A Blow to Software Patents

Earlier today the United States Court of Appeals for the Federal Circuit issued its much anticipated decision in In re Bilski.  The question that was presented by this case was whether a purely mental process is patentable subject matter.  The Federal Circuit, however, decided to write about something much more interesting to them, namely whether software patents are patentable subject matter.  We had been expecting a far reaching decision that dealt a blow to business method patents, but few would have expected just how far reaching the decision would be and that it would call into question thousands of software patents granted over the last 10 to 15 years.

I was in attendance at the oral arguments held in Washington, DC, and I did not see this coming, although I did have some fears in the back of my mind about just how far the Court would go.   Chief Judge Michel peppered David Hansen, arguing orally on behalf of Bilski,  with question after question, trying to get him to define the meaning of terms such as “concrete”, “tangible”, “useful” and “transformative.”  Judge Michel kept saying these are all just adjectives, but what to they mean.   This lead me to believe that the Court was going to seek to define the terms in a narrow way, making it difficult if not impossible to obtain a business method patent.  Never in my wildest dreams did I think they were going to throw the baby out with the bath water.  Actually, that is not exactly right, I did think about it, talked about it with my partner John White, and managed to convince myself that even the Federal Circuit wouldn’t manage to bungle this area of law so horribly by doing something like that.  Boy was I wrong!

To be honest, many of those who I have spoken with think I am over reacting to the Federal Circuit’s decision.  I suppose bloggers get paid to over react, so maybe you have to take this with a grain of salt, but I am 100% confident that I am not over reacting.  This is an issue I have followed for a decade.  I have written on the issue, I work in the software patent arena, I am an inventor in this area, and I write code myself.  I feel comfortable calling myself an expert in this area and I feel with every ounce of my being that this decision is bad, wrong and stupid.  Over the coming weeks I will continue to write and explain why.  The outcome of this case is not what worries me, but what is in the decision that will be used from this point forward to thwart software patents… and yes… I do believe software should be patentable.  Software is a tool like any other and unless we are going to stop allow patents on tangible tools then I see no reason to curtail patents on other tools, particularly a tool so useful and vital as a software program.

While the Federal Circuit has not said that software cannot be patented, what they did say substantially changes the law that has prevailed over the last 10 years and will render many software patents useless.  Moving forward, you can protect software, but only by protecting the machine that the software operates on, which is the way patent attorneys used to be forced to write software patent applications many years ago.  What it also means is that to have any chance at protecting software with a patent you will have to be willing to spend signficant amounts of money, because simply put there is no economical way to draft patents cost-effectively given the new Federal Circuit guidelines.

Specifically, the Federal Circuit overruled the now famous State Street Bank decision, which in 1998 recognized that there was no reason to prevent the patentability of business method patents.  If you read the decision of the Federal Circuit you will see in multiple places where the Court says that State Street has not been overruled, but that is quite frankly intellectually dishonest.  Rarely, if ever, are cases actually overruled.  The way a court will distance themselves is to explain that the holding and underlying reasoning that lead to a decision is no longer applicable moving forward.  As long as they do not use the magic words “we overrule” then they can technically say that the case has not been overruled, but there is absolutely no other way to characterize what the Federal Circuit did here while still be intellectually honest.

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The reason State Street was so significant was because it established a new test to determine whether inventions that do not fit into the traditional, tangible model could be patentable.  In order to do this Judge Rich said that inventions of a computer/business-method nature could be patentable if there were produced a “useful, concrete and tangible result.”  Thus, when a computer program accepts data in, proceeds with calculations and then yields data out, if the data output is useful and identifiable then the process is patentable.  This was a significant holding because it recognized (rightly so in my opinion) that software is a tool that can create useful and definite outputs, but outputs that are not tangible in the real world sense.

What the Federal Circuit did today, however, was to throw away the “useful, concrete and tangible result” inquiry.  Here is what the Court had to say:

  • The useful, concrete and tangible result inquiry “is insufficient to determine whether a claim is patent-eligible under § 101.”
  • “[W]e also conclude that the “useful, concrete and tangible result” inquiry is inadequate and reaffirm that the machine-or-transformation test outlined by the Supreme Court is the proper test to apply. “
  • Footnote 19: “[T]hose portions of our opinions in State Street and AT&T relying solely on a “useful, concrete and tangible result” analysis should no longer be relied on.

