Federal Circuit Review

§ 101 Patentability

This issue will focus on the categories of invention that qualify for patent Volume Two | Issue Four protection, as set forth in 35 U.S.C. § 101. In October 2008, the Federal Circuit issued an en banc decision reversing its prior precedent and holding January 2010 that a business method is not a patent-eligible “process” under 35 U.S.C. § 101. In re Bilski, 545 F.3d 949 (Fed. Cir. 2008) (en banc), cert. granted (U.S. Jun. 1, 2009) (No. 08-964). The en banc decision set forth a new In This Issue: “machine-or-transformation” test to determine whether a claimed method constitutes a patent-eligible “process.” This year, the Supreme Court g The Supreme Court Appeal granted certiorari to consider the Bilski decision. The Court heard oral of In re Bilski argument on November 9, 2009, but has not yet issued a decision. The Bilski Supreme Court appeal has generated substantial interest across many g Federal Circuit Decisions disparate industries, including hardware and software companies, biotech, After Bilski information technology and financial firms, and drug makers. A decision is expected in the spring or summer of 2010, and is expected to modify or g PTO Guidelines replace the machine-or-transformation test.

Meanwhile, the Federal Circuit has worked to sharpen and clarify its new machine-or-transformation test. Over the past year, the Federal Circuit has issued three decisions applying the machine-or-transformation test. The Federal Circuit reached opposite patent eligibility determinations in two decisions involving different medical diagnostic method claims. Compare Prometheus Laboratories, Inc. v. Mayo Collaborative Services, 581 F.3d 1336 (Fed. Cir. 2009) with Classen Immunotherapies, Inc. v. Biogen IDEC, 304 Fed. Appx. 866 (Fed. Cir. 2008). Another decision found a method for marketing a product not eligible for patent protection. In re Lewis Ferguson, 558 F.3d 1359 (Fed. Cir. 2009). In addition, the Patent and Trademark Office also issued interim Guidelines regarding the application of the machine-or-transformation test pending the Supreme Court’s decision in Bilski.

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The Supreme Court Appeal of In re Bilski

The Supreme Court granted certiorari in the Bilski case on June 1, 2009. Before the Supreme Court are two questions:

1. Whether the Federal Circuit erred by holding that a “process” must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing (“machine- or-transformation” test), to be eligible for patenting under 35 U.S.C. § 101, despite this Court’s precedent declining to limit the broad statutory grant of patent eligibility for “any” new and useful process beyond excluding patents for “laws of nature, physical phenomena, and abstract ideas.”

2. Whether the Federal Circuit’s “machine-or-transformation” test for patent eligibility, which effectively forecloses meaningful patent protection to many business methods, contradicts the clear Congressional intent that patents protect “method[s] of doing or conducting business.” 35 U.S.C. § 273.

The Bilski appeal has drawn intense interest and attention — arguably, more than any other patent case in U.S. history. About 70 amicus briefs on the merits were filed with the Supreme Court. Although views varied widely, many amici criticized the Federal Circuit’s test, answering the first question presented (above) in the affirmative and arguing that the machine-or-transformation test should not be exclusively applied. With regard to the second question, amici differed on whether the Supreme Court should establish patent eligibility criteria that ensure the continued viability of business method patent claims.

The Supreme Court heard oral argument on November 9, 2009. During oral argument, the Justices criticized positions taken by both sides, but seemed aligned in questioning the patentability of business methods and in broadly considering whether the machine-or-transformation test would appropriately limit the patent eligibility of certain processes without deterring advancements in areas such as software and biomedical arts. The Justices explored both prongs of the machine-or-transformation test, asking how much machine involvement or transformation, respectively, would be required to render a process patent eligible.

Based on questions from the Justices at oral argument, it appears likely that Bilski’s particular claims, and other pure business methods, will be found not eligible for patent protection. The fate of the machine-or-transformation test itself is uncertain – in all likelihood, the Court will modify or replace the test. However, during oral argument, the Court struggled with appropriate boundaries for the types of processes deserving patent protection.

Federal Circuit Decisions After Bilski

Since its en banc decision in Bilski, the Federal Circuit has issued only three decisions applying the machine-or-transformation test to process claims. Prometheus Laboratories, Inc. v. Mayo Collaborative Services, 581 F.3d 1336 (Fed. Cir. 2009); Classen Immunotherapies, Inc. v. Biogen IDEC, 304 Fed. Appx.

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866 (Fed. Cir. 2008); and In re Lewis Ferguson, 558 F.3d 1359 (Fed. Cir. 2009). Four cases have been stayed pending the Supreme Court’s decision in Bilski.1 Meanwhile, one case continues to proceed with the appellant’s principal brief due March 1, 2010.2

Classen v. Biogen In Classen Immunotherapies Inc. v. Biogen IDEC, 2006 U.S. Dist. LEXIS 98106 (D. Md. Aug. 16, 2006), the district court granted the defendant’s summary judgment motion to invalidate the asserted claims as “an attempt to patent an unpatentable natural phenomenon.” Id. at *15. Exemplary claim 1 of U.S. Patent No. 5,723,283, recites:

A method of determining whether an immunization schedule affects the incidence or severity of a chronic immune-mediated disorder in a treatment group of mammals, relative to a control group of mammals, which comprises immunizing mammals in the treatment group of mammals with one or more doses of one or more immunogens, according to said immunization schedule, and comparing the incidence, prevalence, frequency or severity of said chronic immune-mediated disorder or the level of a marker of such a disorder, in the treatment group, with that in the control group.

