VEDDERPRICE ®

November 2008

IP Strategies Special Bulletin

BUSINESS METHOD PATENTS: THE BILSKI CASE

On October 30, 2008, the U.S. § 101 either by showing that the cost of a commodity sold by a Court of Appeals for the Federal claimed process (i) is tied to commodity provider at a fi xed Circuit issued its highly particular machine or price. Claim 1 reads: anticipated en banc decision in (ii) transforms an article. By A method for managing the In re Bilski, ruling that the applying the machine-or- consumption risk costs of a determination whether a claimed transformation test, the Bilski commodity sold by a commodity method constitutes court rejected as unpatentable provider at a fi xed price patent-eligible subject matter subject matter relating to a comprising the steps of: requires an analysis under a method for hedging risks in (a) initiating a series of “machine-or-transformation test.” commodities trading. transactions between said In doing so, the court discarded While some may hail the Bilski commodity provider and as “insuffi cient” their previous decision as having a signifi cant consumers of said commodity standard for determining impact on so-called “business wherein said consumers patent-eligibility that hinged on method patents” or “software purchase said commodity whether a claimed method patents,” it is important to note at a fi xed rate based upon produces “a useful, concrete and that the court rejected any tests historical averages, said fi xed tangible result.” In reaching its based on such broadly worded rate corresponding to a risk ruling, the Bilski court categorical exclusions. Rather, position of said consumer; reexamined the U.S. Supreme the court specifi cally stated that (b) identifying market participants Court’s case law as well as its the test to use is whether the for said commodity having a own precedent concerning claimed method or process counter-risk position to said subject matter eligibility under satisfi es the machine-or- consumers; and the statute, i.e., what constitutes transformation test. Thus, the (c) initiating a series of patentable subject matter under most successful patent applicants transactions between said 35 U.S.C. § 101. In establishing operating in the post-Bilski world the machine-or-transformation will be those describing and test, the majority in the 9–3 claiming their inventive processes decision attempted to base its in a manner that best meets the in this issue... conclusions in the Supreme machine-or-transformation test. Court’s precedents. Specifi cally, Business Method Patents: The Patent Application The Bilski Case...... 1 the Bilski court held that the at Issue machine-or-transformation test Bilski Practice Tips...... 6 The patent application at issue requires a two-branched inquiry was directed to a method for Case Law Review...... 7 in which an Applicant may show managing the consumption risk that a process claim satisfi es

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commodity provider and the principle itself [is to afoul of the instruction against said market participants at determine] if: (1) it is tied to a dissecting claims when a second fi xed rate such particular machine or apparatus, determining subject matter that said series of market or (2) it transforms a particular eligibility, and was therefore participant transactions. article into a different state or inadequate. Likewise, the court During the examination phase, thing.” Interestingly, the Bilski instructed against reliance on the the examiner rejected all of the court, in establishing that this “useful, concrete and tangible claims as not directed to patent- machine-or-transformation test result” test established in its eligible subject matter under was the exclusive test for famous State Street opinion. § 101. The Board of Patent patentability, relied strongly on Further still, in relatively summary Appeals and Interference the Supreme Court’s phrasing of fashion, the court dismissed any sustained the examiner’s this principle in Benson: notion that the so-called rejections. The Applicant then “Transformation and reduction of “technological arts” test was appealed to the U.S. Court of an article ‘to a different state or viable given the ambiguity of what Appeals for the Federal Circuit. thing’ is the clue to the is suffi ciently “technological,” and patentability of a process claim also rejected establishment of The Supreme Court’s that does not include particular any categorical exclusions (e.g., Establishment of machines.” (Emphasis added.) against “business methods” or the Machine-Or- Transformation Test Noting the equivocal support in “software”). Finally, the court Benson for the assertion that the used this opportunity to clarify its In determining whether the machine-or-transformation test is holding in its recent In re claimed risk management the exclusive test, the Bilski court Comiskey decision, in which process constituted eligible noted that the Court’s claims directed to a process for subject matter, the court began subsequent Diamond v. Diehr mandatory arbitration of disputes by noting that the Supreme Court opinion was not equivocal in this were held unpatentable under has previously held that one regard, and therefore inferred § 101. The Comiskey court cannot patent “fundamental that the Court intended to concluded that the claims at issue principles,” i.e., laws of nature, establish the machine-or- were drawn to a “mental process” natural phenomena or abstract transformation test as the of arbitrating disputes, and that ideas. The key consideration exclusive test. claims to such an application of enunciated by the Court is that Importantly, in establishing the only human intelligence to the one cannot wholly preempt use exclusivity of the machine-or- solution of practical problems is of such fundamental principles transformation test, the court very no more than a claim to a through a patent claim, whereas clearly established that previous fundamental principle. The court an application of a fundamental tests were no longer viable. further explained that its principle may be permitted. Beginning with the so-called Comiskey decision did not rely on Relying on the Supreme Court’s Freeman-Walter-Abele test (i.e., any requirement of “physical 1972 decision in Gottschalk v. determine whether the claim steps” in a claim. Indeed, the Benson, the Bilski court stated recites an “algorithm” within the court stated, “even a claim that that the “defi nitive test to meaning of Benson, and then recites ‘physical steps’ but neither determine whether a process determine whether that algorithm recites a particular machine or claim is tailored narrowly enough is “applied in any manner to apparatus, nor transforms any to encompass only a particular physical elements or process article into a different state or application of a fundamental steps”), the court noted that it ran thing, is not drawn to principle rather than to preempt

