Invalidity Challenges After KSR and Bilski

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1 Invalidity Challenges After KSR and Bilski February 24, 2010 Presenters Steve Tiller and Greg Stone Whiteford, Taylor & Preston, LLP 7 St. Paul Street Baltimore, Maryland (410) stiller@wtplaw.com gstone@wtplaw.com

2 Requirements for Patentability Written description 35 U.S.C. 112 Novelty 35 U.S.C. 102 Non-obviousness 35 U.S.C. 103

3 Obviousness Under 35 U.S.C. 103 A patent is invalid if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art Prior to KSR, the Federal Circuit applied the teaching, suggestion, or motivation test ( TSM test ) a patent claim was obvious only if there was some teaching, suggestion, or motivation to combine the prior art, and many cases required an express teaching, suggestion, or motivation to combine

4 KSR Intl. Co. v. Teleflex, Inc. 550 U.S. 398 (2007) Patent claimed a mechanism for combining an electronic sensor with an adjustable automobile pedal KSR argued obvious Rejected the TSM test as too rigid and limiting Found that the combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results Common sense of a person having ordinary skill in the art can be sufficient to support a finding of motivation

5 KSR TSM test improperly looked only at the problem the patentee sought to solve; proper obviousness analysis must consider whether any need or problem in the field of endeavor of the patent provides a reason for combining references Obviousness can be found where a combination would be obvious to try where there is market demand and a finite number of identified, predictable solutions, PHOSITA has good reason to pursue the known options Cautioned against hindsight bias still must provide an articulated reasoning to support obviousness determination, and cannot rely solely on applicant s own specification

6 USPTO Examination Guidelines PTO issued new guidelines to help Examiners support an obviousness finding: Combining prior art elements according to known methods to yield predictable results Simple substitution of one known element for another to obtain predictable results Use of known technique to improve similar devices / methods in the same way Applying a known technique to a known device / method ready for improvement to yield predictable results Obvious to try choosing from a finite number of identified, predictable solutions, with a reasonable expectation of success Known work in one field may prompt variations of it in the same or other fields based on market forces if the variations are predictable Some teaching, suggestion, or motivation in prior art would lead PHOSITA to modify prior art reference or combine references to arrive at the claimed invention

7 Impact of KSR Patent prosecution significant impact, raising the bar to establish patentability Patent litigation minimal impact seen thus far on invalidating issued patents, but KSR findings do dictate certain strategies

8 Impact on Patent Prosecution Increased number of rejections from Examiners based on obviousness, and increased affirmance of those rejections by the PTO Board of Appeals (affirmance of final rejections post-ksr jumping from 56% to 69%) Applicant strategies: Show why the steps taken by the applicant were not readily apparent recite unexpected or superior results, functions, or properties in the specification Avoid characterizing the field of the invention and identifying problems in the related art adverse party in litigation may use such statements against the patentee in litigation Avoid detailed discussion of prior art court may later use that discussion as evidence of a high level of skill in the art

9 Impact on Patent Litigation No statistically significant change in findings of patent invalidity Litigation strategies as defendant: Establish high level of skill in the art Argue the prior art had same goal as the patent Argue the invention is merely optimization of a variable as a result of routine experimentation Identify known reasons for improvement in the industry and argue that it would be obvious to substitute an element in the prior art with another to achieve the desired results making it cheaper, stronger, etc. Argue the invention would have been obvious to try because only a finite number of identified, predictable ways exist to achieve the goal of the patent

10 Impact on Patent Litigation Litigation strategies as plaintiff / patentee: Argue that the prior art is non-analogous and relates to solving a different problem than the patent-in-suit Argue hindsight or a failure to articulate a reason for the combination Argue that the results or the properties of the patent are either unexpected or superior so as to avoid the combination of old elements argument Demonstrate how the prior art teaches away from the claimed invention Rely on secondary considerations (e.g., commercial success, difficulty of others in finding solutions, copying by others)

11 Points to Take Away KSR has raised the bar for establishing non-obviousness of an invention TSM test is still useful to show obviousness, but legitimate reasons to combine references may go beyond express teachings of prior art design need, market pressure, and common sense may all be considered. Federal Circuit has established a lower threshold for establishing the motivation to combine references, and decisions finding patents nonobvious (and thus patentable) have found elements missing from the prior art, unexpected results, or direct evidence of teaching away Key issue in determining patentability will be predictability of the claimed combination, so concentrate patenting effort on early identification of the unpredictability of the invention

