11 Step Computer Method Patent Defines Patent Eligible Subject Matter

The Federal Circuit Court of Appeals (“Federal Circuit”) reversed the trial court’s decision that the process – a computer method claim – was not statutory subject matter under 35 U.S.C. § 101. Ultramercial, LLC v. Hulu, LLC, Case No. 2010-1544 (Fed. Cir. Sept. 15, 2011) (available here). The 11 step computer program method patent claim was held to be a machine under the “machine or transformation” (MOT) test. Earlier, the District Court had dismissed the patent owner’s case without formally construing the 11 elements in the method patent claim and this failure to properly construe the claim elements in a Markman ruling was a factor in the reversal.

“This court has never set forth a bright line rule requiring district courts to construe claims before determining subject matter eligibility. Indeed, because eligibility is a ‘coarse’ gauge of the suitability of broad subject matter categories for patent protection, Research Corp. Techs., Inc. v. Microsoft Corp., 627 F.3d 859, 869 (Fed. Cir. 2010), claim construction may not always be necessary for a § 101 analysis. See, e.g., Bilski v. Kappos, 130 S. Ct. 3218, 3231 (2010) (finding subject matter ineligible for patent protection without claim construction).” Slip opn. p. 5.

The § 101 subject matter eligibility analysis is merely a threshold check. Claim patentability ultimately depends on “the statutory conditions the patent statute such as novelty, nonobviousness, and adequate disclosure.” See Ultramercial, p. 6; Classen Immunotherapies, Inc. v. Biogen IDEC, Nos. 2006-1634, 2006-1649, 2011 WL 3835409, at *6 (Fed. Cir. Aug. 31, 2011) (pointing out the difference between “the threshold inquiry of patent-eligibility, and the substantive conditions of patentability”).

Per the Federal Circuit, the claimed invention in this case was a method for monetizing and distributing copyrighted products over the Internet. “As a method, it satisfies § 100’s definition of ‘process’ and thus falls within a § 101 category of patent-eligible subject matter. Thus, this court focuses its inquiry on the abstractness of the subject matter claimed by the ’545 patent.” p. 9.

“‘[I]nventions with specific applications or improvements to technologies in the marketplace are not likely to be so abstract that they override the statutory language and framework of the Patent Act.’ Research Corp., 627 F.3d at 869. The ’545 patent [in suit] seeks to remedy problems with prior art banner advertising, such as declining clickthrough rates, by introducing a method of product distribution that forces consumers to view and possibly even interact with advertisements before permitting access to the desired media product. By its terms, the claimed invention purports to improve existing technology in the marketplace. By its terms, the claimed invention invokes computers and applications of computer technology.” P. 9-10 (emphasis added).

The ’545 patent claims a particular method for monetizing copyrighted products, consisting of the following steps: (1) receiving media products from a copyright holder, (2) selecting an advertisement to be associated with each media product, (3) providing said media products for sale on an Internet website, (4) restricting general public access to the media products, (5) offering free access to said media products on the condition that the consumer view the advertising, (6) receiving a request from a consumer to view the advertising, (7) facilitating the display of advertising and any required interaction with the advertising, (8) allowing the consumer access to the associated media product after such display and interaction, if any, (9) recording this transaction in an activity log, and (10) receiving payment from the advertiser. ’545 patent col.8 ll.5-48. Many of these steps are likely to require intricate and complex computer programming. In addition, certain of these steps clearly require specific application to the Internet and a cyber-market environment.

In conclusion, the many claim elements, which constitute the claimed process restrictions of: viewing, restricting, limiting access, displaying and processing payments, satisfy the “machine” portion of the “machine or transformation” (MOT) test.

Virtual Money for Online Game – Business Method or Computer Program Patent?

The U.S. Patent and Trademark Office (USPTO) recently published a patent application by Zynga Game Networks, Inc. See www.zynga.com which seeks to patent virtual money generated and exchanged by players in online games.  The published patent application, Patent Publication No. 20100227675 (available here), entitled “Virtual Playing Chips in a Multiuser Online Game Network” (Ser. No. 12/716,573, filed March 3, 2010), represents an innovation by Zynga, best known as the developer of the online computer game FarmVille (see www.facebook.com/FarmVille. The virtual money patent is innovative both in a technical sense for online computer games and in a legal sense in light of the 2010 Supreme Court case, Bilski v Kappos, 561 U.S. __ (2010) (available here).  In Bilski, four members of the Supreme Court stated that business method patents were not patentable subject matter under the Patent Statute.  See concurring opinion by Justices Stevens, Ginsburg, Breyer, and Sotomayor.  Justice Stevens clearly stated that Bilski’s method of hedging “is not a ‘process’ [within the scope of Patent Statute Section 101] because it describes only a general method of engaging in business transactions—and business methods are not patentable.” Concurring opinion, slip opn 2.