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patent-eligible subject matter.” different state or thing. This did not specify any particular type On the other hand, the court transformation, the court states, or nature of data, nor did it stated, “a claim that purportedly must be central to the purpose of specify how or from where the lacks any ‘physical steps’ but is the claimed process. Further, the data was obtained or what the still tied to a machine or achieves court emphasized that the main data represented. In contrast, an eligible transformation passes aspect of the transformation test the court further noted, a muster under § 101.” that requires clarifi cation is what dependent claim was deemed to The Federal Circuit’s sorts of things constitute “articles” be drawn to patent-eligible Application of the Machine- such that their transformation is subject matter where it specifi ed or-Transformation Test suffi cient to impart patent- that “said data is X-ray eligibility under § 101. While the attenuation data produced in a Because the applicants in the court noted that it was virtually two dimensional fi eld by a instant case admitted that their self-evident that a process for a computed tomography scanner.” claims (e.g., claim 1 above) did chemical or physical The rationale elucidated by the transformation of physical objects court was that this data clearly The court made clear or substances is patent-eligible represented physical and tangible that a claimed subject matter, the court observed objects, namely the structure of process is patent- that “[t]he raw materials of many bones, organs, and other body information-age processes, tissues. Thus, the transformation eligible if it transforms however, are electronic signals of that raw data into a particular an article into a and electronically-manipulated visual depiction of a physical data.” Thus, the court adopted object on a display was suffi cient different state the “measured approach” from its to render that more narrowly or thing. prior precedents in determining claimed process patent-eligible. whether transformation of such Further, the Federal Circuit data would suffi ce to meet the noted for clarity that because the not limit any process step to any transformation branch of the test. electronic transformation of the specifi c machine or apparatus, data itself into a visual depiction the court did not consider issues Meaning of “Transformation” was suffi cient, the claim in Abele specifi c to the machine In determining what it means to was not required to involve any implementation part of the suffi ciently “transform” an article transformation of the underlying machine-or-transformation test. as to establish patent-eligible physical object that the data Instead, the court left elaboration subject matter, the Bilski court represented. This result, the on the precise contours of looked to its own (and its court asserts, satisfi es the basic machine implementation, as well predecessor court’s) precedents. principle underlying the Supreme as the answers to particular In particular, the court found Court’s articulation for the questions such as whether or guidance in In re Abele, where the machine-or-transformation test, when recitation of a computer court’s predecessor held namely the prevention of suffi ces to tie a process claim to a unpatentable a broad preemption of fundamental particular machine to future independent claim reciting a principles. As demonstrated by cases. The court then considered process of graphically displaying Abele, so long as the claimed the transformation part of the test. variances of data from average process is limited to a practical The court made clear that a values. This broad independent application of a fundamental claimed process is patent-eligible claim was held unpatentable, the principle to transform specifi c if it transforms an article into a court noted, because the claim