12 Patentable Subject Matter Under 35 U.S.C. 101 Patentable subject matter includes any new and useful process, machine, manufacture, or composition of matter Prior Tests The State Street Test - Business methods are patentable as long as the invention produces a useful, concrete, and tangible result The Freeman-Walter-Abele Test In claim where algorithm is directly or indirectly recited the Court must determine whether algorithm is applied to physical elements or process steps Technological Arts Test urged by a number of Amici Patents should be reserved only for technological inventions that involve the application of science or mathematics thereby excluding non-technological inventions such as activities whose ability to achieve their claimed goals depend solely on contract formation

13 In re Bilski 545 F.3d 943 (Fed. Cir. 2008) BPAI rejected Bilski s patent application for a method of hedging risk in commodities trading Federal Circuit affirmed Rejected other tests and affirmed the machine-ortransformation test as the sole test for determining whether a claimed process pre-empts a fundamental principle Although rejected, technological arts test may still be one logical way to think about the issue The machine-or-transformation test a process is patentable if (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing Case was argued at the Supreme Court in November; decision expected soon

14 Machine-or-Transformation Test The use of a specific machine or transformation of a specific article must impose meaningful limits on the claim s scope to impart patent eligibility The involvement of the machine or transformation in the claimed process must not merely be insignificant extra-solution activity Simple recordation step in a claimed process does not impart patent eligibility under 101 Simple data gathering does not impart patent eligibility under 101 Mere field-of-use limitations are generally insufficient

15 Electronic Information In defining article the Court recognized that the raw materials of the information age processes are electric signals and electronically-manipulated data Where a claim includes an algorithm, a requirement that data inputs be gathered, by itself, is insufficient to convert the algorithm into a patent eligible process However, there need only be a transformation of the electronic data itself the process need not involve a transformation of the physical object the data represents E.g., In Abele, the court held as patentable certain claims specified that said data is X-ray attenuation data produced in a two dimensional field by a computed tomography scanner while invalidating certain claims that did not specify the type or nature of data, from where the data was obtained or what the data represented. Allowable claims made clear that data represented physical and tangible objects, namely the structure of bones, organs and other body tissues, and transformed data into a particular visual depiction of a physical object on a display, thus rendering claims narrow and patent eligible. Left open the question of whether or when recitation of a computer suffices to tie a process claim to a particular machine

16 Applying the Machine-or- Transformation Test Must determine whether claim is tailored narrowly enough to encompass particular application of fundamental principle rather than pre-empt principle itself A claim is not eligible for patent protection if it claims law of nature, natural phenomena or abstract idea Test is not applied on a limitation level; rather, an entire claim must be analyzed Does the claim recite a process, machine, manufacture, or composition of matter? if it is a process, the test applies Does the claim recite a fundamental principal? if the claimed process recites a mental process, law of nature, natural phenomenon, or abstract idea, it recites a fundamental principle and the test applies Is the claim limited to the application of that principle? Is it tied to a particular machine or apparatus? OR Does it transform a particular article into a different state or thing? Does the specific machine or transformation of a specific article impose meaningful limits of the claim s scope? Does the involvement of the machine or transformation impose more than an insignificant extra-solution activity?

17 Post-Bilski Federal Circuit Decisions In re Ferguson, 558 F.3d 1359 (Fed. Cir. 2009) Sought to patent a method for product marketing; Ct. held that invention was not tied to a machine because a machine must be a concrete thing, consisting of parts, or of certain devices and did not transform anything but was merely directed to organizing business or legal relationships Prometheus Labs., Inc. v. Mayo Collab. Servs., 581 F.3d 1336 (Fed. Cir. 2009) Reversed District Court s grant of summary judgment of invalidity under 101, finding that the claims involved the transformation of the human body following the administration of a drug where chemical and physical changes altered the drug s metabolites the concentrations of which were determined. The fact that the transformation of physical matter can be described as occurring according to natural law did not negate patentability and that a subsequent mental step in the process does not, by itself, negate the transformative nature of prior steps; the inventive nature of the claimed methods stems not from preemption of all use of the natural process applied in the claim; rather from the application of a natural phenomenon in a series of transformative steps comprising particular methods of treatment