“Our recent case law reinforces my [Justice Stevens’] view that a series of steps for conducting business is not a ‘process’ under §101. Since Congress passed the 1952 Act, we have never ruled on whether that Act authorizes patents on business methods. But we have cast significant doubt on that proposition by giving substantial weight to the machine-or-transformation test, as general methods of doing business do not pass that test. And more recently, Members of this Court have noted that patents on business methods are of ‘suspect validity.’” Concurring opinion, slip opn 33 (citing eBay Inc. v. MercExchange, L.L.C., 547 U. S. 388, 397 (2006))

The majority in  Bilski v Kappos did not provide substantive guidance as to what is or is not patentable subject matter under Section 101 as applied to business method patents.  Business method patents are often commercially implemented as computer programs.  However, sometimes the patent claims, which define the scope of the owner’s rights, do not have language limiting their scope to computer programs.  The majority opinion found that Bilski’s proposed patent claim, as presented in his application, was not a patentable “process” under Section 101 because the hedging method was an abstract idea.  The Bilski “Petitioners seek to patent both the concept of hedging risk and the application of that concept to energy markets. Rather than adopting categorical rules [for Section 101] that might have wide-ranging and unforeseen impacts, the Court resolves this case narrowly on the basis of this Court’s decisions in Benson, Flook, and Diehr, which show that petitioners’ claims are not patentable processes because they are attempts to patent abstract ideas.” Bilski v Kappos, slip opn. 13.  Zynga’s patent claim for virtual money may be subject to the same criticism as the claims in Bilski.

After Bilski, there are several tests which patent practitioners employ to determine whether a patent claim is patentable subject matter under Section 101.  The tests are well described in the earlier Federal Circuit court opinion, In re Bilski,  545 F. 3d 943 (Fed. Cir. 2008) (available here).  The Federal Circuit attempted to condense several tests used over the past 20 years into a singular machine-or-transformation test.  The Supreme Court in Bilski v Kappos affirmed the Federal Circuit’s rejection of the Bilski hedging scheme as being unpatentable but rejected the Federal Circuit’s efforts to unify the theory of patentable subject matter for business methods and computer programs.  Per the Supreme Court, the machine-or-transformation test is a “useful tool” but is not the sole test of subject matter patentability.  The Federal Circuit had earlier ruled that the  machine-or-transformation test was the sole test, thereby discarding several other tests of Section 101 patentability.

All these business method – computer program cases turn on the specific words in the patent claims, which words define the scope and meaning of the patentee’s rights.  Zynga’s first patent claim states:

1. A method. comprising:
receiving at a server a purchase order for virtual currency from a player wherein the purchase order was made with legal currency, and wherein the virtual currency is usable within the context of a computer-implemented game;
crediting an account of the player with virtual currency wherein the virtual currency is not redeemable for legal currency;
receiving a second purchase order for a virtual object within the context of the computer-implemented game from the player wherein the second purchase order was
made with virtual currency; and
debiting the account of the player based on the second purchase order.

Rather than dissect and comment on Zynga’s virtual currency patent claim, a recitation of the claims approved and disapproved by the Supreme Court provides better guidance on this topic.

In Gottschalk v. Benson, the Supreme Court rejected a claim as being directed to an abstract idea and ruled that an algorithm to convert binary-coded decimal numerals into pure binary code was a not a patentable “process” under §101. 409 U. S., at 64–67. Gottschalk v. Benson, 409 U.S. 63, 175 USPQ 673 (1972) (converting a number into a different format is not patentable).  In Parker v. Flook, 437 U.S. 584, 198 USPQ 193 (1978), the Court rejected a method of updating alarm limits for the catalytic conversion of hydrocarbons as being not patentable because of insignificant postsolution activity.

The Federal Circuit in Bilski described an earlier Supreme Court case, Diamond v. Diehr, 450 U.S. 175, 209 USPQ 1 (1981) which approved the patentability of an algorithm used to operate a machine.

“The Supreme Court last addressed this issue in 1981 in Diehr, which concerned a patent application seeking to claim a process for producing cured synthetic rubber products. 450 U.S. at 177-79. The claimed process took temperature readings during cure and used a mathematical algorithm, the Arrhenius equation, to calculate the time when curing would be complete. Id. Noting that a mathematical algorithm alone is unpatentable because mathematical relationships are akin to a law of nature, the Court nevertheless held that the claimed process was patent-eligible subject matter, stating: ‘[The inventors] do not seek to patent a mathematical formula. Instead, they seek patent protection for a process of curing synthetic rubber. Their process admittedly employs a well-known mathematical equation, but they do not seek to pre-empt the use of that equation. Rather, they seek only to foreclose from others the use of that equation in conjunction with all of the other steps in their claimed process.’” Bilski, Federal Circuit slip opn. 6 – 7, quoting Diehr at 187.

Lastly, the Supreme Court in Bilski v Kappos cited a very old 1853 case involving Morse’s telegraph patent.  O’Reilly v. Morse, 56 U.S. 15 How. 62 (1853).  The O’Reilly Court, in a similar manner to the Bilski Court, found that one of Morse’s patent claims, using electromagnetism for writing, would preempt a wide swath of technological developments and was not patentable.  Morse claimed: “the use of the motive power of the electric or galvanic current, which I call electro-magnetism, however developed for marking or printing intelligible characters, signs, or letters, at any distances.”  This claim was too broad and would preempt the entire technical field without regard to the machinery associated with the process.  The Court rejected the patent claim due to preemption of an entire field of technologic advances.  However, the Court approved other Morse patent claims, one of which claimed: “the system of signs, consisting of dots and spaces, and of dots, spaces, and horizontal lines, substantially as herein set forth and illustrated, in combination with machinery for recording them, as signals for telegraphic purposes.”

In conclusion, a best practice will include the use of pure method claims and claims tied in some manner to a machine or claims which transform a thing into something else.