1. In re Bilski (Fed Cir. 2008) Patentable subject matter In re Bilski (Fed Cir. 2008) Patentable subject matter December 2, 2008 John King Ron Schoenbaum Lauren Keller Katzenellenbogen John King Ron Schoenbaum Lauren Keller Katzenellenbogen

2. © 2008 Knobbe Martens Olson & Bear LLP2 2 Bilski – patentable subject matter Background on business method patents:  § 101: Patentable subject matter = “any new and useful process, machine, manufacture, or composition.”  1981: Supreme Court identifies three categories of unpatentable subject matter: laws of nature, natural phenomena, and abstract ideas. Diamond v. Diehr.  1998: Federal Circuit decides “State Street”  Articulates “useful, concrete and tangible result” test

3. © 2008 Knobbe Martens Olson & Bear LLP3 Bilski – patentable subject matter  2008: CAFC decides to hear In re Bilski en banc, and poses 5 questions, including:  Whether a process “must result in a physical transformation of an article or be tied to a machine” to be eligible.  Whether State Street should be overruled in any respect. 3

4. © 2008 Knobbe Martens Olson & Bear LLP4 Bilski – patentable subject matter Overview of decision:  Confirms that no “business methods exception” to § 101 exists.  Overrules State Street’s “useful, concrete and tangible result” test.  Articulates new “machine or transformation” test. 4

5. © 2008 Knobbe Martens Olson & Bear LLP5 Bilski – patentable subject matter Machine-or-transformation test:  § 101 is satisfied if claimed process:  Is “tied to a particular machine,” or  Transforms an article.  Opinion gives very little guidance on what “tied to a particular machine” means.  Transformation prong satisfied by manipulation of data representing a physical article 5

6. © 2008 Knobbe Martens Olson & Bear LLP6 Bilski – patentable subject matter Can business methods that do not involve a computer be patented after Bilski? 6

7. © 2008 Knobbe Martens Olson & Bear LLP7 Bilski – patentable subject matter Can business methods that do not involve a computer be patented after Bilski? Answer: rarely, if ever 7

8. © 2008 Knobbe Martens Olson & Bear LLP8 Bilski – patentable subject matter Will Bilski significantly change the way the USPTO examines patent applications? 8

9. © 2008 Knobbe Martens Olson & Bear LLP9 Bilski – patentable subject matter Will Bilski significantly change the way the USPTO examines patent applications? Answer: probably not 9

10. © 2008 Knobbe Martens Olson & Bear LLP10 Bilski – patentable subject matter May 15, 2008 memo to TC directors: “… the Office’s guidance to examiners is that a § 101 process must (1) be tied to another statutory class (such as a particular apparatus) or (2) transform underlying subject matter (such as an article or materials) to a different state or thing.” 10

11. © 2008 Knobbe Martens Olson & Bear LLP11 Bilski – patentable subject matter Is Bilski limited to business method patents? 11

12. © 2008 Knobbe Martens Olson & Bear LLP12 Bilski – patentable subject matter Is Bilski limited to business method patents? Answer: No 12

13. © 2008 Knobbe Martens Olson & Bear LLP13 Bilski – patentable subject matter The “particular machine” prong 13

14. © 2008 Knobbe Martens Olson & Bear LLP14 Bilski – “particular machine” prong Can a general-purpose computer serve as a “particular machine” under Bilski? 14

15. © 2008 Knobbe Martens Olson & Bear LLP15 Bilski – “particular machine” prong Can a general-purpose computer serve as a “particular machine” under Bilski? Answer: Almost definitely 15

16. © 2008 Knobbe Martens Olson & Bear LLP16 Bilski – “particular machine” prong 3 Reasons why a general purpose computer can be enough: 1.If more than a general-purpose computer is required, tens of thousands of patents will become invalid. 2.Bilski’s discussion of Benson strongly suggests that a “digital computer” can be a “particular machine.” 16

17. © 2008 Knobbe Martens Olson & Bear LLP17 Bilski – “particular machine” prong 3 Reasons why a general purpose computer can be enough: 3.The “machine-or-transformation” test is a proxy for determining whether the claim effectively preempts a “fundamental principle” (i.e., a natural phenomenon, law of nature, or abstract idea).  A fundamental principle will not be preempted merely because the claim requires no more than a general- purpose computer. 17

18. © 2008 Knobbe Martens Olson & Bear LLP18 Bilski – “particular machine” prong Is the mere recitation of a computer in a method claim enough? 18