The district court determined that “[c]learly, the correlation between vaccination schedules and the incidence of immune mediated disorders that Dr. Classen claims to have discovered is a natural phenomenon. The issue, therefore, is whether the Classen patents simply describe this correlation.” Id. at *13. The district court found that “the 283 patent describes only a general inquiry of whether the proposed correlation between an immunization schedule and the incidence of chronic disorders exists. As such, the process is indistinguishable from the idea itself.” Id. at *13-14.

The district court further found that claims including “the active step of immunizing patients in accordance with a schedule determined to be low risk” did not render the claims patentable as “‘[i]nsignificant post-solution activity will not transform an unpatentable principle into a patentable process.’” Id. at *15 (internal citing omitted).

The Federal Circuit affirmed the district court’s summary judgment that the claims are invalid under § 101 in a short non-precedential opinion. The court held that “Dr. Classen’s claims are neither ‘tied to a particular machine or apparatus’ nor do they ‘transform[] a particular article into a different state or thing.’” Classen Immunotherapies Inc. v. Biogen IDEC, 304 Fed. Appx. 866, 867 (Fed. Cir. 2009) (citing Bilski, 545 F.3d at 954).

1 DealerTrack, Inc. v. Huber, No. 06-cv-2335, slip op. (C.D. Cal. Jul. 7, 2009), appeals stayed, No. 2009-1566 and No. 2009-1588 (Fed. Cir. Oct. 27, 2009) (appeal from order granting summary judgment); Every Penny Counts, Inc., v. Bank of America Corp., No. 2:07-cv- 042, slip op. (M.D. Fla. May 27, 2009), appeal stayed, No. 2009-1442 (Fed. Cir. Aug. 31, 2009) (appeal from order granting summary judgment); CyberSource Corp. v. Retail Decisions, Inc., No. 3:04-cv-03268, slip op. (N.D. Cal. Mar. 27, 2009), appeal stayed, No. 2009- 1358 (Fed. Cir. Jul. 30, 2009) (appeal from order granting summary judgment); and Fort Properties, Inc. v. American Master Lease, LLC, No. 8:07-cv-365, slip op. (C.D. Cal. Jan. 22, 2009), appeal stayed, No. 2009-1242 (Fed. Cir. Jun. 11, 2009) (appeal from order granting summary judgment). 2 Research Corporation Technologies, Inc. v. Microsoft Corp., No. 01-cv-658, slip op. (D. Ariz. Jul. 28, 2009), appeal docketed, No. 2010- 1037 (Fed. Cir. Oct. 22, 2009) (appeal from order granting partial summary judgment).

 Federal Circuit Review

Prometheus v. Mayo In Prometheus Laboratories, Inc. v. Mayo Collaborative Services, 581 F.3d 1336 (Fed. Cir. 2009), the Federal Circuit reversed a district court’s pre-Bilski summary judgment decision invalidating process claims involving medical diagnostics.

The asserted patent claims relate to methods for identifying metabolites of thiopurine, a drug used to treat various gastrointestinal disorders such as Crohn’s disease and ulcerative colitis. Claim 1 of U.S. Patent No. 6,355,623 is representative:

A method of optimizing therapeutic efficacy for treatment of an immune mediated gastrointestinal disorder, comprising:

(a) administering a drug providing 6-thioguanine to a subject having said immune-mediated gastrointestinal disorder; and

(b) determining the level of 6-thioguanine in said subject having said immune-mediated gastrointestinal disorder,

wherein the levels of 6-thioguanine less than about 230 pmol per 8x108 red blood cells indicates a need to increase the amount of said drug subsequently administered to said subject and

wherein the levels of 6-thioguanine greater than about 400 pmol per 8x108 red blood cells indicates a need to decrease the amount of said drug subsequently administered to said subject.

The district court invalidated the patent claims as unpatentable natural phenomena under § 101. Prometheus Laboratories, Inc. v. Mayo Collaborative Services, 2008 U.S. Dist. LEXIS 25062 (S.D. Cal. March 28, 2008). The district court determined that, of the claimed “three steps: (1) administer the drug to a subject; (2) determine metabolite levels; and (3) be warned that an adjustment in dosage may be required,” the first two “‘administering’ and ‘determining’ steps are merely necessary data-gathering steps for any use of the correlations,” and the third “‘warning’ step (i.e. the ‘wherein’ clause) — is only a mental step.” Id. at *17-18. Because the claimed steps “are merely data-gathering” and “mental,” the district court reasoned that the “the claims recite the correlations themselves” which renders them patent ineligible. Id. at *18.