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data, and the claim is limited to a that the claimed process Open Questions visual depiction that represents transformed the relationships While the Bilski court was very specifi c physical objects or between the commodity provider, explicit in its determination that substances, there is no danger the consumers and market the machine-or-transformation that the scope of the claim would participants. The court found that test is the exclusive test to be wholly preempt all uses of the the claim only refers to used when determining patent principle. “transactions” involving the eligibility of process or method Refi ning this analysis further, exchange of legal rights at a claims, it also gives rise to a the court noted precedents that “fi xed rate corresponding to a risk number of issues that will require “adding a data-gathering step to position.” Thus, the court held further explanation before the full an algorithm is insuffi cient to that the claims did not involve the impact of Bilski can be convert that algorithm into a transformation of any physical determined. Perhaps most patent-eligible process.” Thus, a object or substance, or an obviously, because the claim that is merely an algorithm electronic signal representative of applicants in Bilski admitted that combined with a data-gathering any physical object or substance. their claims failed to recite any step will not meet the Given the applicants’ admitted specifi c machine, the court transformation requirement failure to meet the machine expressly declined to elaborate because simply stating that data implementation part of the test as on “issues specifi c to the inputs are gathered—without well their failure to meet the machine implementation part of specifying how—is a transformation part of the test, the the test.” Instead, such meaningless limit on a claim, court held that the claim entirely questions are left to future since every algorithm inherently fails the machine-or- cases, particularly the question requires the gathering of data transformation test and is not “whether or when recitation of a inputs. drawn to patent-eligible subject computer suffi ces to tie a Application of the matter. process claim to a particular Machine-Or-Transformation Therefore, the Federal Circuit machine.” On the suffi ciency of Test In Bilski held that, while it agreed with the a computer as the necessary Applicants that the only limit to In holding that the Applicants’ machine, it is worth noting the patent-eligibility imposed by process as claimed failed to court’s observation that the Congress is that the invention fall transform any article to a Benson court rejected the use of within one of the four categories different state or thing, the Bilski a computer as a suffi cient enumerated in § 101, the Federal court reasoned that purported “machine” because the use of a Circuit stated that it must apply transformations or manipulations computer did not resolve their the Supreme Court’s test to simply of public or private legal preemption concerns. That is, determine whether a claim to a obligations or relationships, because the claimed method process is drawn to a statutory business risks or other such could only be used on a general “process” within the meaning of abstractions cannot meet the test purpose computer, the claim § 101. By applying the machine- because they are not physical would still amount to a complete or-transformation test, the Bilski objects or substances, and they preemption of the underlying court held that the Applicants’ are not representative of physical fundamental principle. This claim fails that test. Accordingly, objects or substances. The court suggests the possibility that a the Applicants’ claim is not drawn stated that the Applicants’ process claim reciting a general to a “process” under § 101 as that process at most incorporated purpose computer as the specifi c term has been interpreted. only ineligible transformations in machine to which the process is

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tied could satisfy the specifi c the status or performance of a impermissible as an entire fi eld. machine branch of the machine- machine (e.g., a car engine, a For example, if, instead of “X-ray or-transformation test to the server computer, etc.) would attenuation data produced . . . by extent that the process could be seem to be suffi ciently attached to a computed tomography carried out by other machines, a physical and tangible object. scanner” as in Abele, the claim e.g., application specifi c circuits, Clearly, the subject matter of the recited “X-ray attenuation data etc. claims at issue in Bilski, i.e., data produced by an X-ray machine” In this same vein, the court representing a legal or contractual or “attenuation data produced by stated that, in order to meet the obligation between parties, is not any diagnostic imaging device,” test, the involvement of the tied to a suffi ciently physical or would the inclusion of all possible specifi c machine or transformation tangible object. If a person is a “diagnostic imaging devices” must impart “meaningful limits” on physical or tangible object, would constitute an impermissible fi eld the claim’s scope. This begs the transformation of a person’s limitation? question: What kinds of ties biometric data (e.g., height, It is anticipated that these and between the claimed process and weight, fi ngerprints, etc.) be other issues will be further the recited machine and/or their suffi cient? If so, how is the developed by the courts in the degree of connection are required amount of money that person coming months and years. to establish such “meaningful owes to a creditor a less Several practice tips in view of limits” on a claim’s scope? For meaningful “state variable” of that the Bilski case are on the example, would a process claim person than his/her biometric data following page. reciting function-specifi c if one is developing an If you have any specifi c “components” used to carry out “information-age” process, for questions regarding this case, the process impart meaningful example, an algorithm for please contact Christopher P. limits on the claim? Certainly, determining if someone is a good Moreno at 312-609-7842, such a claim would seem to credit risk? Uchendu O. Anyaso at 312-609- impart more specifi c (and Further still, the court explained 7628 or any member of the therefore more meaningful) that a claim preempting a Intellectual Property Group at limitations than a bare recitation of fundamental principle within a Vedder Price. Q a computer programmed to carry specifi c “fi eld” of endeavor was no out the process, thereby paying more eligible for patenting than a greater heed to the preemption claim precluding all uses of the concerns underpinning the fundamental principle. Instead, machine-or-transformation test. the court noted, “a claim that is Regarding the transformation tied to a particular machine or alternative of the test, the court brings about a particular established that transformation of transformation of a particular data that is clearly representative article does not preempt all uses of “physical and tangible objects,” of a fundamental principle in any e.g., bone, organs and body fi eld but rather is limited to a Christopher P. Moreno Uchendu O. Anyaso tissues, would suffi ce to render a particular use, a specifi c process patent-eligible. How far application.” However, at some could an applicant push the suffi ciently high level of meaning of a “physical and abstraction, a specifi c application tangible” object? Data concerning may be perceived as

