit the definitions of a "process, machine, manufacture, or composition of matter" because it is neither a series of acts nor a physical thing. Of course, a competent draftsman can always draft "laws of nature" and "physical phenomena" to appear to be in a statutory category, such as a product or process, which is why the exceptions must apply to subject matter that otherwise falls within one of the statutory classes of § 101. See Sarkar, 588 F.2d at 1333, 200 USPQ at 137 ("Sets of steps conducted entirely by nature are not subject to patenting; they are not invented by man."); Smithkline Beecham Corp. v. Apotex Corp., 365 F.3d 1306, 1331, 70 USPQ2d 1737, 1756 (Fed. Cir. 2004) (Gajarsa, J., concurring) ("SKB's paroxetine hemihydrate ... can be 'made' through a natural process of spontaneous conversion" and the claim covers a product of a "natural process").
Abstract ideas
"An idea of itself is not patentable, but a new device by which it may be made practically useful is." Rubber-Tip Pencil Co. v. Howard, 87 U.S. 498, 507 (1874). See also Burr v. Duryee, 68 U.S. at 570 ("We find ... no authority to grant a patent for a 'principle,' or a mode of operation, or an idea, or any other kind of abstraction."). Unlike "laws of nature" and "natural phenomena," "abstract ideas" are conceived by man and can be claimed as methods.
The nature of an "abstract idea" is harder to describe, so I start with some definitions. The term "abstract" is defined as "1. considered apart from concrete existence: an abstract concept. 2. Not applied or practical; theoretical. 3. Not easily understood; abstruse." The American Heritage Dictionary (2d ed. Houghton Mifflin Co. 1982). "Idea" is defined as "1. Something that exists in the mind, potentially or actually, as a product of mental activity, such as a thought, image, or conception. 2. An opinion, conviction, or principle .... 3. A plan, scheme, or method." Id. "Practical" is defined as "4. Capable of being used or put into effect; useful: practical knowledge of German.... 6. Concerned with the production or operation of something useful: Woodworking is a practical art." Id. "Application" is defined as "3.a. The act of putting something to a special use or purpose: an application of a new method. b. A specific use to which something is put: the application of science to industry. 4. The capacity of being usable; relevance: Geometry has practical application." Id. "Useful" is defined as "Capable of being used advantageously." Id. Therefore, the "abstract idea" exception refers to disembodied plans, concepts, schemes, or theoretical methods. The opposite of an "abstract idea" is something having a concrete existence, tangible, and put to a practical use. In my opinion, an "abstract idea" is "applied" or "embodied," i.e., it is transformed into a "practical application" or a "concrete and tangible" instantiation, when it is utilized in an invention that is a "process, machine, manufacture, or composition of matter" under § 101. A "machine, manufacture, or composition of matter" covers concrete and tangible "things." A "process" that is tied to a particular machine or apparatus, or that transforms physical subject matter, performs concrete and tangible "acts."
The most well known example of an "abstract idea" is a mathematical algorithm, which is a "procedure for solving a given type of mathematical problem," Diamond v. Diehr, 450 U.S. at 186, 209 USPQ at 9. Mathematical algorithms per se, such as claim 13 in Gottschalk v. Benson, merely recite steps for transforming data (numbers) and are disembodied because they do not recite means (structure) for implementing the steps and because they do not require transformation of physical subject matter, such as electrical signals. Mathematical algorithms can be "abstract ideas" that do not represent a "law of nature" or a "physical phenomenon." See In re Meyer, 688 F.2d 789, 794‑95, 215 USPQ 193, 197 (CCPA 1982) ("However, some mathematical algorithms and formulae do not represent scientific principles or laws of nature; they represent ideas or mental processes and are simply logical vehicles for communicating possible solutions to complex problems."). Importantly, "abstract ideas" are not limited to mathematical subject matter: any series of steps that, as claimed, is not physically embodied is an "abstract idea."