If the “useful, concrete and tangible result” inquiry is insufficient and inadequate to determine the existence of patentable subject matter under 101 then State Street has quite clearly been overruled, evicerated, disregarded or whatever you would like to call it. The entire point of the States Street decision was the implementation of the “useful, concrete and tangible result” inquiry in order to determine whether an invention is patentable subject matter. Take that part out of State Street and all you have is the name of a bank on the heading of a defunct decision issued by the Federal Circuit in 1998.

The decision, the concurring decisions and the dissents are quite long, so there is much more analysis that needs to be done.  For now, what I perceive to be some of the more significant aspects of the decision are set forth below.  At least Judge Newman understood exactly the ramifications of what the majority of the Court was doing.  If only we could clone Judge Newman and populate the Federal Circuit with her and her clones.  I would also like to see her, or a clone, become the next Director of the USPTO.

Federal Circuit on the Supreme Court:

The Supreme Court, however, has enunciated a definitive test to determine whether a process claim is tailored narrowly enough to encompass only a particular application of a fundamental principle rather than to pre-empt the principle itself. A claimed process is surely patent-eligible under § 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing. A claimed process involving a fundamental principle that uses a particular machine or apparatus would not pre-empt uses of the principle that do not also use the specified machine or apparatus in the manner claimed. And a claimed process that transforms a particular article to a specified different state or thing by applying a fundamental principle would not pre-empt the use of the principle to transform any other article, to transform the same article but in a manner not covered by the claim, or to do anything other than transform the specified article.

Federal Circuit on New Technologies:

Nevertheless, we agree that future developments in technology and the sciences may present difficult challenges to the machine-or-transformation test, just as the widespread use of computers and the advent of the Internet has begun to challenge it in the past decade. Thus, we recognize that the Supreme Court may ultimately decide to alter or perhaps even set aside this test to accommodate emerging technologies. And we certainly do not rule out the possibility that this court may in the future refine or augment the test or how it is applied. At present, however, and certainly for the present case, we see no need for such a departure and reaffirm that the machine-or-transformation test, properly applied, is the governing test for determining patent eligibility of a process under § 101.

Federal Circuit Overrules State Street:

The second articulation we now revisit is the “useful, concrete, and tangible result” language associated with State Street, although first set forth in Alappat. The basis for this language in State Street and Alappat was that the Supreme Court has explained that “certain types of mathematical subject matter, standing alone, represent nothing more than abstract ideas until reduced to some type of practical application.” Alappat, 33 F.3d at 1543; see also State St., 149 F.3d at 1373. To be sure, a process tied to a particular machine, or transforming or reducing a particular article into a different state or thing, will generally produce a “concrete” and “tangible” result as those terms were used in our prior decisions. But while looking for “a useful, concrete and tangible result” may in many instances provide useful indications of whether a claim is drawn to a fundamental principle or a practical application of such a principle, that inquiry is insufficient to determine whether a claim is patent-eligible under § 101. And it was certainly never intended to supplant the Supreme Court’s test. Therefore, we also conclude that the “useful, concrete and tangible result” inquiry is inadequate and reaffirm that the machine-or-transformation test outlined by the Supreme Court is the proper test to apply.

Federal Circuit Announced the New Test:

Thus, the proper inquiry under § 101 is not whether the process claim recites sufficient “physical steps,” but rather whether the claim meets the machine-or-transformation test. As a result, even a claim that recites “physical steps” but neither recites a particular machine or apparatus, nor transforms any article into a different state or thing, is not drawn to patent-eligible subject matter. Conversely, a claim that purportedly lacks any “physical steps” but is still tied to a machine or achieves an eligible transformation passes muster under § 101.

Judge Newman in Dissent:

The court today acts en banc to impose a new and far-reaching restriction on the kinds of inventions that are eligible to participate in the patent system. The court achieves this result by redefining the word “process” in the patent statute, to exclude all processes that do not transform physical matter or that are not performed by machines. The court thus excludes many of the kinds of inventions that apply today’s electronic and photonic technologies, as well as other processes that handle data and information in novel ways. Such processes have long been patent eligible, and contribute to the vigor and variety of today’s Information Age. This exclusion of process inventions is contrary to statute, contrary to precedent, and a negation of the constitutional mandate. Its impact on the future, as well as on the thousands of patents already granted, is unknown.


