REINVENTING 35 U.S.C. 101 – BUT IGNORING THE PROBLEM – PART I

12.06.2017

By Lawrence Hoffman

Introduction:

One of the biggest issues in U.S. patent law today is patent eligibility. §101 of the Patent Act identifies four categories of things for which a patent can be granted, namely, new and useful processes, machines, manufactures, and compositions of matter. That sounds simple enough, and very broad, but in its decisions in patent cases, the U.S. Supreme Court has created three general exceptions within the four categories. These are inventions directed to laws of nature, natural phenomena (which include naturally occurring materials), and abstract ideas.

The Court carved out these exceptions, it has stated, to assure that patents do not preempt the basic tools of scientific and technological work and thereby hinder, rather than promote the progress of the useful arts as the U.S. Constitution requires.

Of course, for a legal principle to be useful, there must be a practical way to apply it to real-world situations. How, then, are we to determine if an invention is directed to one of these three exceptions?

What We Have to Work With Today:

Since Congress has given us no help here, the U.S. patent office and the courts have had to work this out by themselves. Not surprisingly, the matter ultimately reached the Supreme Court. In a series of cases culminating in Alice Corp. v. CLS Bank, the Court articulated a two-part test as follows:

First, we determine whether the claims at issue are directed to one of those patent-ineligible concepts. If so, we then ask, [w]hat else is there in the claims before us? To answer that question, we consider the elements of each claim both individually and as an ordered combination to determine whether the additional elements transform the nature of the claim into a patent-eligible application. We have described step two of this  analysis as a search for an ‘inventive concept—i.e., an element or combination of elements that is “sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.

This test has proved to be devilishly hard to apply in practice, especially so as to software-implemented inventions. Patent examiners and judges often react to such inventions almost automatically as being directed to abstract ideas and then struggle to apply the second part of the Alice test.

The most charitable way to describe the result is that it has been inconsistent. In truth, the current state of U.S. patent eligibility jurisprudence can best be described as a total mess. I have never seen or heard anything good said about it. There have even been arguments that §101 should be repealed altogether. The most positive thing I know that anyone has said is that the patent office and the courts are doing the best they can, given what they have to work with.

What Is Wrong With What We Have Now:

Ask any patent attorney or other stakeholder in the patent system, and you will get a litany of complaints about the Alice test. Some of these relate to implementation of the test. For example, there is no definition of “abstract idea”. I, for one, have never been able to understand when an idea is abstract and when it is not abstract.

Another complaint is that if an invention is directed to something ineligible, and fails the first part of the test, how can it logically include something more that will let it pass the second part of the test? In other words, what does “directed to” really mean? If it is applied to mean something like “that’s what is being claimed”, how can a claim fail the first part of the test, but pass the second part of the test? Did it really fail the first part after all?

Yet another common complaint is that the search for the “ something more “ is like chasing a black cat around a dark room. Describing this “a search for an ‘inventive concept” is particularly ironic as the Court has made clear on many occasions that application of §101 is completely separate from the other requirements for patentability, in particular, the requirement for non-obviousness in §103. In this connection, bear in mind that when the law was codified in 1952, §103 was created to replace what was previously the requirement for – you guessed it – inventiveness.

Then there is a second kind of complaint that relates to special interests. On one side, there are those who think that the test unduly narrows the scope of patent eligibility by making it too hard to patent software related inventions, and virtually impossible in the case of business method inventions. Often, China is cited as an example of a country which has a more pro-patent law, and the advocates of broader software eligibility say that by destroying its patent system, the U.S. is also destroying its place as the world’s technological leader.

On the other side, there are some who that think the test is so vague and difficult to apply that it lets through too many software related inventions. Indeed, there are some who do not think software of any kind should be subject to patent protection.

I don’t intend to get involved in a debate on the special interest issue. I have mentioned it only so you don’t think I am unaware of it.

However, there is an elephant in the room that has mostly been ignored, and to me, it is the biggest problem of all. Simply stated, neither §101 itself, nor the Alice test, and the cases on which it is based, takes proper account of the constitutional basis for granting patents, i.e., to promote the progress of the useful arts.