"Abstract ideas," if drafted as such, do not fall within a statutory category; e.g., a claim in the form "I claim the relationship a2 + b2 = c2, where a and b are length of the legs of a right angle triangle and c is the length of the hypotenuse," does not fit the definitions of a "process, machine, manufacture, or composition of matter" because it is neither a series of acts nor a physical thing. Of course, a competent draftsman can always draft an "abstract idea" to appear to be in a statutory category, which is why the exception must apply to subject matter that otherwise falls within one of the statutory classes of § 101. Claims that qualify under § 101 as a "machine, manufacture, and composition of matter," or under § 100(b) as a "process" involving the use of a known machine, manufacture, or composition of matter, generally do not pose statutory subject matter problems because physical structure is not an abstract idea. Transformation of data by a machine is a special case which will be discussed later in connection with State Street. The main problem is that "abstract ideas," such as mathematical algorithms, and other kinds of subject matter which do not appear to the USPTO to be included within the "useful arts" of the Constitution, are easily and naturally drafted as a series of steps, which fits the dictionary definition of a process. In my opinion, not all processes in the dictionary sense are statutory "processes" under § 101. The definition of a statutory "process" in Cochrane v. Deener requires a transformation of physical subject matter to a different state or thing. A series of steps which meets the definition of a statutory "process" is not an "abstract idea" because of the concrete, physical acts. Since a "process" is not required to recite the means (structure) to perform the steps, claims often do not recite how the steps are implemented, which can make it difficult to determine whether the subject matter is a statutory "process" or an "abstract idea."
A claim that covers ("preempts") any and every possible way that the steps can be performed is a disembodied "abstract idea" because it recites no particular implementation of the idea (even if one is disclosed). For example, in discussing the mathematical algorithm in Gottschalk v. Benson, the Supreme Court discussed the cases holding that a principle, in the abstract, cannot be patented and then stated:Here the "process" claim is so abstract and sweeping as to cover both known and unknown uses of the BCD to pure binary conversion. The end use may ... be performed through any existing machinery or future-devised machinery or without any apparatus.
409 U.S. at 68, 175 USPQ at 675. There is also concern that the scope of the claim is not commensurate with the scope of enablement. See also O'Reilly v. Morse, 56 U.S. 62 (1854) (Morse's eighth claim to use of electric or galvanic current for marking or printing intelligible characters, signs, or letters at a distance broader than the description in the specification).
Incidental physical limitations, such as data gathering, field of use limitations, and post-solution activity are not enough to convert a "abstract idea" into a statutory "process." See "Incidental physical limitations," infra. Some aspects of the "abstract idea" exception have not been explored by the courts. For example, it seems possible that some subject matter technically may not be an "abstract idea" because it requires actions, e.g., "negotiating a contract," but may not qualify as a "process" because the actions do not transform physical subject matter and, so, do not involve any kind of "technology." For this reason, the nonstatutory subject matter analysis under the transformation definition of a statutory "process" is best treated as independent from the "abstract idea" exception.
Two different views of exclusions
Exclusions have been thought of in two ways: as exceptions and as exclusions.
In the more useful and more common meaning, exceptions refer to subject matter which would be within one of the four categories, as drafted, "but for" some exceptional condition, i.e., they take out subject matter that would otherwise be included. See Sarkar, 588 F.2d at 1333, 200 USPQ at 137 ("a series of steps is a 'process' within § 101 unless it falls within a judicially determined category of nonstatutory subject matter exceptions"); Pardo, 684 F.2d at 916, 214 USPQ at 677 ("any process, machine, manufacture, or composition of matter constitutes statutory subject matter unless it falls within a judicially determined exception to section 101"); State Street, 149 F.3d at 1375 n.9, 47 USPQ2d at 1602 n.9 ("Of course, the subject matter must fall into at least one category of statutory subject matter [before determining whether it encompasses statutory subject matter]."). This meaning of an exception accounts for the fact that a competent draftsman can readily draft a claim to appear to be within one of the four categories of § 101.
The less useful characterization is that exclusions represent subject matter that is excluded by the terms of § 101. See Alappat, 33 F.3d at 1553 n.13, 31 USPQ2d at 1565 n.13 (Archer, C.J., concurring in part and dissenting in part) ("It is erroneous therefore to characterize, as the majority does, nonstatutory subject matter such as a mathematical algorithm as an "exception" to § 101. Defining patentable subject matter is the raison d'être of § 101."). "Laws of nature, physical phenomena and abstract ideas," if drafted as such (e.g., "I claim E=mc2"), do not fit within any of the statutory definitions because they do not have structure, as required by a "machine, manufacture, or composition of matter," and are not a series of steps, as required by a "process." Or, a claim to a series of steps might fit the dictionary definition of a process, but might be excluded from § 101 because it does not meet the definition of a statutory "process" as requiring a physical transformation of physical subject matter.