19. © 2008 Knobbe Martens Olson & Bear LLP19 Bilski – “particular machine” prong Is the mere recitation of a computer in a method claim enough? Answer: Not always 19

20. © 2008 Knobbe Martens Olson & Bear LLP20 Bilski – “particular machine” prong Factors:  Does the claim require some non-trivial use of a computer?  Is the claim limited to some practical application?  Is the practical application recited in sufficiently narrow terms? 20

21. © 2008 Knobbe Martens Olson & Bear LLP21 Bilski – “particular machine” prong Will Bilski be extended to “system” and “computer-readable medium” claims? 21

22. © 2008 Knobbe Martens Olson & Bear LLP22 Bilski – “particular machine” prong Will Bilski be extended to “system” and “computer-readable medium” claims? Answer: Probably 22

23. © 2008 Knobbe Martens Olson & Bear LLP23 Bilski – “particular machine” prong Reasons:  Unless extended to system and CRM claims, Bilski will be easy to circumvent.  In State Street, CAFC emphasized that the focus should be on what applicant has invented, and not on the particular claim format used. 23

24. © 2008 Knobbe Martens Olson & Bear LLP24 Bilski – validity challenges Will Bilski be used to challenge the validity of existing business method patents during litigation? 24

25. © 2008 Knobbe Martens Olson & Bear LLP25 Bilski – validity challenges Will Bilski be used to challenge the validity of existing business method patents during litigation? Answer: Yes 25

26. © 2008 Knobbe Martens Olson & Bear LLP26 Bilski – Validity Challenges  Claims with minimal or no recitations of computer hardware will be the most vulnerable.  Prior to enforcement, consider using reissue process to add appropriate hardware language (if supported by specification). 26

27. © 2008 Knobbe Martens Olson & Bear LLP27 Practical Suggestions  Attempt to avoid the business method groups in the Patent Office.  Do not state in the patent application “a business method” or “a method of conducting business.” 27

28. © 2008 Knobbe Martens Olson & Bear LLP28 Practical Suggestions  Recent statistics indicate that you need to avoid the business method groups in the Patent Office.  Allowance rate of business method inventions is less than 20%.  Allowance rate of non-business method inventions is typically greater than 50%. 28

29. © 2008 Knobbe Martens Olson & Bear LLP29 Practical Suggestions  Include unique hardware to enhance the likelihood of being assigned to a different patent group.  Illustrate a hardware device in the first drawing.  Describe the hardware device in the abstract.  Draft the first patent claim so that it is directed to the hardware device. 29

30. © 2008 Knobbe Martens Olson & Bear LLP30 Practical Suggestions  Include unique hardware to enhance the likelihood of being assigned to a different patent group.  Focus on the method in a subsequent claim.  Consider adding method claims with a preliminary amendment after the application as been assigned to an Examiner in a non-business method group. 30

31. © 2008 Knobbe Martens Olson & Bear LLP31 Practical Suggestions  In the patent claims consider using the phrase “one or more computer processors.”  In the first patent claim consider also using the phrase “transforming data X into data Y.” 31

32. © 2008 Knobbe Martens Olson & Bear LLP32 Practical Suggestions  Make your first patent claim narrow and easy to understand.  Many Examiners do not read the patent application in detail. Instead, the Examiners tend to focus on the first patent claim.  Draft a first claim that is narrow and is in plain English.  Keep the number of claims to less than 20. 32

33. © 2008 Knobbe Martens Olson & Bear LLP33 Practical Suggestions  Conduct an in-person Examiner interview as soon as possible.  Meet with both the Examiner and his supervisor.  If you are assigned to the business method group, ask the Examiner whether you can make any amendments that would result in the assignment of the patent application to a different group. 33

34. © 2008 Knobbe Martens Olson & Bear LLP34 Practical Suggestions  When conducting the in-person Examiner interview:  If possible, communicate that you have a real business – show a prototype, discuss sales, etc.  Show your enthusiasm for the invention.  Determine whether the Examiner and his supervisor are willing to cooperate. 34

35. © 2008 Knobbe Martens Olson & Bear LLP35 Practical Suggestions  Consider filing a continuation application:  Obtaining an issued patent does not stop the process – you can obtain more.  One advantage is that you can seek a broader scope of protection in a continuation application.  The Examiner also tends to be more willing to negotiate. 35

36. Questions? John King Ron Schoenbaum Lauren Keller Katzenellenbogen John King Ron Schoenbaum Lauren Keller Katzenellenbogen