Help May Be On The Way – Some Recent Suggestions:

All that having been said, most practitioners and other would-be pundits think the Alice test needs to be replaced. Overwhelmingly, the method of choice for doing this is by amending § 101.

As I write this (in early June 2017), there are three proposals on the table for a revised §101. The first one, published in February came from the Intellectual Property Owners (IPO) group. At the end of March, the IP Law Section of the American Bar Association  presented a second proposal (the “ABA proposal”). And on May 12, the American Intellectual Property Law Association (AIPLA) came out with its own proposal.

Let’s look at the proposals side-by-side:

IPO PROPOSAL ABA PROPOSAL AIPLA PROPOSAL
(a) ELIGIBLE SUBJECT MATTER

Whoever invents or discovers, and claims as an invention, any useful process, machine, manufacture, composition of matter, or any useful improvement thereto, shall be entitled to a patent for a claimed invention thereof, subject only to the exceptions, conditions, and requirements set forth in this Title.

 

(a) Eligible Subject Matter.- Whoever invents or discovers any useful process, machine, manufacture, or composition of matter, or any useful improvement thereof, shall be entitled to obtain a patent on such invention  or discovery, absent a finding that one or more conditions or requirements under this title have not been met.

 

(a) Eligible Subject Matter.—Whoever invents or discovers any new and useful process, machine, manufacture, composition of matter, or any useful improvement thereof, shall be entitled to a patent therefor, subject only to the conditions and requirements set forth in this title.
101(b) SOLE EXCEPTION TO SUBJECT MATTER ELIGIBILITY

A claimed invention is ineligible under subsection (a) if and only if the claimed invention as a whole, as understood by a person having ordinary skill in the art to which the claimed invention pertains, exists in nature independently of and prior to any human activity, or exists solely in the human mind.

 

(b) Exception.- A claim for a useful process, machine, manufacture, or

composition of matter, or any useful improvement thereof, may be denied

eligibility under this section 101 on the ground that the scope of the exclusive rights under such a claim would preempt the use by others of all practical applications of a law of nature, natural phenomenon, or abstract idea. Patent eligibility under this section shall not be negated when a practical application of a law of nature, natural phenomenon, or abstract idea is the subject matter of the claims upon consideration of those claims

as a whole, whereby each and every limitation of the claims shall be fully considered and none ignored.

(b) Sole Exceptions to Subject Matter Eligibility.—A claimed invention is ineligible under subsection (a) only if the claimed invention as a whole exists in nature independent of and prior to any human activity, or can be performed solely in the human mind.

 

101(c) SOLE ELIGIBILITY STANDARD

The eligibility of a claimed invention under subsections (a) and (b) shall be determined without regard as to the requirements or conditions of sections 102, 103, and 112 of this Title, the manner in which the claimed invention was made or discovered, or the claimed invention’s inventive concept.

 

Eligibility under this section 101 shall not be negated based on considerations of patentability as defined in Sections 102, 103 and 112, including whether the claims in whole or in part define an inventive concept. (c) Sole Eligibility Standard.—The eligibility of a claimed invention under subsections (a) and (b) shall be determined without regard to the requirements or conditions of sections 102, 103, and 112 of this title, the manner in which the claimed invention was made or discovered, or whether the claimed invention includes an inventive concept.

 

 

All three proposals contain sub-parts (a) that largely follow present § 101 with only minor changes. The three proposals also include sub-parts (b) that define exceptions to what is stated in the respective sub-parts (a). The IPO and AIPLA proposals also contain sub-parts (c) to the effect that novelty, obviousness and full disclosure considerations (as stated in §§ 102, 103, and 112 of the law) are not to be taken into account in determining eligibility. The ABA proposal includes no sub-part (c) but has a section in sub-part (b) to the same effect.

The IPO and AIPLA proposals are not really different. However, I think the AIPLA’s use of the phrase “can be performed solely in the human mind” in sub-part (b) is better than the corresponding phrase “exists solely in the human mind” in the IPO version.

Do These Proposals Really Help:

All three are constructive steps forward, though each contains some wording I think is problematic. To me, however, they all seen to ignore the big problem by failing to take explicit account of the constitutional purpose of promoting the progress of the useful arts. f

The Small Problems:

The main problem I see with the IPO and AIPLA proposals is that neither addresses eligibility of inventions directed solely to laws of nature. It’s not clear why this was done; it’s hard to believe that either organization thinks that claims directed to laws of nature should be patent eligible.