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Practice Tips in • If a method or process is • If one assumes that the Supreme computer-implemented, bare Court would not grant certiorari on View of Bilski recitation of that fact in the claim an appeal from the Bilski decision • In order to pass the scrutiny of may not be suffi cient to meet the (given the Federal Circuit’s patent-eligibility under § 101, a specifi c machine branch of the grounding of its opinion in the claim to a process should now machine-or-transformation test. Court’s precedents) or that the recite either a specifi c machine to To the extent possible, it may be applicants in Bilski are not willing which the process is tied, or better to recite specifi c structures to push the issue further, then specifi cally recite transformation implemented within a computer for patentees should start considering of a physical and tangible object implementing the claimed any issued, pre-Bilski claims that (or signals/data representative process, e.g., “performing, by a may be questionable under the thereof). In the case of a patent fi rst component, X; performing, by machine-or-transformation test. application directed to, for a second component in For any claims where patent- example, electronically communication with the fi rst eligibility under the machine-or- manipulated data, one would do component, Y; etc.” Alternatively, transformation test is well to specify (a) the type or if implementations other than questionable, and where support nature of the data, (b) how or computer-based implementations for meeting the test’s requirements where the data was obtained and/ are possible, e.g., pen and paper exists, reissue proceedings may or (c) what data is represented. or other machines not strictly present a potential remedy. Compare this with the allowed interpreted as computers, then 35 U.S.C. § 251 states that claim in Abele cited with approval recitation of a “computer- “[w]henever any patent is, through by the Bilski court, i.e., “said data implemented” method might be error without any deceptive is X-ray attenuation data [setting suffi ciently restrictive as to avoid intention, deemed wholly or partly forth what the data represents] the fatal preemption concern. inoperative or invalid . . . by produced in a two dimensional reason of the patentee claiming fi eld [setting forth the type or • Because questions remain as to more or less than he had a right to nature of the data] by a computed the precise scope of what claim in the patent,” then the tomography scanner [setting forth constitutes a suffi cient “machine” patentee may seek to correct the where the data is obtained].” or when data is suffi ciently error through a reissue of the representative of a “physical and patent. Noting that § 251 is tangible object,” it is advisable, if remedial in nature and should possible, to include multiple therefore be construed liberally, method claims touching upon both the Federal Circuit in its 2006 branches of the test. That is, one Medrad v. Tyco decision found set of method claims might be that § 251 should “be read to directed to a specifi c machine- encompass any error that causes based implementation, whereas a patentee to claim more or less another set of method claims than he had a right to claim” might be directed to tying any (emphasis added), including, one claimed transformation into may presume, errors in adhering specifi c physical and tangible to the requirements of 35 U.S.C. objects or data representative § 101. thereof.