The Federal Circuit, applying the machine-or-transformation test, reversed the district court’s decision. The Federal Circuit declared that “[t]he asserted claims are in effect claims to methods of treatment, which are always transformative when a defined group of drugs is administered to the body to ameliorate the effects of an undesired condition.” Prometheus Laboratories, Inc. v. Mayo Collaborative Services, 581 F.3d 1336, 1346 (Fed. Cir. 2009). The Federal Circuit also stated that “[c]ontrary to the district court, we do not view the disputed claims as merely claiming natural correlations and data- gathering steps.” Id.

 Federal Circuit Review

The Federal Circuit explained that “[t]he crucial error the district court made in reaching the opposite conclusion was failing to recognize that the first two steps of the asserted claims are not merely data- gathering steps.” Id. at *1347. This is because, in addition to being transformative, “the administering and determining steps are part of a treatment protocol . . . the administering step provides thiopurine drugs for the purpose of treating disease, and the determining step measures the drugs’ metabolite levels for the purpose of assessing the drugs’ dosage during the course of treatment.” Id. at *1347. The Federal Circuit also stated that “[g]iven the integral involvement of the administering and determining steps in Prometheus’s therapeutic methods, this case is easily distinguishable from prior cases that found asserted method claims to be unpatentable for claiming data-gathering steps and a fundamental principle” — thus distinguishing its holding from Classen Immunotherapies Inc. v. Biogen IDEC case. Id. at *1348.

In re Ferguson In In re Lewis Ferguson, 558 F.3d 1359 (Fed. Cir. 2009), the Federal Circuit affirmed the Board of Patent Appeals and Interferences’ decision that the patent applicant’s method claims for marketing a product do not constitute patentable statutory subject matter under § 101. The patent’s process claims failed both prongs of Bilski’s machine-or-transformation test. Id. at 1363. Additionally, the Federal Circuit held that claims to a “marketing paradigm” do not constitute patentable statutory subject matter, because a “paradigm” is an abstract idea.

Claims 1 and 24 of U.S. Patent Application Serial No. 09/387,823 are representative of the claims of the applicant’s method and “paradigm” claims:

1. A method of marketing a product, comprising:

developing a shared marketing force, said shared marketing force including at least marketing channels, which enable marketing a number of related products;

using said shared marketing force to market a plurality of different products that are made by a plurality of different

autonomous producing company, so that different autonomous companies, having different ownerships, respectively produce said related products;

obtaining a share of total profits from each of said plurality of different autonomous producing companies in return for said using; and

obtaining an exclusive right to market each of said plurality of products in return for said using.

24. A paradigm for marketing software, comprising:

a marketing company that markets software from a plurality of different independent and autonomous software companies, and carries out and pays for operations associated with marketing of software for all of said different independent and autonomous software companies, in return for a contingent share of a total income stream from marketing of the software from all of said software companies, while allowing all of said software companies to retain their autonomy.

 Federal Circuit Review

The Federal Circuit rejected Applicants’ argument that the claims satisfied the machine prong of the test because “a marketing force is not a machine or apparatus” and further determined that Applicants’ method claims do not “transform any article into a different state or thing.” Id. at 1364. The Federal Circuit explained that “[a]t best it can be said that Applicants’ methods are directed to organizing business or legal relationships in the structuring of a sales force (or marketing company)” and made clear that, as provided in Bilski, “such abstractions cannot meet the test because they are not physical objects or substances, and they are not representative of physical objects or substances.” Id. (citing Bilski, 545 F.3d at 963).

The court also rejected Applicants’ argument that the claimed “paradigm” is directed to a machine because “[a] company is a physical thing, and as such analogous to a machine.” Id. at 1366. The court noted that “the paradigm claims do not recite ‘a concrete thing, consisting of parts, or of certain devices and combination of devices’” as set forth in Nuijten. Id. (citing In re Nuijten, 500 F.3d 1346, 1355 (Fed. Cir. 2007)). The court concluded that “[a]bsent identity with any statutory category, Applicants’ paradigm claims are, therefore, unpatentable as not directed to statutory subject matter.” Id.

PTO Guidelines

On August 24, 2009, the Patent and Trademark Office released the Interim Examination Instructions for Evaluating Subject Matter Eligibility under 35 U.S.C. § 101 (the “Interim Guidelines”) pending the Supreme Court’s review of Bilski. The period for comment on the Interim Guidelines ended November 9, 2009.

To determine patent subject matter suitability, the Interim Guidelines direct the examiner to (1) construe the claims; (2) determine whether the claims are directed to one of the four categories of § 101; and (3) determine whether “the claims as a whole are directed to a particular practical application of a judicial exception (abstract idea, law of nature or natural phenomenon) or a judicial exception in its entirety.” In the case of a method, Guidelines state that the examiner should apply the Bilski machine-or- transformation test.

 Federal Circuit Review

Notes

 Contact Information

If you have any questions, please contact the authors of this newsletter listed below or the Willkie attorney with whom you regularly work.

Eugene L. Chang Michael W. Johnson Chandra E. Garry (212) 728-8988 (212) 728-8137 (212) 728-8623 [email protected] mjohnson1 @willkie.com [email protected]

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