In my opinion, it is more correct that exclusions refer to subject matter that would otherwise be within one of the categories of § 101. Subject matter which does not fall within one of the categories of § 101 is nonstatutory for that reason and one does not need to get to the exceptions.
Machines and machine-implemented processes: The Federal Circuit's test in State Street Bank and AT&T
Pre-State Street
It is beyond the scope of this opinion to provide a comprehensive history of § 101. The Supreme Court cases of Parker v. Flook and Diamond v. Diehr are analyzed at length in the literature. See, e.g., 1 Patents § 1.03[6]. I focus primarily on certain § 101 issues as they developed in the Court of Customs and Patent Appeals (CCPA) and the Federal Circuit.
Early statutory subject matter issues were addressed under the "mental steps" doctrine, the "function of a machine" doctrine, or under the "method of doing business" exception. Although several cases discuss a "method of doing business" exception, no cases were ever held unpatentable on this basis. See State Street, 149 F.3d at 1375, 47 USPQ2d at 1603 ("The business method exception has never been invoked by this court, or the CCPA, to deem an invention unpatentable."). The "function of a machine" doctrine, which was applied to deny a process claim where the steps described the inherent function of the disclosed apparatus, was overruled in Tarczy-Hornoch. "The mental-steps doctrine was based upon the familiar principle that a scientific concept or mere idea cannot be the subject of a valid patent. The doctrine was regularly invoked to deny patents to inventions consisting primarily of mathematical formulae or methods of computation." (Citations and footnotes omitted.) Diamond v. Diehr, 450 U.S. at 195, 209 USPQ at 12 (Stevens, J., dissenting). Claims that were broad enough to cover being performed by a human using his mind, although they were capable of being performed by a machine, were rejected under the "mental steps" doctrine; see "Claims read on nonstatutory and statutory subject matter," infra. The CCPA held that claims limited to machines and machine-implemented processes were patentable subject matter, i.e., they were not subject to rejection under the "mental steps" theory. See In re Bernhart, 417 F.2d 1395, 163 USPQ 611 (CCPA 1969) (machine claims and machine‑implemented process claims do not fall within the "mental steps" exclusion); In re Mahoney, 421 F.2d 742, 745, 164 USPQ 572, 575 (CCPA 1970) (§ 112, second paragraph, and § 101 "mental steps" rejections overcome since the claims are limited to a machine implementation and "since the machine‑implemented process is clearly statutory."). The "mental steps" doctrine was in effect overruled in Musgrave, by limiting mental steps to steps incapable of being performed by a machine or apparatus. See Musgrave, 431 F.2d at 889‑90 and 889 n.4, 167 USPQ 287 & 287 n.4.
A rejection based on "mental steps" and "mathematical steps" was reversed in In re Benson, 441 F.2d at 687 & 688, 169 USPQ at 552 & 553 ("Claim 8 is for a method to be practiced in part on particular apparatus specified to be a 'reentrant shift register'" and did not include coverage of the process implemented by the human mind. Claim 13, which could be carried out with hardware or manually, was said to have no practical use other than the more effective operation of a digital computer, which was in the "technological arts."). Certiorari was granted and the Supreme Court reversed. Gottschalk v. Benson, 409 U.S. 63, 175 USPQ 673. The Court stated that "[t]he patent sought is on a method of programming a general‑purpose digital computer to [solve a mathematical algorithm]," 409 U.S. at 65, 175 USPQ at 674, and, thus, recast the statutory subject matter issue in terms of mathematical algorithms or abstract ideas, instead of the "mental steps" doctrine. Legal writers have noted at least five possible explanations for the holding. See, e.g., 1 Patents § 1.03[6][c]. Three of the reasons remain particularly relevant to process claims. First, the mathematical algorithm was to a principle, in the abstract, or a mental process, which "are not patentable, as they are the basic tools of scientific and technological work." Gottschalk v. Benson, 409 U.S. at 67, 175 USPQ at 675. The Court stated: "The conversion of BCD numerals to pure binary numerals can be done mentally .... The mathematical procedures can be carried out in existing computers long in use, no new machinery being necessary. And, as noted, they can also be performed without a computer." (Emphasis added.) Id. at 67, 175 USPQ at 675. The Court noted that "the 'process' claim is so abstract and sweeping as to cover both known and unknown uses ... [and] be performed through any existing machinery or future‑devised machinery or without any apparatus" (emphasis added), id. at 68, 175 USPQ at 675. This is considered a second reason in 1 Patents § 1.03[6][c], but I consider it part of the first reason related to claim breadth. The fact that the claims that are so broad as to read on being performed mentally (nonstatutory subject matter) as well as by a machine (possibly statutory subject matter) are nonstatutory is implicitly the "mental steps" doctrine. See section entitled "Claims that read on statutory and nonstatutory subject matter are unpatentable," infra; Diamond v. Diehr, 450 U.S. at 201 n.18, 209 USPQ at 14 n.18 (Stevens, J., dissenting) (commentators have suggested that the Court implicitly relied upon the mental steps doctrine and that the analysis in Benson was entirely consistent with the mental steps doctrine). The more accepted terminology today is that the claim is so broad that it is an "abstract idea" rather than "mental steps." The Court did not comment on the fact that claim 8 contained the structure of a "reentrant shift register," an element of all general purpose digital computers, whereas claim 13 did not recite any machine. Claim 8 is the reason why machine‑implemented mathematical algorithms were subsequently held to be nonstatutory.
