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Monthly Archives: November 2014

IP Law for Startups: A Primer Presentation

An Article in Schott, P.C.’s IP Law For Start-ups Series
By Stephen B. Schott

I gave this short presentation at the University of Pennsylvania’s Wharton School this past week. The idea was to introduce the students to the IP issues they may see at the beginning of their startup cycle, and only briefly touch upon the IP issues they might see at the end.

If you have questions, contact me.

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Older Supreme Court Cases Provide Guidance for Determining Patentable Subject Matter Post Alice

By Stephen B. Schott

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The question on almost every patent attorney’s mind these days is: “What is patentable subject matter in the aftermath of the Supreme Court case of Alice Corp. v. CLS Bank?” Because it is so recent, there is not yet a body of case law applying the two-part Alice test and finding claims to contain patentable subject matter. And until that body of case law forms, patent attorneys feel adrift on how to advise their clients and proceed before the USPTO.

But where the Supreme Court sets patent attorneys to sea, it also provides guidance in the form of its older cases discussing patentable subject matter. For example, at least twice in the software era, the Supreme Court took up the question of what is patentable subject matter and found inventions that met the statutory requirement. One case dealt with the creation of a microorganism and is not as relevant to the Alice case. Looking at the second case, however, may give guidance for how to proceed in the wake of Alice. And even in those cases where the Court found that something was not patentable, there may be clues as to how to argue for patentability post-Alice.

Diamond v. Diehr: Patentable subject matter? Yes

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The Diehr patent application (later US patent 4,344,142) claimed a method for determining how rubber should be heated in order to be best cured. The application’s claims use a computer to calculate and control the heating times for the rubber and includes steps relating to heating rubber and removing the rubber from the heat. The calculation steps are a mathematical algorithm containing a timing procedure that was the invention’s novel feature.

The Diehr claim reads as follows:

1.  A method of operating a rubber-molding press for precision molded compounds with the aid of a digital computer, comprising:

providing said computer with a database for said press, including at least,

natural logarithm conversion data (ln),

the activation energy constant (C) unique to each batch of said compound being molded, and

a constant (x) dependent upon the geometry of the particular mold of the press,

initiating an interval timer in said computer upon the closure of the press for monitoring the elapsed time of said closure,

constantly determining the temperature (Z) of the mold at a location closely adjacent to the mold cavity in the press during molding,

constantly providing the computer with the temperature (Z),

repetitively calculating in the computer, at frequent intervals during each cure, the Arrhenius equation for reaction time during the cure, which is

ln v = CZ + x where v is the total required cure time,”

repetitively comparing in the computer at said frequent intervals during the cure each said calculation of the total required cure time calculated with the Arrhenius equation and said elapsed time, and

opening the press automatically when a said comparison indicates equivalence.

The Supreme Court found that the claimed process was not merely a mathematical algorithm but was a process for molding rubber, and hence patentable. Thus, tying the algorithm to a process was the point on which the patent’s subject matter eligibility turned.

Takeaway. The patent practitioner should take the language of the Court and use it at the USPTO. In particular, this quote from Diehr may be helpful: “[W]hen a claim containing a mathematical formula implements or applies that formula in a structure or process which, when considered as a whole, is performing a function which the patent laws were designed to protect (e.g., transforming or reducing an article to a different state or thing), then the claim satisfies the requirements of § 101.”

This “transform” bit is a reference to the somewhat maligned but still alive and well transformation part of the “machine or transformation” test for patentable subject matter eligibility. If you’re up against the USPTO, you might argue that your algorithm or software process results in a specific transformation (protectable under the law), and recite the Supreme Court case of Diehr to support your argument.

The Diehr case creates a safe harbor in the storm of post-Alice uncertainty by tying claims to the solution of a technological problem.  Any such tie avoids the pure mathematical statements, economics and finance formulas, and schemes of a non-technical character (“methods of organizing human activity”) that the Supreme Court identifies as “abstract ideas” that must be include additional elements to achieve patent eligibility.

Parker v. Flook: Patentable subject matter? No

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The Flook claims recited a method for monitoring the operation of a catalytic converter for hydrocarbon production by collecting data and applying an algorithm to the data to update an alarm value. The algorithm was well-known but its application to this field of use was not.

Because the Court determined that the algorithm was well-known and thus its application in the claimed field of use was akin to patenting a mathematical principal, the claims were not patentable subject matter.

Takeaway. The Court left a small trail of breadcrumbs to patentability in this quote, and this is what should form the basis for arguments for patentability in post-Alice arguments: “Even though a phenomenon of nature or mathematical formula may be well known, an inventive application of the principle may be patented. Conversely, the discovery of such a phenomenon cannot support a patent unless there is some other inventive concept in its application.”

Thus, a savvy applicant or patentee should focus arguments for patentability around the presence of an “inventive concept in the claims.”

Bilski v. Kappos: Patentable subject matter? No.

Bilski’s claims recited a method for managing risk in financial transactions. Claim 1 recited the following steps.

(a) initiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumers purchase said commodity at a fixed rate based upon historical averages, said fixed rate corresponding to a risk position of said consumers;

(b) identifying market participants for said commodity having a counter-risk position to said consumers; and

(c) initiating a series of transactions between said commodity provider and said market participants at a second fixed rate such that said series of market participant transactions balances the risk position of said series of consumer transactions.”

The Court rejected the “machine or transformation” test as the sole test for patentable subject matter. It stated that this test was useful but not the only measure of patentable subject matter. The Court then went on to invalidate the claims as unpatentable, but not by applying the machine or transformation test exclusively.

Takeaway. In discussing patentable subject matter, the Court stated that “Section 101 is a ‘dynamic provision designed to encompass new and unforeseen inventions.’” An applicant or patentee should use this quote and drive home the newness of a claimed invention when arguing that it contains patentable subject matter. And to the extent that the USPTO or a Court describe a claim as unpatentable because it’s a business method, Bilski forbids any such conclusion noting that “But what [35 USC] Section 273 does is clarify the understanding that a business method is simply one kind of “method” that is, at least in some circumstances, eligible for patenting under §101.”1 This is a quote to lead with when arguing the patentability of any business method claim—even though it arose in a case where a business method claim was found not to be patentable subject matter.

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1. The Court was referring to an earlier version of 35 USC Section 273 that specifically mentioned business method patents but its conclusion is still true, as the more recent version of the statute expanded the statute’s application.