Friday, 31 October 2008

Ocean pours oil on troubled waters

IP auction company Ocean Tomo has sent a circular to interested parties, to calm their nerves over the US Federal Court's recent en banc decision in re Bilski (noted here on Patently-O). According to Ocean Tomo this decision

"... is unlikely to substantially change the scope of subject matter eligible for so-called business method patents or to alter the value of business method portfolios. The Court, relying on ... Supreme Court precedent, articulated a “machine or transformation test” for patentability. Under this test “an applicant may show that a process claim satisfies §101 either by showing that his claim is tied to a particular machine, or by showing that his claim transforms an article.” However, because the claim at issue in Bilski was admitted to be “not limited to operation on a computer,” or to carrying out the process by “any specific machine or apparatus,” the Court expressly declined to consider the contours of the machine implementation alternative. “[I]ssues specific to the machine implementation part of the test are not before us today. We leave to future cases the elaboration of the precise contours of machine implementation, as well as the answers to particular questions, such as whether or when recitation of a computer suffices to tie a process claim to a particular machine.” (Emphasis added).

The ... “transformation” test is broad. For example, ... a claim direct to the “transformation” of the depiction of a physical object on a visual display meets that test. ... the Court overruled the “useful, concrete and tangible result” test established in State Street, holding that it was “insufficient to determine whether a claim is patentable subject matter under §101.” But while this test is no longer the law, the new test will likely not alter the ultimate answer to the question as applied to particular business methods.

“Business method patents” commonly claim implementation by computer. Accordingly, the Court’s refusal to consider “whether or when recitation of a computer” is sufficient to render a process claim patentable means that the practical impact of Bilski should be limited. Absent development of further case law which squarely addresses this point, Bilski does not appear to materially change the business method patent landscape, or alter valuations of these patents".

There may be an element of wishful thinking or self-interest here but, to me at least, OT's position seems about right. Any comments?


  1. OT has a self-serving need to down-play the impact of In Re Bilski. Jon Barney, an IP Attorney formerly with Knobbe Martens, formed his company around U.S. Patent 6,556,992 on a "Method and System for Rating Patents and Other Intangible Assets," which later joined with Ocean Tomo. I'd venture to say that the '992 patent fails the machine or transformation test of Benson.

  2. I think that it depends very much on the drafting of the patent. My reading of the case is that the Court wants to see the claim written so that the business method is tied to a computer (hardware). The assumption behind OceanTomo's statement is that many (most?) business method related patents have sufficient disclosure that claims can be written which are directed towards the machine. That may be true of some patent applications. However, the State Street decision lead to a false sense of security. Prior to State Street most patent drafters took care to include a description of the hardware; post State Street this was not seen to as important. This is particularly noticeable for patents which have been prosecuted in the European Patent Office. The EPO's case law on computer-implemented inventions effectively requires a recitation of hardware elements to stand some chance of grant - and many European filings based on US priority applications fail the test

  3. I think OT is too sanguine. On its face the "machine-or-transformation" test is much the same as the old UK "vendible product" test. The vendible products tests was unduly restrictive if taken seriously, and incoherent and uncertain if massaged sufficiently to generate acceptable results. Hence its rejection after the 1959 Aus HC decision in NRDC, not quite 20 years after it was introduced. I expect the machine-or-transformation test will go much the same way - it will result in general uncertainty combined with rejection of a number of meritorious patents, until it ultimately gets rejected, who knows far in the future.

    A second problem with Bilski is that the machine-or-transformation test is expressly no more than a proxy for the more basic principle that a claim cannot “pre-empt substantially all uses of [a] fundamental principle.” In other words, Bilski says that an inventor is not entitled to claim the entire scope of her inventive contribution. On this view Watt’s claim to steam engines in which “steam is to be condensed in vessels distinct from the steam vessels, or cylinders, although occasionally communicating with them,” or Neilson’s hot-blast furnace claim to “all machines, of whatever construction, whereby the air is heated intermediately between the blowing apparatus and the blast furnace,” would be invalid; that is, unless we start drawing tortured distinctions between “fundamental” and “non-fundamental” principles.