May 5, 2008

In re BilskiGlenn J. Perry, Director

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In re Bilski (Fed. Cir 2007-1130)

Chronology�

�US Application 08/833,892�Claims 1-11 finally rejected under 35 U.S.C. § 101 as non-statutory

� April 3, 2003 BPAI hearing � no decision

� March 8, 2006 BPAI Hearing Appeal No. 2002-2257

� September 6, 2006 BPAI decision affirming final rejection

� October 1, 2007 oral argument before a panel of the CAFC

� Feb. 15, 2008 CAFC orders en banc rehearing and

requests answers to five(5) specific questions relating to 35

U.S.C. §101 (patent eligible subject matter)

� March 6, 2008 Supplemental briefs deadline

� April 5, 2008 Amicus Briefs deadline

� May 8, 2008 scheduled CAFC oral argument

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35 U.S.C. § 101 BACKGROUND

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Foundations of §101

Patent Act 1952

� 35 U.S.C. §101. Inventions patentable

Whoever invents or discovers any new and

useful

� process, �------ (focus of in re Bilski)

� machine,

� manufacture,

� or composition of matter, or any new and

useful improvement thereof, may obtain a

patent therefore, subject to the conditions and

requirements of this title.

� Legislative Report: ��anything under the sun�7

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Anything under the sun ?

�����

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�����

Not Quite

35 USC §101- What does it mean?

� The courts and the

USPTO Board of Patent

Appeals and

Interferences (BPAI)

have views on what this

section of the law

means.

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COMPUTERS AND ALGORITHMS

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Computer and Algorithm Cases

� Gottschalk v. Benson (S. Ct. 1972) � no

patent, BCD to pure binary; patent claim can�t

wholly preempt an algorithm

� Parker v. Flook (1978) � updating an alarm

limit � applications claiming algorithm can only

claim a practical application of the algorithm

� Diamond v. Chakrabarty (S. Ct. 1980)

� Diamond v. Diehr (S. Ct. 1981) � claim must

be directed to practical and definite application

with a useful result (cure rubber)

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Computer and Algorithm Cases

� Arrhythmia (CAFC 1992) � Congress never

put limits on process of 101.

� In re Alappat (CAFC 1994) � rasterizer �

useful, concrete & tangible (UCT) result

� AT&T v. Excel (CAFC 1999) � claim directed

to a process requires no physical

transformation. Claimed algorithm tied to a

telephone system (physical tie in), UCT result

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Computer Case Principles

� In Benson, Flook, and Diehr, the Supreme

Court set forth basic principles that govern the

patentability of process claims. The principles

articulated in the Supreme Court�s trilogy,

although applied in those cases to computer-

related claims, actually long predate them and

have their roots in the foundations of the

patent system.

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Computer Case Principles

� Benson, Flook, and Diehr make clear that

these long-settled principles continue to apply

as technology changes and evolves.

� Supreme Court has required that the claimed

steps be defined in terms of physical effects or

operations, specifically, that the steps be tied

to the use of a specific apparatus or effect the

transformation or reduction of subject matter

to a different state or thing.

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Computer Case Principles

� This understanding of �process,� as used in

§ 101, as fundamentally physical in nature

places that category of patentable subject

matter on the same footing as the other

Section 101 categories -- machine,

manufacture, composition of matter -- all of

which are physical by definition.

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BUSINESS METHOD PATENTS

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� Hub and spoke fund management

(1998)

� Court says: No business method

exception.

� 101 is �first door�.

� Flood gates opened.

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Business Methods � 10 years

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�one click�

�name your price�

1988

� Recent years � backlash against

�business method patents� in

popular press.

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USPTO GUIDELINES - 2005

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2005 USPTO Interim Guidelines �

patent subject matter eligibility

� 1300 O.G. 142, posted Oct. 26, 2005, OG Notice Nov. 22,

2005

� Provided guidance to Examiners based on USPTO

interpretation of binding case law

� Judicial Exceptions:� 1) abstract idea

� 2) law of nature

� 3) Natural phenomenon

� Patent Eligible if

� Practical application, and

� Physical transformation, or Useful, concrete & tangible

(UCT) result

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ENTER BILSKI

A LITTLE COMMODITIES

TRADING HISTORY

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Commodities Trading History

� First recorded instance of futures trading occurred with rice in

17th Century Japan, there is some evidence that there may

also have been rice futures traded in China as long as 6,000

years ago.