18 Post-Bilski District Court Decisions Fort Props., Inc. v. Amer. Master Lease, LLC, 609 F. Supp. 2d 1052 (C.D. Cal. 2009) Business method for creating an investment instrument out of real property by creating deedshares was invalid because the invention only transformed legal obligations and relationships Research Corp. Techs., Inc. v. Microsoft Corp., 2009 U.S. Dist. LEXIS (D. Ariz. Jul. 28, 2009) Under machine prong, simply because a digital apparatus, such as a computer or calculator, could assist with performing a step does not render it patent eligible and under transformation prong, the question is whether or not the patent claims mandate any visual depiction which represents certain objects

19 Post-Bilski District Court Decisions Cybersource Corp. v. Retail Decisions, Inc., 620 F. Supp. 2d 1068 (N.D. Cal. 2009) Invalidated patent for method of detecting credit card fraud over the Internet Manipulations of abstractions (here credit card numbers) do not meet the transformation prong Credit card number is not an article because it represents an account, which is simply a series of rights and obligations While an IP address denotes a particular hardware device that is connected to the Internet and therefore represents a physical object here the IP address was not transformed The recitation of over the Internet did not meet the machine prong because 1) the claim was not tied to a particular machine because the Internet is an abstraction and not a machine one can touch, 2) the involvement of the Internet is merely an insignificant extra-solution activity, and 3) the use of the Internet did not impose meaningful limits on the scope of the claims simply by limiting to online credit card transactions mere field of use limitation

20 Post-Bilski District Court Decisions Fuzzysharp Techs. Inc. v. 3D Labs Inc., Ltd., 2009 U.S. Dist. LEXIS (N.D. Cal. Dec. 11, 2009) Rejected argument that a method of improving 3D computer graphics was tied to a particular machine simply because the claims make a general reference to a computer and even if tied to a particular machine, the use of a computer does not provide a meaningful limit on the scope of the claims Discussed 3 Board of Patent Appeals and Interferences decisions holding that the mere fact that a claim references the use of a computer, standing alone, is insufficient to meet the machine prong

21 Post-Bilski District Court Decisions Abstrax, Inc. v. Dell, Inc., 2009 U.S. Dist. LEXIS (E.D. Tex. Oct. 7, 2009) Upheld patent that claimed a method for assembling a product having components because the configuration model (data concerning how parts, pieces and components fit together) represents physical and tangible objects and representative structures, which are transformed into assembly instructions Articles may be electronic signal and electronically manipulated data Court focused on specificity of the data, where it came from and how it was used in the claim DealerTrack, Inc. v. Huber, 657 F. Supp. 2d 1152 (C.D. Cal. 2009) Held invalid a patent for a credit application processing system finding that it was tied to nothing more than a general purpose computer that had been programmed in some unspecified manner; however, noting that Bilski declined to adopt a broad exclusion of software

22 Post-Bilski District Court Decisions Every Penny Counts, Inc. v. Bank of America Corp., 2009 U.S. Dist. LEXIS (M.D. Fla. May 27, 2009) Rejected argument that the machine-ortransformation test did not apply because the patent claimed a system rather than a process because the use of a computer does not make the claim for a machine

23 Success Rates for Post-Bilski Invalidity Challenges under cases have affirmed rejection of patent applications or invalidated the patents considered under the machine-or-transformation test 3 cases have upheld the patents considered under the machine-or-transformation test In Research Corp., the court invalidated some claims and upheld some claims under the machine-ortransformation test A number of cases have been stayed pending the Supreme Court s decision

24 Points to Take Away If Bilski is upheld by the Supreme Court, method patents that do not include meaningful application of a machine or transformation of an article will not be enforceable It will likely be harder to obtain business method patents and issued business method patents may be subject to strong invalidity challenges under 101 Tying the method to a computer, network or the Internet may not be sufficient to become patentable subject matter

25 Impact of KSR and Bilski Patent owners may be more cautious in seeking to enforce patents or in seeking patent protection, particularly for business methods Alleged infringers may be more aggressive Not left without protection trade secret and copyright protection may provide some protections

26 Questions Steve Tiller and Greg Stone Whiteford, Taylor & Preston, LLP 7 St. Paul Street Baltimore, Maryland (410) stiller@wtplaw.com gstone@wtplaw.com