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Case Law Review enable certain battery-saving determined that the ITC did not features, infringe the ’983 patent. have statutory authority to issue LIMITED EXCLUSION ORDERS The ITC also found Qualcomm an LEO against downstream GRANTED BY THE ITC DO liable for inducing third party products of non-respondents. NOT APPLY TO DOWNSTREAM manufacturers to incorporate With respect to the LEO, MANUFACTURERS NOT NAMED battery-saving software and Qualcomm and the third-party AS RESPONDENTS TO AN Qualcomm’s chips into their appellants argued that the ITC ITC COMPLAINT mobile devices. exceeded its statutory authority As a remedy, the ITC issued a by issuing an LEO that excludes Kyocera Wireless limited exclusion order (“LEO”) imports of downstream Corp. v. International Trade excluding “[h]andheld wireless manufacturers who were not Commission communication devices, including named as respondents to (Fed. Cir. 2008) cellular telephone handsets and Broadcom’s initial complaint. In The International Trade PDAs, containing Qualcomm contrast, Broadcom and the ITC Commission (“ITC”) may not baseband processor chips or maintained that the ITC has issue a limited exclusion order chipsets that are programmed to authority to order an LEO which that applies to all downstream enable the power saving features excludes all of a respondent’s products when it applies to covered by claims 1, 4, 8, 9, or 11 articles that are determined to parties not named as of U.S. Patent No. 6,714,983, violate, regardless of the identity respondents to the ITC wherein the chips or chipsets are of the importer. complaint, according to the manufactured abroad by or on The Federal Circuit turned to Federal Circuit. behalf of Qualcomm the Commission’s authority to Broadcom Corporation Incorporated.” Thus, wireless issue exclusion orders, which is (“Broadcom”) owns U.S. Patent device manufacturers that were granted under 35 U.S.C. No. 6,714,983 (“the ’983 patent”), not respondents to Broadcomm’s § 1337(d). According to the which is generally directed ITC complaint were subject to the statute, Congress created two towards a mobile computing LEO because they purchased and distinct forms or exclusion device that can both incorporated Qualcomm chips into orders: a limited exclusion order communicate with wireless their mobile wireless devices and a general exclusion order. networks and operate in a outside the United States and The default and limited exclusion reduced power mode to extend then imported them into the order “shall be limited to persons battery life. Broadcom fi led a United States for sale. determined by the Commission complaint with the ITC naming Qualcomm and third-party [(i.e., the ITC)] to be violating this Qualcomm Incorporated manufacturers and carriers section,” according to section (“Qualcomm”), and only appealed the ITC’s decision. On 1337(d)(2). By contrast, the Qualcomm, as the respondent. appeal, the Federal Circuit Federal Circuit said, “a ‘general Broadcom alleged that thirteen affi rmed the ITC’s fi ndings that the exclusion’ order (‘GEO’) is only Qualcomm chips and chipsets 983 patent was not invalid; appropriate if two exceptional infringed several Broadcom affi rmed the ITC’s determination circumstances apply. patents, including the ’983 patent. of no direct infringement by Specifi cally, under subsection The ITC rejected Qualcomm’s Qualcomm; held that the ITC d(2)(A), the Commission may invalidity arguments and misapplied the standard for issue a GEO if it is ‘necessary to determined that Qualcomm’s induced infringement; and prevent circumvention of an chips, when programmed to exclusion order limited to

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products of named persons’ or, product consisted of a under subsection d(2)(B), if ‘there rectangular, hollow tube having a is a pattern of violation of this Practice Tip: square cross-section but featured section and it is diffi cult to identify When fi ling a complaint with the buffer surfaces on all four of its the source of infringing products.’” ITC, the patent holder should sides. Thus, the Federal Circuit said that carefully consider whom to name as The district court granted an LEO is “both ‘an order limited respondents to the complaint since Swisa’s motion for summary to products of named persons,’ a limited exclusion order cannot judgment based on and one where the complainant limit imports of downstream noninfringement and stated that has not demonstrated ‘a pattern manufacturers that are not named the plaintiff in a design patent of this section and [diffi culty in respondents. Alternatively, the case must prove both (1) that the identifying] the source of patent holder may wish to seek a accused device is “substantially infringing products.’” general exclusion order, but the similar” to the claimed design In this case, the court patent holder should be aware of under what is referred to as the determined that the ITC did not the more stringent requirements “ordinary observer” test, and have the authority to issue an necessary for obtaining such an (2) that the accused device LEO that applies to downstream order. contains “substantially the same products imported by parties not points of novelty that named as respondents to the ITC distinguished the patented complaint. The Federal Circuit INFRINGEMENT OF DESIGN design from the prior art.” After noted, for example, that PATENTS IS BASED ON THE comparing the claimed design Broadcom appears to have made “ORDINARY OBSERVER” TEST and the accused product, the a strategic decision to not name Egyptian Goddess, Inc. v. district court held that Swisa’s downstream wireless device Swisa, Inc. allegedly infringing product did manufacturers, most of whom (Fed. Cir. 2008 (en banc)) not incorporate the “point of were known, and to not request novelty” of the ’389 patent, which the ITC to enter a GEO. The “ordinary observer” test the court identifi ed as “a fourth, Consequently, the Federal Circuit should be the test used when bare side to the buffer.” concluded that the statute permits evaluating infringement of design EGI appealed the district the LEO to exclude only the patents, according to the Federal court’s decision, and a panel of violating products of the named Circuit. the Federal Circuit agreed with respondents. Q Egyptian Goddess, Inc. (“EGI”) the district court. The panel appealed the decision of the stated that the point of novelty in district court and alleged that a patented design “can be either Swisa, Inc. (“Swisa”) had a single novel design element or infringed EGI’s U.S. Design a combination of elements that Patent No. 467,389 (“the ’389 are individually known in the prior patent”). The patent claimed a art.” In order for a combination design for a nail buffer consisting of individually known design of a rectangular hollow tube elements to constitute a point of having a generally square cross- novelty, however, the panel said section and featuring buffer “the combination must be a surfaces on three of its four nontrivial advance over the prior sides. Swisa’s accused infringing art.” The panel noted that EGI’s

