US Courts Swinging Toward Higher Threshold For Patentability

By Steven Seidenberg
For years, the United States has appeared unusually generous towards patent applicants. The country has extended legal protection to many inventions, such as business methods, that typically are not patentable in Europe and other parts of the world.

Now, however, America appears to be back-pedalling. Two recent court rulings in the United States have significantly cut back on the types of inventions that can patented in the country. And these decisions may be just the beginning. More court-imposed restrictions may be coming soon, according to some experts.

The two decisions – In re Comiskey and In re Fuijten – were handed down on 20 September by the US Federal Circuit Court of Appeals (often referred to as the nation’s appellate “patent court”). In the first of these cases, Stephen Comiskey claimed he invented a process for using mandatory arbitration to resolve disputes affecting wills and contracts. This process basically required adding a mandatory arbitration provision to a will or contract, then using arbitration to resolve any subsequent disputes concerning the document.

A three-judge panel of the Federal Circuit held that in order to be patentable, a business method like Comiskey’s must produce a useful, concrete or tangible result – otherwise it is an abstract idea, and thus unpatentable.

This test is nothing new. In the 1998 case of State Street Bank & Trust Co. v. Signature Financial Group, the Federal Circuit held that a business method could be a patentable “process” so long as it produces a “useful, concrete and tangible result.”

The Comiskey court, however, added a second test. The panel found that even if a method produces a useful result, it is patentable only if it either (a) requires a specific type of machine to implement it or (b) changes materials to a different state. If this test is not met, the method is simply a “mental process,” requiring only the operation of human intelligence. Such mental processes are, again, unpatentable abstract ideas, the court held.

Many of the claims in Comiskey’s patent application failed to meet this test, according to the court. His claimed inventions may be useful, the court found, but many of his claims did not need a specific machine to implement them, nor did they change materials to a different state. They were thus unpatentable mental processes.

The High Water Mark

In Nuijten, the Federal Circuit ruled another invention was unpatentable. Petrus Nuijten had invented an improved method of placing electronic signals – known as watermarks – into electronic files, so as to discourage unlawful copying and distribution of these files. He obtained patents on his watermarking process, the device performing his process, and the storage medium holding the resulting watermarked data.

That, however, was not enough for Nuijten. He wanted to patent the watermarks, too, even though they were merely transitory electrical and electromagnetic signals.

A three-judge panel of the Federal Circuit rejected Nuijten’s request, ruling 2-1 that a signal per se is not patentable subject matter. The majority noted that the Patent Act grants legal protection to only four types of inventions: a “process, machine, manufacture, or composition of matter.” A signal does not fall within any of these categories, not even a “manufacture” – because a “manufacture” must be non-transitory and tangible, the court found.

The panels in Comiskey and Nuijten asserted that their rulings are consonant with prior case law in this area, including State Street Bank. But plenty of legal experts disagree. They note that State Street Bank was, for years, widely interpreted to mean that any novel invention could be patented so long as it produced a “useful, concrete and tangible result.” This interpretation of State Street was shared by at least three US Supreme Court Justices. (See the dissent in Laboratory Corporation of America v. Metabolite Laboratories.)

Many patent applicants and the USPTO also relied on this expansive interpretation of State Street Bank – and the resulting patents may now be in trouble. The covered inventions may now be unpatentable subject matter, pursuant to Comiskey and Nuijten.

“Many patents, especially business method patents, will be immediately subject to attack [under Comiskey],” says Lance Reich, a patent attorney in the Atlanta office of Woodcock Washburn.

The Nuijten ruling may spell trouble for owners of software patents, who often have claimed exclusive rights in the abstract organisation of electronic data. Jay Sandvos, a patent attorney with Boston-based Bromberg & Sunstein, said, “Many owners of software patents will need to look at this decision and decide whether to have their patents re-examined or reissued, or to throw up their hands and say ‘we give up.'”

Together, the Comiskey and Nuijten rulings appear to significantly cut back on the types of inventions that can be patented in the United States. “In these two decisions, the Federal Circuit is clearly reducing the scope of what is permissible patentable subject matter,” Sandvos said. “It is hard to interpret these decisions as anything but pushing back what can be patentable.”

And these rulings may just be the beginning, because there is a widespread movement in the United States to cut back on patent rights. Many businesses, academics, patent experts, government officials and public interest organisations are clamouring for changes in the patent law, to make it harder to get and enforce patents. The US Supreme Court has joined in, too. The high court has, in the last three years, issued a steady stream of rulings that overturned the Federal Circuit and cut back on patent rights.

“In the broad context, I think the pendulum is swinging,” said Reich. “There is definitely a swing away from State Street Bank … and towards narrowing the scope of patentability.”

The Federal Circuit, say observers, has seen the handwriting on the wall. “The Federal Circuit is definitely on board with the trend,” Sandvos said, adding, “The trend will continue. It is inevitable.”

Steve Seidenberg may be reached at info@ip-watch.ch.