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Join the Discussion

4 comments so far.

  • [Avatar for Gene Quinn]
    Gene Quinn
    November 3, 2008 11:26 am


    You are, of course, entitled to your opinion, even when you are wrong, and you are wrong here. You seemed to gloss over in the fact that the Federal Circut said that in order for a claim to be valid it must be “limited to a visual depiction that represents specific physical objects or substances…”

    The law had matured to the point where we no longer had to ignore reality and could acknowledge that software is NOT hardware. Can aspects of software be protected still, yes. Can software be protected now? Absolutely not.

    If you know anything about software you know that requiring output to be a visual depiction that represents specific physical objects or substances means that virtually nothing is protectable.

  • [Avatar for tmeaney]
    November 3, 2008 09:32 am

    This is the point in your post that I take extreme issue with Mr. Quinn.

    “Moving forward, you can protect software, but only by protecting the machine that the software operates on, which is the way patent attorneys used to be forced to write software patent applications many years ago.”

    Page 26 of the Bilski slip states the following:

    “Thus, the transformation of that raw data into a particular visual depiction of a physical object on a display was sufficient to render that more narrowly-claimed process patent-eligible.

    We further note for clarity that the electronic transformation of the data itself into a visual depiction in Abele was sufficient; the claim was not required to involve any transformation of the underlying physical object that the data represented. We believe this is faithful to the concern the Supreme Court articulated as the basis for the machine-or-transformation test, namely the prevention of pre-emption of fundamental principles. So long as the claimed process is limited to a practical application of a fundamental principle to transform specific data, and the claim is limited to a visual depiction that represents specific physical objects or substances, there is no danger that the scope of the claim would wholly pre-empt all uses of the principle.”

    This is clearly NOT a 100% rejection of the software process claim. Telling people who read your posts that now the ONLY way, after the Bilski opinion, to protect your software inventions is through a machine-connected claim is, in fact, inaccurate based on the explicit language of the opinion. And, I HAVE read your prior opinions. In fact, I have typically agreed with many of your positions on software patents. Like you, I consider myself an expert in the software arena, both in the legal world and practice world. I represent and have represented many software companies for years, I’ve coded and developed, and I also agree with you that this Bilski case is a “bad, wrong and stupid” opinion.

    I also completely understand that the PTO doesn’t need any help in coming up with their overreaching guidelines to help them artificially reduce their backlog. However, I’d rather them use as support that non-lawyer reporter’s interpretation that Bilski invalidated all method claims, than a publication from a long-time respected member of our bar and supporter of software patents.

  • [Avatar for Gene Quinn]
    Gene Quinn
    November 3, 2008 12:59 am


    Thanks for your opinion, but you are 100% wrong.

    Requiring an invention be tied to hardward in order for it to be patented means that only hardware is patentable.

    Before you chastise me I suggest you read my other writings on the PLI site that explain this matter in detail for a lawyer audience:



    Everything I have said here in this post and on the PLI site is 100% accurate and I am confident that my view and opinions will be vindicated in time.

    And please, suggesting that I am giving the PTO any ideas. Get real. They have been itching for means to summarily reject patent applications and limit the number of filings. The Federal Circuit handed them a gold platted gift and it is naive to think that they wouldn’t get it had I not written about the matter.

  • [Avatar for tmeaney]
    November 3, 2008 12:28 am

    This post is close to the “breaking news” report that concluded that the recent Bilski case invalidated all method claims. The greatest danger of this post is its mistaken announcement that the Bilski court invalidated any protection of software through process claims. That is just flat wrong. The court went through a fairly detailed explanation of why some of the software process claims in the Abele case were still patent eligible under the discussed machine-or-transformation test. While I agree that the court’s effective overruling of State Street is extremely unfortunate (and will hopefully be rectified by the Supreme Court), this type of announcement is the last thing we need to give the patent office mistaken support for any new, overreaching guidelines in implementing the Bilski ruling.