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asserted point of novelty was a fi rst one patented is infringed by combination of four of the claimed the other.” Practice Tip: design’s elements, and the panel In a decision that could agreed with the district court’s strengthen the amount of When considering whether a design determination that one prior art protection provided by design patent may present a question of patent contained each of the four patents, the Federal Circuit infringement for a product, it is elements except that the body agreed with EGI in holding that recommended to consider whether was triangular, rather than “the ‘ordinary observer’ test the product and the patented design square, in cross-section. Thus, should be the sole test for are substantially the same to the panel concluded that “no determining whether a design deceive an ordinary observer. In reasonable juror could conclude patent has been infringed. Under cases where the accused design that EGI’s asserted point of that test, . . . infringement will not and the claimed design are not novelty constituted a non-trivial be found unless the accused plainly dissimilar, the ordinary advance over the prior art.” article ‘embod[ies] the patented observer analysis may include Additionally, the panel noted that design or any colorable imitation reviewing the prior art, which may the various design elements of thereof.’” The Federal Circuit yield signifi cant differences between the claimed design “were each reasoned, in part, that the point the product and the patented individually disclosed in the prior of novelty test proved too diffi cult design. art.” Thus, the panel concluded to apply where the claimed that summary judgment was design has numerous features appropriate. that can be considered points of DISCLOSING ALL ELEMENTS The Federal Circuit then novelty, or where multiple prior DOES NOT MANDATE granted EGI’s request for an en art references are in issue and ANTICIPATION AND BEWARE banc review. The Federal Circuit the claimed design consists of a GENERAL MEANS PLUS considered whether the “point of combination of features, each of FUNCTION DISCLOSURE FOR novelty” test or the “ordinary which could be found in one or SOFTWARE observer” test should be used to more of the prior art designs. Net MoneyIN v. Verisign determine whether an accused Nonetheless, the Federal Circuit (Fed. Cir. 2008) infringing product infringes a affi rmed the district court’s design patent. To infringe under summary judgment in favor of According to the Federal the point of novelty test, “the Swisa because “no reasonable Circuit, in order for a reference accused device must appropriate fact-fi nder could fi nd that EGI met to anticipate a claim, the the novelty in the patented device its burden of showing, by a reference must teach all of the which distinguishes it from the preponderance of the evidence, claimed elements together; prior art.” Under the ordinary that an ordinary observer, taking teaching all the elements in observer test, “[I]f in the eye of an into account the prior art, would separate embodiments is not ordinary observer, giving such believe the accused design to be enough for anticipation under attention as a purchaser usually the same as the patented 35 U.S.C. § 102. Additionally, gives, two designs are design.” Q a general purpose computer or substantially the same, if the microprocessor alone cannot resemblance is such as to provide suffi cient structure for deceive such an observer, means-plus-function language. inducing him to purchase one This case involves systems supposing it to be the other, the for processing credit card