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� Futures trading is a natural outgrowth of the problems of

maintaining a year-round supply of seasonal products like

agricultural crops. In Japan, merchants stored rice in

warehouses for future use. In order to raise cash, warehouse

holders sold receipts against the stored rice. These were

known as "rice tickets." Eventually, such rice tickets became

accepted as a kind of general commercial currency. Rules

came into being to standardize the trading in rice tickets.

These rules were similar to the current rules of American

futures trading.

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� In the US, futures trading started in the

grain markets in the middle of the 19th

Century. The Chicago Board of Trade

was established in 1848

� In the 1870s and 1880s the New York

Coffee, Cotton and Produce Exchanges

started.

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Why futures trading ?

� Guarantee delivery of product� Speculate� Hedge risk

� weather� costs of other commodities

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Claim 1

�1. A method for managing the consumption risk costs of a

commodity sold by a commodity provider at a fixed price

comprising the steps of:

�(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 consumer;

(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.

Claim 1

�Claim directed to managing risk related to commodities.

�No �technology�recited in claim 1

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CAFC - 5 Questions for en banc hearing

� 1. Whether claim 1 of the 08/833,892 patent application

claims patent-eligible subject matter under 35 U.S.C. § 101?

� 2. What standard should govern in determining whether a

process is patent-eligible subject matter under §101?

� 3. Whether the claimed subject matter is not patent-eligible

because it constitutes an abstract idea or mental process;

when does a claim that contains both mental and physical

steps create patent-eligible subject matter?

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CAFC - 5 Questions for en banc hearing

� 4. Whether a method or process must result in a physical

transformation of an article or be tied to a machine to be

patent-eligible subject matter under §101?

� 5. Whether it is appropriate to reconsider State Street Bank &

Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368

(Fed. Cir. 1998), and AT&T Corp. v. Excel Communications,

Inc., 172 F.3d 1352 (Fed. Cir. 1999), in this case and, if so,

whether those cases should be overruled in any respect?

Business Methods Death Warrant?

� Potential to eliminate an

entire class of US

patents?

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AIPLA Amicus Brief

� AIPLA�s supports Bilski and a broad interpretation of patentable subject matter.

� Improper to narrowly apply the subject matter categories of §101 by requiring process implementation by APPARATUS.

� §101 should only be limited by

� Laws of nature

� Physical phenomena

� Abstract ideas

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Other Amicus Briefs

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� Those favoring a �narrow� §101 door argue that we issue too many and too broad claims that disrupt the marketplace

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� Those favoring a �wide� §101 door point out that section 101 should be wide because it encourages innovation.

� Who knows where technology will go in the future?

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� 35 U.S.C. §101 is a �threshold� question

� Bad claims that might pass through a wide §101 door will be eliminated by §112, §102 or §103.

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In re Bilski (Fed. Cir 2007-1130)

� En banc argument May 8, 2008

� No decision yet

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Questions ? Comments?

Glenn J. Perry

gjperry@skgf.com

202-903-3070

Thank You

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Appendix � Other recent §101 cases

� In re Ferguson (BPAI July 27, 2006)

� In re Nuijten (Fed. Cir. Sep 20, 2007) (09/211,928)

� In re Comiskey, (Fed. Cir. Sep. 20, 2007) (09/461,742)

� Ex parte Tieu, 2007 WL 2823746, n.2 (PTO Bd. App. & Int.

Sep 27, 2007)

� Ex parte Gosby, 2007 WL 2843739 (PTO Bd. App. & Int. Sep

28, 2007)

� Ex parte Yang-Huffman, 2007 WL 2899992 (Bd.Pat.App. &

Interf. Oct 4, 2007)

� Dec. 5, 2007 Oral argument before CAFC In re Ferguson

(09/387,823)