Submitted by patentadmin on Tue, 10/19/2010 - 14:37

In June the Supreme Court handed down its non-decision in the famous – or infamous, depending upon your point of view – Bilski case. Ever since then, patent attorneys and patent owners have been trying to figure out exactly what the decision means. It has been suggested that subsequent decisions by the C.A.F.C. will clarify the matter.

Well, while we wait for the C.A.F.C., a recent, exceedingly cogent Report And Recommendation by Magistrate Judge Alan Kay of the U.S. District Court for the District of Columbia may shed some much-needed light on this question. (Graff/Ross Holdings LLP v. Federal Home Loan Mortgage Corporation a/k/a Freddie Mac)

Graff/Ross is the owner of a patent directed to a computerized process for calculating a price for the sale of a fixed income asset and generating a financial analysis output. It alleged that Freddie Mac infringed this patent by auctioning off blocks of mortgages via an electronic network. Some people have alleged far worse with respect to these auctions – the word “fraud” comes to mind – but that is another matter.

Taking time off from responding to congressional investigations, Freddie Mac moved to dismiss the patent infringement action on the grounds that “the asserted [patent] claims do not fall within the statutory class of subject matter … but are instead an unpatentable abstract idea.” Graff/Ross, being represented by attorneys, denied this. The case was stayed, pending the Supreme Court’s Bilski decision. When the Bilski decision came down, the stay was lifted and the case was dumped on Magistrate Judge Kay.

Only one independent claim was being asserted. As analyzed by Judge Kay, this claim required only the following: (1) receiving input data entered by a keyboard; (2) providing any computer controlled by a processor to receive the input and send outputs to a monitor or printer; (3) using the computer processor to calculate a price for at least one component of a fixed income asset; and (4) generating financial analysis that includes that price. He went on to remark that the claim fails to “specify precisely how the [computer processor is] specifically programmed.”

Here is where we get to the heart of the matter. Judge Kay noted that, under Bilski, a “process is unpatentable … not because it contains a mathematical algorithm as one component, but because once that algorithm is assumed to be within the prior art, the application, considered as a whole, contains no patentable invention.” After reviewing the cases upon which Bilski rests, he concluded, “[t]hese cases instruct courts to view the entirety of a given claim when assessing the claim’s patent-eligibility. But these cases also reach within the claim to determine whether the ‘practical effect’ of granting a patent on the claim would result in a patent on any of the three exceptions to patentability – i.e., laws of nature, physical phenomena and abstract ideas.”

Since the Supreme Court had offered “very little guidance” on this question, he turned to the Interim Guidance rules utilized by the USPTO. “If the machine or apparatus is ‘merely an object on which the method operates,’ that will weigh against patent eligibility. Additionally, where a ‘claim is so abstract and sweeping to cover both known and unknown uses of the concept, and be performed through an existing or future-devised machinery, or even without any apparatus’ that will weigh in favor of finding that the claim is drawn to an unpatentable abstract idea … the presence of a ‘general concept’ in a claim ‘can be a clue that the claim is drawn to an abstract idea.”

Applying this test, he found that the “third step [of the claim] does not even specify a formula or process to ‘compute a … price,’ making this step completely abstract and unverifiable. Furthermore, ‘financial analysis’ is a vague term that could include any type of financial data or output. Where the performance of the process is not verifiable, as here, it suggests that the claim is drawn to an unpatentable abstract idea. This is especially true here where the recited machines appear to be no more than ‘object[s] on which the method operates.”

So, there it is. The patent is invalid as directed to an abstract idea – nonpatentable subject matter. Freddie Mac can go back to trying to explain how it lost billions of taxpayer dollars.

THE LESSON TO BE LEARNED: Look to the underlying concept, not its specific implementation, when assessing patentability.

Submitted by Anonymous (not verified) on Mon, 10/25/2010 - 23:23


Yes, but even this rule of thumb offers only a modicum of guidance, making it all but impossible to approach such questions on anything other than a case-by-case basis. Post-Bilski, the courts will apparently be hashing out the "abstract idea" concept, in all its painful minutiae, for quite a while. Thanks, SCOTUS!

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