Perhaps the concept was considered too vague. If so, an effort could have been made to formulate a workable definition.  The patent office in its Examination Guidelines on §101 has done so.

Perhaps it was thought that laws of nature are already covered by the  “exist in nature independently of and prior to any human activity” clause. If that was the issue, I still think it should have been mentioned specifically. In any event, I can think of no good reason that claims directed to things that exist in nature should be excluded from eligibility, but that claims directed to laws of nature should not be excluded.

The real difference is in how the exclusions are articulated in the ABA proposal. The ABA proposal only states a single exclusion based on preemption of free access to all the Supreme Court exclusions. For convenience, let me repeat sub-part (b) of the ABA proposal:

a claim…may be denied eligibility on the ground that the scope of the exclusive rights under such a claim would preempt the use by others of all practical applications of a law of nature, natural phenomenon, or abstract idea. Patent eligibility under this section shall not be negated when a practical application of a law of nature, natural phenomenon, or abstract idea is the subject matter of the claims upon consideration of those claims as a whole, whereby each and every limitation of the claims shall be fully considered and none ignored.

I think this approach is problematic because it seems to make denial of eligibility optional, because it suggests lack of a practical application as the sole criterion for invoking the exception, and because it refers to abstract ideas.

Perhaps use of the phrase “may be denied eligibility” is not intended to suggest that denial of eligibility should be optional. In that case, I think the wording should have been something like “shall be deemed ineligible to be patented”. On the other had if the intent was to make it optional, why create such an option without any suggestion as to how it should be implemented?

The ABA’s focus on practicality is a more serious problem. According to the American Heritage® Dictionary of the English Language, Fifth Edition defines the word “practical” as:

  1. Of, relating to, governed by, or acquired through practice or action, rather than theory or speculation
  2. Manifested in or involving practice
  3. Capable of or suitable to being used or put into effect; useful
  4. Concerned with the production or operation of something.

The first two clearly don’t provide anything helpful. The third one doesn’t seem to either; the current law (and sub-part (a) of the ABA proposal) already require utility. To me, the fourth one is no better than the “something more” requirement of the Alice test. There’s never been any doubt that manufacturing processes are patent eligible, but it’s hard to imagine a process claim (business method of otherwise) that doesn’t concern operation of something, if only a programmed general purpose computer.

Does the ABA intend all computer implemented inventions, including those that claim no more than a business method implemented on a general purpose computer, to be patent eligible? If so, I think they have made a mistake, despite what the Supreme Court has said. I am virtually certain that methods of commerce were not regarded as useful arts by the drafters of the Constitution, as I will explain below.

As to the reference to “abstract ideas”, I like the fact that it is not mentioned in other proposals. I have never understood the difference between an abstract idea and any other kind of idea.

The Really Big Problem:

`        Now we come to the main point of this article: In my opinion, to make a significant improvement in the law of patent eligibility, §101 needs to explicitly correlate patent eligibility of processes, as well as machines, manufactures and compositions of matter (other than those existing in nature) with the constitutional directive to promote the useful arts, as we understand that term in modern times. To put it simply, I think Congress did not take proper account of the constitutional directive when it drafted §101 in 1952 and that the Supreme Court has also failed to do so when it created the Alice test.

I think it is obvious that the “founding fathers” intended the Constitution to apply to situations that did not exist in the 18th Century and could not have been foreseen at the time. I think they also expected that, in applying the Constitution in future years, its words were to be interpreted according to how they themselves understood those words.

Why You Should Keep Reading:

At the risk of revealing the ending, so to speak, I will try to convince you that Congress should write the concept of technology explicitly into a revised §101. I propose to convince you first, by demonstrating what the founding fathers probably meant when they wrote about promoting the progress of useful arts and how the phrase “useful arts” is understood today.

Then, I will show that most of the eligibility problems arise in the context of process inventions, and particularly as to business methods, i.e., methods of commerce. I will also present arguments and supporting evidence that such methods were not considered to be useful arts when the Constitution was drafted. But because I believe that methods of commerce should not categorically be excluded from patent eligibility, I will show how reference to technology in a revised §101 provides a way in which an invention applicable to commerce can be constitutionally valid.

