The petitioner’s patent application sought protection for an invention that claimed a procedure for instructing buyers and sellers how to protect against the risk of price fluctuations in a discrete section of the economy.
It explained how commodities buyers and sellers in the energy market can protect, or hedge, against the risks of price changes which happen every now and then.
The key claims were claim 1, which described a series of steps instructing how to hedge risk, and claim 4, which placed the claim 1 concept into a simple mathematical formula. The remaining claims explained how claims 1 and 4 can be applied to allow energy suppliers and consumers to minimize the risks resulting from fluctuations in market demand.
PROCEDURAL HISTORY
The Patent and Trademark Examiner rejected the application on the grounds that the invention is not implemented on a specific apparatus, merely manipulates an abstract idea, and solves a purely mathematical problem.
The Board of Patent Appeals and Interferences agreed and affirmed. The United States Court of Appeals of the Federal Circuit, in turn, affirmed. It produced five different opinions.
LAWS INVOLVED
35 U.S.C. § 101: Whoever invents or discovers any new and useful process, machine, manufacture or composition of matter, or any new and useful improvement, thereof, may obtain a patent, therefore, subject to conditions and requirements of titles. Issue: Whether the petitioner’s invention patentable under the above-mentioned law?
HELD
The Patent and Trademark Examiner rejected petitioners' application, explaining that “it is not implemented on a specific apparatus and merely manipulates an abstract idea and solves a purely mathematical problem without any limitation to a practical application, therefore, the invention is not directed to the technological arts.”
The Board of Patent Appeals and Inferences affirmed, concluding that the application involved only mental steps that do not transform physical matter and was directed to an abstract idea.
The United States Court of Appeals for the Federal Circuit heard the case en banc and affirmed. They reject the prior test for determining whether the invention produced a ‘useful’, ‘concrete and tangible result.’ They referred to the case of State Street Bank & Trust Co. Ltd. v. Signature Financial Group Inc., 149 F.3d 1368 and held that a claimed process is patentable if:
It is tied to a particular machine or apparatus, or
It transforms a particular article into a different state or thing.
The Court also held that business methods are not patent-ineligible per se, they are patent ineligible because they describe a method of doing business that is not a process under §101 and, therefore, rejected the idea that business method patents should be outside the scope of patent eligibility per se, saying at least some business patent method should be patent eligible.
SC said that the “machine and transformation test” isn’t the sole standard. Thus, so long as the business method claims otherwise meet the requirements of §§ 102 (invention be novel), 103 (non- obvious), and 112 (fully and particularly described), those claims are patentable.
Instead of applying the “machine-or-transformation” test, the Court simply looked to its precedent in Benson, Flook, and Diehr case and concluded that Applicants’ claims were drawn to “abstract ideas” and thus not patentable.
Therefore, concluding that this machine or transformation test is the sole test for determining patent eligibility of a process under §101, the Court applied the test and held the application wasn’t patent eligible.