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transactions over the Internet against a number of parties distinctly claim the invention as and for addressing security alleged to compete in the Internet required by the second concerns not present in direct credit card processing fi eld, paragraph of section 112.” The retail transactions. A working including Verisign, Inc. and court continued that “[t]o avoid document entitled Internet eProcessing Network purely functional claiming in Keyed Payments Protocol (the (collectively, “Verisign”). During cases involving computer- “iKP reference”) sets forth claim construction, among other implemented inventions, we have standards on “how payments things, the district court ‘consistently required that the may be accomplished effi ciently, invalidated claims 1, 13, and 14 structure disclosed in the reliably[,] and securely.” The of the ’737 patent, which contain specifi cation be more than simply iKP reference sets forth two limitations in means-plus-function a general purpose computer or standard models, or protocols, format, as lacking corresponding microprocessor. Because to enable Internet-based secure structure and thus indefi nite general purpose computers can electronic payments while under 35 U.S.C. § 112 2. The be programmed to perform very utilizing the existing fi nancial district court then addressed two different tasks in very different infrastructure for payment motions for summary judgment: ways, simply disclosing a authorization and clearance. (1) the district court granted computer as the structure Unsatisfi ed with the early Verisign’s motion for summary designated to perform a approaches taken by others, judgment that it did not induce particular function does not limit inventor and patent attorney infringement of NMI’s patents, the scope of the claim to the Mark Ogram set out to create a and (2) the district court granted corresponding structure, new payment model to remedy Verisign’s motion for summary material, or acts that perform the what he perceived as two judgment of invalidity, based on function.’” Thus, the Federal defi ciencies in the prior art the argument that the iKP Circuit upheld the district court’s protocols: “the fact that the reference anticipated claim 23 of decision that claims 1, 13, and 14 customer had to send the ’737 patent under 35 U.S.C. of the ’737 patent were indefi nite. confi dential information over the § 102(a). As to the district court’s Internet to an unknown As to the question regarding conclusion that the iKP reference merchant; and the fact that the means-plus-function anticipated claim 23 of the ’737 credit card issuers imposed language, the Federal Circuit patent, the Federal Circuit onerous fi nancial requirements found that the district court reversed. The Federal Circuit on merchants.” Ogram fi led a correctly concluded that claims 1, described that the iKP reference patent application directed to a 13, and 14 of the ’737 patent are discloses two separate protocols payment model utilizing a indefi nite under 35 U.S.C. § 112 for processing an Internet credit fi nancial processing entity, and 2. The court explained that a card transaction, but neither of the patent application ultimately patent applicant who employs these protocols contains all fi ve resulted in U.S. Patent Nos. means-plus-function language links arranged or combined in the 5,822,737 (“the ’737 patent”) “must set forth in the specifi cation same way as claimed in the ’737 and 5,963,917 (“the ’917 an adequate disclosure showing patent. The Federal Circuit also patent”). Shortly after fi ling the what is meant by that language. noted that the district court was patent application, Ogram If an applicant fails to set forth an wrong to combine parts of the formed Net MoneyIN (“NMI”). adequate disclosure, the separate protocols shown in the NMI fi led suit for infringement applicant has in effect failed to iKP reference to conclude that of the ’737 and ’917 patents particularly point out and

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claim 23 was anticipated. The Federal Circuit stated, “Granted, Practice Tip: there may be only slight differences between the When reviewing the rejection of a protocols disclosed in the iKP patent application or as a defense reference and the system of to infringement, a reference cited for claim 23. But differences allegedly anticipating the claimed between the prior art reference subject matter should be carefully and a claimed invention, however reviewed. In order for a reference slight, invoke the question of to anticipate a claim, it must obviousness, not anticipation.” disclose all elements of the claim Because the parties did not arranged and combined in the same contend that the iKP reference way as claimed. An examiner disclosed all of the limitations cannot pick and choose different recited in the claim arranged or elements from different combined in the same way as in embodiments to argue that a the claim, and because it was in reference anticipates a claim. error for the district court to fi nd Furthermore, when drafting a patent anticipation by combining application, extra care should be different parts of the separate taken to ensure that the protocols in the iKP reference specifi cation includes suffi cient “simply because they were found structure that corresponds to any within the four corners of the means-plus-function claim document,” the Federal Circuit language. This is particularly reversed the district court’s grant important when the means-plus- of summary judgment of invalidity function language is performed by a as to claim 23 of the ’737 computer since disclosing the patent. Q computer in general, with nothing else, may not provide suffi cient support for means-plus-function language.

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Nov08_IPBulletin.indd 11 11/20/2008 11:16:19 AM VEDDERPRICE

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