Second, the method did not transform or reduce subject matter to a different state or thing. The Supreme Court stated that "[t]ransformation and reduction of an article 'to a different state or thing' is the clue to patentability of a process claim that does not include particular machines," 409 U.S. at 70, 175 USPQ at 676. As noted in Schrader, 22 F.3d at 295, 30 UPSQ2d at 1459‑60, the statement in Gottschalk v. Benson is imperfect because the subject matter transformed is not limited to objects and substances. Nevertheless, claim 13 clearly recites no structure and does not transform any physical subject matter, tangible or intangible; it only operates on binary coded decimal numbers. The fact that there is no physical transformation supports the first reason that the claims are so broad that they are directed to directed to an abstract idea rather than a practical application thereof.
Third, the Court stated the following "nutshell":It is conceded that one may not patent an idea. But in practical effect that would be the result if the formula for converting BCD numerals to pure binary numerals were patented in this case. The mathematical formula involved here has no substantial practical application except in connection with a digital computer, which means that if the judgment below is affirmed, the patent would wholly pre‑empt the mathematical formula and in practical effect would be a patent on the algorithm itself.
Gottschalk v. Benson, 409 U.S. at 71‑72, 175 USPQ at 676. I view this as related to the first point, that one cannot patent a principle or abstract idea, and that where a claim is so broad that it covers every "substantial practical application," this is "in practical effect would be a patent on the [abstract idea] itself" that would "preempt" others from using the principle. The Court seems to say that performing a mathematical algorithm on a digital computer could preempt every "substantial practical application." Thus, the fact that claim 8 was directed to a method performed on a computer, and not the mathematical algorithm per se as in claim 13, did not make it statutory.
Thus, Gottschalk v. Benson can be explained in terms of (1) the claims being so broad as to read on an abstract idea ("mental steps") as well as on a machine-implemented method; (2) the claims not meeting the transformation definition of a process; and (3) the claims, even if performed on a machine, were so broad as to cover every "substantial practical application" and "in practical effect would be a patent on the [abstract idea] itself." The Court did not hold that the claims were unpatentable because they covered a computer program.
Because claim 8 in Benson contained a "reentrant shift register," it was considered that machine-implemented processes would be nonstatutory if "patenting the 'machine process' in practical effect would be a patent on the algorithm itself." In re Waldbaum (Waldbaum II), 559 F.2d 611, 616, 194 USPQ 465, 469 (CCPA 1977). Most claims in the subsequent cases recited machine apparatus claims and machine-implemented process claims, probably because pre‑Gottschalk v. Benson case law held that such claims were patentable subject matter. The CCPA held that if the claim was directed essentially to a mathematical algorithm, even if the solution is for a specific purpose and was performed on a machine, the method was nonstatutory. See In re Christensen, 478 F.2d 1392, 178 USPQ 35 (CCPA 1973) (method of determining the porosity of subsurface formations in situ using mathematical formula held nonstatutory); Waldbaum II (method of operating a data processor using specific machine steps to calculate the relative numbers of 0s and 1s in a data word held nonstatutory); In re Richman, 563 F.2d 1026, 195 USPQ 340 (CCPA 1977) (method of calculating an airborne radar boresight correction angle based using actual terrain measurements in a radar held nonstatutory); In re de Castelet, 562 F.2d 1236, 1244, 195 USPQ 439, 446 (CCPA 1977) (machine method of generating a curve from data supplied to a computer for controlling a numerical control system type model forming means, including steps of "transforming the electrical signals" and "transmitting electrical signals ... from said computer to said model forming means," held nonstatutory: "We think the instant claims recite a process for solving a set of mathematical equations per se, the solution being a set of points along a curve, and not a process which merely uses equation solutions as one step in achieving some result other than solution of the equations."). Claims which only used the results of mathematical algorithms and did not include the mathematical algorithms itself were held to be statutory subject matter. See In re Deutsch, 553 F.2d 689, 692, 193 USPQ 645, 648 (CCPA 1977) ("Unlike the abandoned claims, which included formulae and algorithms, the claims on appeal are drawn to system‑operated methods in which system control is applied at less frequent intervals than those at which individual plant controls are applied.... Thus, the claimed invention lies in the timing and sequencing of control application, not in the control means ('[mathematical] optimization technique') itself."); Chatfield, 545 F.2d at 158, 191 USPQ at 736 ("Chatfield's independent claims contain neither a mathematical formula nor a mathematical algorithm. Mathematical algorithms appear only in the dependent claims and do not themselves constitute the method per se.").