In the remainder of this part of the article, I will discuss the historical underpinnings and intended meaning of the IP Clause of the Constitution, the succession of patent laws as they dealt with patent eligibility, and the jurisprudence leading up to the 2010 decision in Bilski v. Kappos in which patent eligibility of business method patents was first addressed by the Supreme Court.

In the second part, I will address Bilski v. Kappos itself and the problems it and the subsequent Mayo Collaborative Services v. Prometheus Laboratories, Inc. and Alice cases created for the U.S. Patent and Trademark Office and the courts by failing to address the constitutional basis for patent law. I will conclude with my suggestions for how to improve the existing proposals to bring their treatment of process inventions into conformity with the Constitutional imperative, and the reasons for my suggestions.

How It All Began:

The origin of granting monopolies to reward innovation is obscure. There is some evidence that the idea originated in ancient Greece or even in ancient China. The first well-documented examples of patents for inventions in modern times may be found in fifteenth-century Venice where patents were granted to artisans working in the glassmaking industry for which the area was renowned. The concept was spread to the rest of Europe by Venetian expatriates.

In 14th Century England, limited duration monopolies were already being granted by the Crown to reward innovators and entrepreneurs who brought technology into the country from abroad. Such royal grants were not subject to judicial oversight and over the years, abuses arose in the form of rewards for loyalty and as a method of generating revenue for the royal treasury without direct taxation. By the early 17th Century, the system had become so corrupt that parliament enacted the 1624 Statute of Monopolies. This essentially did away with the royal prerogative but formalized the granting of patents for inventions.  At the time, however, inventions were still considered to include actual innovation as well as importation of technologies from abroad.

In the U.S., the power of Congress to reward authorship and encourage innovation arose out of proposals by Charles Pinckney and  James Madison during the Constitutional Convention in August 1787. The proposal regarding innovation (by Madison) was to “encourage. . . the advancement of useful knowledge and discoveries”. The Pinckney and Madison proposals were combined by a drafting committee and resulted in what is generally called the copyright or IP clause of Article 1, Section 8 of the Constitution. This grants Congress the power “to promote the progress of science and useful arts by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries”. There is reportedly no record to explain how or why Madison’s original wording morphed into the adopted provision.

Be that as it may, to understand the meaning of this provision, we need to know what the terms “science” and “useful arts” meant at the time. Once we get past that, we probably should consider if the drafters meant to associate “science” exclusively with “authors” and “useful arts” exclusively with “inventors” or if inventors can also promote the progress of science.

Today, when we talk about science, we mean something like:

the systematic study of the nature and behavior of the material and physical universe, based on observation, experiment, and measurement, and the formulation of laws to describe these facts in general terms. (Collins English Dictionary – Complete and Unabridged, 12th Edition 2014 © HarperCollins Publisher)

However, in the 18th century, science simply meant knowledge. The word comes from the Latin word scientia. That more comprehensive meaning is almost surely what the drafters of the Constitution had in mind.

But what about useful arts? The Oxford Living Dictionary defines this as “industrial arts” and characterizes the term as “historical”.

A Wikipedia article states that the term refers to “the skills and methods of practical subjects such as manufacture and craftsmanship”. The phrase is said to have “gone out of fashion, but it was used during the Victorian era and earlier as an antonym to distinguish such arts from the performing art and fine art“. That sounds a lot like Madison’s “useful knowledge and discoveries”.

It also sounds like what we would to refer to now as “technology”:

  1. The application of science, especially to industrial or commercial objectives.
  2. The scientific method and material used to achieve a commercial or industrial objective. (American Heritage® Dictionary of the English Language, Fifth Edition. Copyright © 2016)

That alone, I believe, is enough to demonstrate that methods of commerce were not intended to be included in the useful arts, but if that’s not enough for you, consider the fact that Art. 1 Sec. 8 includes a separate clause giving Congress the power to “regulate commerce”. That clause is the basis for trademark law and the antitrust laws which are directed against monopolies and attempts to monopolize.

