When the Supreme Court announced it would hear the Bilski case, many speculated that the Court would use the opportunity to declare an end to patents on business methods. This did not happen. However, the Court did find that Bilski’s claims to a method for hedging risk were not the kind of invention for which a patent should be granted.
What does this mean for other finance industry patents and patent applications? Certain types of business method patents may be safe for now – but warning signs point to hazards down the road.
The Supreme Court’s lack of guidance as to how to determine whether a claim recites an “abstract idea” or an unpatentable business method is a potential hazard for finance industry inventions. Comparing Bilski’s claims with claims at issue in the Federal Circuit’s opinion in State Street Bank & Trust Co.,1 which is the case many view as opening the floodgates to business method patents, highlights the difficulties. State
Street upheld the patentability of a claim that constituted a practical application of a mathematical algorithm, formula or calculation because it produced “a useful, concrete, and tangible result.” “Concrete” is the opposite of “abstract” as those terms are typically understood. Thus, to some extent, the Supreme Court’s use of an “abstract ideas” test in Bilski might be interpreted as consistent with the State Street holding
in which claims must recite a “concrete” result to qualify for patent protection.
Comparing the Bilski and StateStreet claims highlights another important issue: the Bilski claims were directed toward methods and do not recite any machine (computer) limitations, whereas the State Street claims were directed toward “a data processing system” which can be a general purpose computer programmed to perform specific steps. The issue of whether a general purpose computer performing an unpatentable business method can qualify for patent protection was raised before the Supreme Court, but was not addressed in the majority opinion. It is therefore an important open question.
Implications for patent prosecution
Avoiding statutory subject matter rejections begins with the specification. To avoid creating the impression that an invention is nothing more than an abstract idea, it is important to link the inventive concept to the physical world. The PTO’s Interim Guidelines provide some guidance. The Interim Guidelines note that even before Bilski, “the Office had used the ‘abstract idea’ exception in cases where a claimed ‘method’
did not sufficiently recite a physical instantiation.” In analyzing the Bilski claims, the Interim Guidelines conclude that the Supreme Court considered the claims to recite no more than an abstract idea “in the sense that there are no limitations as to the mechanism for entering into the transactions,” thereby indicating a belief that the Supreme Court was using “abstract” in the sense of not related to a tangible thing.
Maximize the likelihood of a favorable outcome by providing in the specification a physical instantiation or a mechanism for implementing the inventive concept. In the financial industry, this typically means describing the computer system or network on which the inventive concept is implemented. Providing more details strengthens the case for the invention being more than a mere abstract idea.
Drafting claims for financial industry inventions requires finesse. To avoid a rejection under §101, the claims should recite something about the physical instantiation or mechanism for achieving the inventive concept. This typically requires the claim to recite that at least some of the steps therein are performed by a computer processor. If the invention requires a computer network, then the claim should include components of the network. It is helpful to enlist the inventor to help brainstorm alternative ways for implementing the invention so that generic claims covering all alternative implementations can be drafted, yet still be limited to a physical instantiation of the invention.
Implications for patent litigation
Financial industry patents that do not recite a physical instantiation or mechanism for implementing the inventive concept likely are vulnerable in light of Bilski. Patent owners must decide whether the cost of litigation justifies the risk of having claims declared invalid under §101. Parties accused of infringing such claims need to consider §101 in formulating defenses. Clearly, the law is still developing. To what extent must a claim recite a physical instantiation to avoid a §101 defense? Is it sufficient to merely mention a computer or processor in a claim? Or does a claim require a more granular recitation of a mechanism for implementing a financial services method, with the inventive concept tied into the mechanism for the claim to meet the requirements under §101? Future case law will provide answers to these questions.
1 State Street Bank & Trust Co. v. Signature Fin. Grp., Inc., 149 F.3d 1368 (Fed. Cir. 1998), overruled by In re Bilski, 545 F.3d 943 (Fed. Cir. 2008) (en banc)