The application of Gottschalk v. Benson was initially considered to be limited to method claims. See In re Noll, 545 F.2d 141, 149, 191 USPQ 721, 727 (CCPA 1976) ("We conclude that Benson must be limited to method claims such as those presented in that case."). Practitioners started drafting claims in means-plus-function format as apparatus claims to avoid a mathematical algorithm rejection. Eventually, in In re Freeman, 573 F.2d 1237, 197 USPQ 464 (CCPA 1978), the CCPA adopted Judge Rich's viewpoint (based on a line of dissenting opinions) that the form of the claim is often an exercise in drafting and is not determinative. See In re Johnson, 589 F.2d 1070, 1077, 200 USPQ 199, 206 (CCPA 1978) ("[Judge Rich's] viewpoint was adopted by this entire Court in In re Freeman"); Diamond v. Diehr, 450 U.S. at 202‑03, 209 USPQ at 14‑15 (Steven, J., et al. dissenting) (discussing dissenting opinions below). However, to the best of my knowledge, only apparatus claims in means-plus-function format were ever held to be nonstatutory subject matter. Under the interpretation of 35 U.S.C. § 112, last paragraph, that was applied by the PTO (and, it seems, by the CCPA) at the time, means-plus-function limitations in ex parte prosecution were broadly construed to cover any and every means for performing the function and, thus, claims in "means for" format were considered equivalent to a process. See Freeman, 573 F.2d at 1247, 197 USPQ at 472 ("[I]f allowance of a method claim is proscribed by Benson, it would be anomalous to grant a claim to apparatus encompassing any and every 'means for' practicing that very method."); In re Maucorps, 609 F.2d 481, 486, 203 USPQ 812, 816 (CCPA 1979) ("As admitted by appellant at oral argument, method claims drawn to the steps performed by appellant's 'means' would be non‑statutory and an attempt to claim appellant's algorithms in their application to a model of a sale organization.... That 35 U.S.C. § 112 authorizes the claiming of 'means for' performing a function cannot rescue appellant's claims from the requirements of § 101, because § 112 does not authorize the claiming of apparatus entirely in terms of 'means for' performing a non‑statutory method."); In re Sherwood, 613 F.2d 809, 817 n.9, 204 USPQ 537, 545 n.9 (CCPA 1980) ("In Freeman, for the purpose of testing compliance with § 101, process and 'means for' claims were treated in the same manner. We do the same here."); Walter, 618 F.2d at 768, 205 USPQ at 408 (discussion of "The 'Means For' Apparatus Claims"); Pardo, 684 F.2d at 916 n.6, 214 USPQ at 677 n.6; In re Abele, 684 F.2d 902, 909, 214 USPQ 682, 688 (CCPA 1982) ("[W]e see no basis for treating [appellants'] apparatus claims [in 'means for' format] differently from their method claims."); and Meyer, 688 F.2d at 795 n.3, 215 USPQ at 198 n.3. The structure corresponding to the means limitations in all these cases was apparently a general purpose computer. The PTO's treatment of claims in means-plus-function format as process claims was criticized in Iwahashi, 888 F.2d at 1375 n.1, 12 USPQ2d at 1912 n.1 and Alappat, 33 F.3d at 1545 n.25, 31 USPQ2d at 1558 n.25, and the district court's treatment of claims in means-plus-function format as process claims was found to be error in State Street, 149 F.3d at 1371, 47 USPQ2d at 1599; however, the Federal Circuit in these three cases did not mention, distinguish, or overrule the similar treatment in Freeman, Maucorps, Sherwood, Walter, Pardo, Abele, and Meyer.