Logically, too, if skills and methods associated with practical subjects such as manufacture and craftsmanship are useful arts (or “technology”, if you will), so must also be the results of such skills and methods to permit patents for machines, manufactures and compositions of matter. That inclusiveness is actually reflected in the organization of the U.S. Patent Office: applications are distributed for examination to Technology Centers according to classification of subject matter, and within a Technology Center, to subgroups called “Art Units”.

Scholarly Research:

Is there any thorough research into a historical basis to determine if methods associated with commerce are useful arts? The Wikipedia article noted above cites a letter from George Washington to Marquis de Lafayette dated Jan. 29, 1798, in which he distinguished commerce from useful arts by stating:

While our commerce has been considerably curtailed for want of that extensive credit formerly given in Europe, and for default of remittance; the useful arts have been almost imperceptibly pushed to a considerable degree of perfection.

While we can view his characterization of the useful arts having reached perfection with benign amusement today, the distinction Washington makes certainly suggests, if not demonstrates, that in those times, methods of commerce, i.e., business methods, were not regarded as part of the “useful arts.”

A scholarly study that strongly supports the view that business methods were not regarded as useful arts at the time the Constitution was drafted is The Multiple Unconstitutionality of Business Method Patents: Common Sense, Congressional Choice, and Constitutional History by Malla Pollack, originally published in 2002 at  28 Rutgers Computer & Tech. L.J. 61. The article may be found here.

Pollack’s paper seems very well researched with 244 references, many contemporary with the events discussed. The paper relies in part (as does almost everything written on this subject) on the English Statute of Monopolies, by which  Parliament effectively put an end to the royal power to grant of commercial monopolies. At the same time, however, it validated the power to grant “letters patent” for inventions of new manufactures for up to 14 years.

Interestingly, Washington’s letter noted above is not cited in the Pollack paper but she does rely on Edward C. Walterscheid, To Promote the Progress of Useful Arts: American Patent Law and Administration, 1798-1836, William s Hein & Co., 2000, and on his The Nature of the Intellectual Property Clause: A Study in Historical Perspective.

Walterscheid is generally acknowledged as the preeminent source on the early history of U.S. patent law. I have not had access to either of his books, but I have seen no suggestion or argument that Walterscheid regarded commerce as within the useful arts

The literature is replete with economically-based and philosophical arguments that business methods, and even abstractions, should be patent eligible, some with non-historical documentation, and some with no real documentation at all. Nevertheless, though my research has not been exhaustive, I have not encountered a convincing study based solely on historical sources demonstrating that methods of commerce were or could likely have been understood by the drafters of the Constitution to be within the useful arts.

History as Reflected By U.S. Patent Office Practice and Court Decisions:

Under the constitutional system of separation of powers, an Act of Congress  is presumed to be constitutional unless the Supreme Court says otherwise. Congress, of course, may then choose to amend the law accordingly.

Likewise, subject to further congressional action, an Act of Congress is to be interpreted by the Executive Branch and the lower courts according to the decisions of the Supreme Court. This principle of judicial review was articulated in 1803 in the case of Marbury v. Madison.

Therefore, if we are to make credible suggestions for improving the patent system, we need to be aware of what we are trying to improve, in this instance, the Court’s §101 jurisprudence. We also need to look at how the Patent Office and the lower courts interpreted patent law over the years.

Available records indicate that early patents related to commerce were not directed to methods of conducting commerce, but to solving technical problems such as creating banknotes resistant to counterfeiting. There were some exceptions, but patents directed to actual methods of commerce did not fare well in the courts.

Actually, the abstract idea-naturally occurring substance-law of nature triad of exclusions to patent eligibility was well established in the 1800’s. In 1852, in Le Roy v. Tatham, the Court stated “A principle, in the abstract, is a fundamental truth; an original cause; a motive; these cannot be patented, as no one can claim in either of them an exclusive right.” In 1874, in Rubber-Tip Pencil Co. v. Howard, the Court further stated “[a]n idea, of itself, is not patentable.”

And more recently, in 1948, in Funk Bros. Seed Co. v. Kalo Co., the Court stated, “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.”

The first modern Supreme Court decision on process patent eligibility was in 1972 in Gottschalk v. Benson. The case involved a method for programming a general-purpose digital computer to convert binary-coded decimal numerals into pure binary numerals. The claims were not directed to any practical application, i.e., end use or to implementation by any specific apparatus. In fact the claims just recited the algorithm itself. The only apparatus mentioned was in one claim which called for part of the process to be performed using a shift register.

