Originally published October 24, 2005
In 1980, the Supreme Court of the United States held that "anything under the sun made by man" is patentable.1 Later decisions by other courts also affirmed the patentability of business method claims.2 These decisions opened the floodgates of the United States Patent and Trademark Office (USPTO) to applications for business method patents. In an effort to limit the number of business method patents allowed, the USPTO began rejecting business method claims using a "technological arts" test. This test essentially limited the allowance of business method claims to those using computers or other electronic processing devices.
On October 17, 2005, in Ex parte Lundgren,3 the Board of Patent Appeals and Interferences of the USPTO reversed an examiner’s rejection of business method claims under 35 U.S.C. § 1014 for failing to satisfy the "technological arts" requirement for patentable subject matter. The three-judge majority held that there is no judicially created technological arts requirement for patentable subject matter.
The patent application in this case relates to a method of compensating a manager exercising control over a privately owned firm for the purpose of reducing the degree to which prices exceed marginal costs in industry, reducing incentive for industry collusion, or reducing incentives for coordinated special interest lobbying.5
This is the second time this case was appealed to the Board. In the first appeal, a merits panel reversed the examiner’s first rejections under 35 U.S.C. § 101 for non-statutory subject matter. An expanded panel of the Board remanded the application to the examiner for reconsideration so that issues of "technological arts" and "practical application" could be further considered.
Following further prosecution, the examiner maintained his rejection under 35 U.S.C. § 101 for non-statutory subject matter. The examiner determined that the process claims produced a useful, concrete and tangible result; however, the examiner asserted that the invention and its practical application were outside the "technological arts." The applicant filed this second appeal with the Board.
The Board’s decision reversed the examiner’s rejections and refused to recognize a separate "technological arts" test to evaluate patentable subject matter under 35 U.S.C. § 101. As described above, the "technological arts" test had limited business method claims to business methods performed with the assistance of a computer. The Board based its decision on a lack of precedential support for the "technological arts" test. Specifically, the Board noted that the Supreme Court was aware of the "technological arts" test but declined to adopt it in its reversal of Gottschalk v. Benson6 in 1972.
A separate opinion concurred with the majority’s refusal to recognize a "technological arts" test but dissented with the majority’s refusal to provide guidance on the test for statutory subject matter. The dissent provides an analysis of statutory subject matter under 35 U.S.C. § 101 and identifies three tests for process claims that are "non-technical." These include requiring a transformation of either tangible or intangible subject matter to a different state or thing; the well recognized exceptions for "laws of nature, physical phenomena and abstract ideas"; and the "useful, concrete and tangible result" test of State Street. After applying these three tests to the business method claims, the dissent concluded that the patent claims were directed to non-statutory subject matter.
The Board’s decision eliminates the "technological arts" test and clarifies that business method patents are not only limited to technological platforms. Because the decision is binding only on the USPTO, the issue will not be clearly decided until it is appealed to the Federal Circuit and Supreme Court. Even then, the issue remains far from clear because the Board’s decision may conflict with recent Congressional efforts to harmonize patent law internationally.
In the interim, the USPTO will likely adopt another test to limit or define the scope of business method patents. The ruling also may create a surge of new business method patent applications.
Footnotes
1 Diamond v. Chakrabarty, 447 U.S. 303 (1980).
2 See State Street Bank & Trust Co. v. Signature Financial Group, 149 F.3d 1368 (Fed. Cir. 1998); AT&T v. Excell Communications, Inc., 172 F.3d 1352 (Fed. Cir. 1999).
3 Appeal No. 2003-2088 (Bd. Pat. App. & Int. 2005).
4 35 U.S.C. § 101 provides:
"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 therefor, subject to the conditions and requirements of this title."
5 U.S. Patent Application No. 08/093,516 (filed July 16, 1993).
6 409 U.S. 63 (1972).
© 2005 Sutherland Asbill & Brennan LLP. All Rights Reserved.
This article is for informational purposes and is not intended to constitute legal advice.
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