Starting with Freeman, the CCPA developed a more formal two‑part test for statutory subject matter which eventually became known as the Freeman-Walter-Abele test, referring to the test in Freeman, as modified by Walter and Abele. Step one of the two‑part test was to determine whether a mathematical algorithm was present. Step two was eventually modified to require "no more than that the algorithm be 'applied in any manner to physical elements or process steps,' provided that its application is circumscribed by more than a field of use limitation or non‑essential post‑solution activity. Thus, if the claim would be 'otherwise statutory,' albeit inoperative or less useful without the algorithm, the claim likewise presents statutory subject matter when the algorithm is included." (Citation omitted.) Abele, 684 F.2d at 907, 214 USPQ at 686. If no mathematical algorithm was present, it was not necessary to get to the second step, and the subject matter was statutory. See Freeman, 573 F.2d at 1246, 197 USPQ at 471 (Using a computer to typeset alphanumeric information: "The method claims here at issue do not recite process steps which are themselves mathematical calculations, formulae, or equations."); In re Toma, 575 F.2d 872, 877, 197 USPQ 852, 856‑57 (CCPA 1978) ("Translating between natural languages is not a mathematical problem as we understand the term to have been used in Benson."); In re Phillips, 608 F.2d 879, 883, 203 USPQ 971, 975 (CCPA 1979) ("Our analysis of the claims on appeal reveals no recitation, directly or indirectly, of an algorithm in the Benson and Flook sense."); Pardo, 684 F.2d at 916, 214 USPQ at 676 ("Applying the first part of the Freeman analysis to the appealed claims, we are unable to find any mathematical formula, calculation, or algorithm either directly or indirectly recited in the claimed steps of examining, compiling, storing, and executing."). It was not always easy to determine whether the claim directly or indirectly recited a mathematical algorithm.
Once a mathematical algorithm was found, directly or indirectly, the second part of the test was applied. These cases illustrate the difficulty in defining a statutory process. Several cases find statutory subject matter based on the physical transformation of tangible materials or intangible electrical signals representing a physical thing. See Johnson, 589 F.2d 1070, 200 USPQ 199 (claims reciting methods for producing an output trace which is different from, and an enhancement of, an input seismic trace were statutory); Sherwood, 613 F.2d at 819, 204 USPQ at 546 ("The claimed invention, contrary to the solicitor's arguments, converts one physical thing into another physical thing just as any other electrical circuitry would do."); Diamond v. Diehr, 450 U.S. at 192‑93, 209 USPQ at 10 ("That respondent's claims involve the transformation of an article, in this case raw, uncured synthetic rubber, into a different state or thing cannot be disputed.... Industrial processes such as this are the types which have historically been eligible to receive the protection of our patent laws."); In re Taner, 681 F.2d 787, 790, 214 USPQ 678, 681 (CCPA 1982) ("Appellants' claimed process involves the taking of substantially spherical seismic signals obtained in conventional seismic exploration and converting ('simulating from') those signals into another form, i.e., into a form representing the earth's response to cylindrical or plane waves. Thus the claims set forth a process and are statutory within § 101."); Abele, 684 F.2d 902, 214 USPQ 682 (claim 5 directed to calculation of number and display of the result was nonstatutory, whereas claim 6, which depended from claim 5 and stated that the data was "X‑ray attenuation data produced in a two dimensional field by a computer tomography scanner," was statutory because it required a CAT‑scan process); Arrhythmia Research Tech., Inc. v. Corazonix Corp., 958 F.2d 1053, 1059, 22 USPQ2d 1033, 1038 (Fed. Cir. 1992) ("These claimed steps of 'converting', 'applying', 'determining', and 'comparing' are physical process steps that transform one physical electrical signal into another. The view that 'there is nothing necessarily physical about 'signals' is incorrect.").
Other cases find no physical steps or that the physical steps were insufficient to define statutory subject matter. See In re Gelnovatch, 595 F.2d 32, 41‑42, 201 USPQ 136, 145 (CCPA 1979) (claims to a "computer method": "But, where, as here, the claims solely recite