The case came to the Court from a final rejection that had been reversed by the Court of Customs and Patent Appeals (CCPA), the predecessor of the present Court of Appeals for the Federal Circuit (CAFC).The Supreme Court reversed, holding essentially that a patent on an algorithm would cover the idea, and not a practical use of the idea and would therefore wholly pre-empt practical application of the mathematical formula. However, patent eligibility of processes using machines or involving materials was expressly acknowledged.

The Court based its decision on the Nineteenth Century and early Twentieth Century cases mentioned above that had already articulated the judicial exceptions to the four categories of patent eligible subject matter, including cases concerning processes.

The algorithm issue arose again in 1978 in the case of Parker v. Flook. Again, the case arose out of a final rejection that had been reversed by the CCPA. The application related to a known process for controlling a petrochemical reaction by updating process alarm limits. The application’s innovation was reliance on a new mathematical algorithm. In Flook, the Court again held the invention was not a patentable “process.”

The claims at issue, unlike the algorithm claims in Benson, were limited to a particular application, so that use of the algorithm in other applications was not preempted. Nevertheless, the Court rejected “[t]he notion that post-solution activity” (an unfortunately fuzzy term apparently intended to refer to eligible elements of the claimed process), can transform an unpatentable principle into a patentable process.” The Court concluded that the process at issue there was “unpatentable under §101, not because it contain[ed] a mathematical algorithm as one component, but because once that algorithm [wa]s assumed to be within the prior art, the application, considered as a whole, contain[ed] no patentable invention.”

Can anybody tell me what the Court was thinking here? Surely it was not saying that combinations of known elements are categorically unpatentable.

The next §101 decision was in 1980 in Diamond v. Chakrabarty in which it held that a genetically engineered bacterium that did not exist in nature  was patent eligible. It is therefore not particularly relevant to the problem at hand.

Going back to the process claim issue, if you think you understand what the Court was saying in Flook, consider what happened in 1981 in Diamond v. Diehr. The application in Diehr claimed a previously unknown method for “molding raw, uncured synthetic rubber into cured precision products,” using a mathematical formula to complete some of its several steps by way of a computer. The Court reversed a final rejection, explaining that “an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection.” Diehr emphasized the need to consider the invention as a whole, rather than “dissect[ing] the claims into old and new elements and then … ignor[ing] the presence of the old elements in the analysis.” Finally, the Court concluded that because the claim was not “an attempt to patent a mathematical formula, but rather [was] an industrial process for the molding of rubber products,” it fell within §101’s patentable subject matter.

Flook and Diehr both involved use of previously unknown mathematical procedures in control of industrial processes. Both appear to have passed muster under §101 and the claims, when considered as a whole were directed to a novel process. So why did Diehr get a patent and Flook did not? The Court attempted to explain the difference by saying that Flook stands for the proposition that the prohibition against patenting abstract ideas “cannot be circumvented by attempting to limit the use of the formula to a particular technological environment” or adding “insignificant post-solution activity.” Oh, sure, now I understand. Right.

In my view, while the Court seems to have gone out of its way to avoid expressly overruling Flook, it did so for all practical purposes.

None of the Benson-Flook-Diehr triad involved a business method. The claims in Benson were directed solely to what we would call an abstract idea under the first part of the Alice test. Under Alice, I don’t think a court would even get to the second part of the test in either Flook or Diehr.

In Part II, we will what happened when the CAFC and the Supreme Court finally addressed the business method question.

About the author: Larry Hoffman has a B.S. in Electrical Engineering and Comp. Sci. from Massachusetts. Institute of Technology and a J.D. from the George Washington University School of Law. He has been a lawyer since 1965 specializing in IP law and product liability defense. He is registered to practice before the U.S. PTO, the U.S. Court of Appeals for the Federal Circuit and the state and federal courts in New York, Maryland, and the District of Columbia. His work has included preparation and prosecution of patents in countries throughout the world, and counseling on IP and product safety matters. He has been involved in the trial of close to 100 lawsuits of various kinds. You can reach him at Lawrence@ipatent.co.il.

 

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