A comparative analysis

Within only a few weeks in the first half of 2010, two last-instance opinions on the connotations of patent eligible subject-matter and the tests to be applied for distinguishing such matter from other material have been delivered on both sides of the Atlantic.

The Supreme Court of the United States in Bilski v. Kappos, No. 08-964, 561 U.S. (2010) had to deal with the issues of whether "a 'process' must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing ('machine-or-transformation' test) to be eligible for patenting under 35 U.S.C.§101" and whether such test "which effectively forecloses meaningful patent protection to many business methods, contradicts the clear Congressional intent that patents protect 'method[s] of doing or conducting business', 35 U.S.C.§273" (Questions presented).

The points of law referred by the President of the European Patent Office in G 3/08 "Programs for computers" of 12 May 2010 to the Enlarged Board of Appeal were limited to "some of the finer aspects" of the exclusion of programs for computers (Press Release of 24 October 2008 on the EPO Website). Nevertheless, at least points 2 and 3 referred overlapped with the first question presented to the U.S. Supreme Court in that the sufficiency of merely mentioning the use of a computer or a computer-readable data storage medium for avoiding exclusion in the area of computer programs was challenged. This issue was indeed also raised and discussed before the U.S. Supreme Court (Transcript of oral argument, p. 33 ff.).

Both cases aroused high-wrought expectations of final clarifications. At first sight, those expectations may not have been met since the Enlarged Board of Appeal found the referral inadmissible and the U.S. Supreme Court contented itself with finding that the machine-or-transformation test is not the sole test for deciding whether an invention is a patent-eligible process (Part II-B-1, p. 8) and that business methods are not categorically excluded from patentability (Part II-C-1, p. 10). Any further development of judicial interpretation was thus left to "lower" instances, i.e. the Court of Appeals for the Federal Circuit and the Boards of Appeal of the EPO (in fact, the Enlarged Board of Appeal is not an instance above the Boards of Appeal but rather coordinate to the Boards). Nevertheless, despite some similarities the resulting status quo of jurisprudence seems to be fundamentally different in both legal systems.

1. Impact of G 3/08

1.1 In G 3/08 the Enlarged Board of Appeal decided that the President's referral was inadmissible under Article 112(1) (b) EPC since there were no different – in the sense of "conflicting" (G 3/08, Nos. 7.2.5, 7.3.1) – decisions on the questions referred. This finding has two immediate consequences:

(Ι) There is no necessity or even possibility for the Enlarged Board of Appeal to enter into a discussion of any merits or demerits of the established case law, all the more so since the legal development is on the hands of the Boards of Appeal and is neither the Enlarged Board´s nor the President's responsibility (Ibid., No. 7.3.8).

(ΙΙ) The status quo of European case law must be considered to be firmly established. Although the Enlarged Board mentions that a "rejection for lack of an inventive step rather than exclusion under Article 52(2) EPC is in some way distasteful to many people" (Ibid., No. 10.13), it refers several times (Ibid., Nos. 4.1, 10.7.1, 10.13.1, 10.13.2) to decision T 154/04-3.5.01 "Estimating sales activity/Duns Licensing Associates" of 15 November 2006 (OJ EPO 2008, 46). As laid out in this decision, an elaborate system for taking excluded subject-matter into account in the assessment of whether there is an inventive step has been developed. While it was not the task of the Enlarged Board in its Opinion to judge whether this system was correct, it appeared to the Enlarged Board "that the case law, as summarised in T 154/04, has created a practicable system for delimiting the innovations for which a patent may be granted".

1.2 Hence, the legal situation of computer-implemented inventions in Europe, at least as regards the central grant proceedings before the EPO, has in the end been decided to be on solid ground. As pointed out in T 154/04, No. 5, the constant jurisprudence of the Boards of Appeal may be summarised in the following principles:

(A) Article 52(1) EPC sets out four requirements to be fulfilled by a patentable invention: there must be an invention, and if there is an invention, it must satisfy the requirements of novelty, inventive step, and industrial applicability.

(B) Having technical character is an implicit requisite of an "invention" within the meaning of Article 52(1) EPC (requirement of "technicality").

(C) Article 52(2) EPC does not exclude from patentability any subject matter or activity having technical character, even if it is related to the items listed in this provision since these items are only excluded "as such" (Article 52(3) EPC).

(D) The four requirements of invention, novelty, inventive step, and susceptibility of industrial application are essentially separate and independent criteria of patentability, which may give rise to concurrent objections. Novelty, in particular, is not a requisite of an invention within the meaning of Article 52(1) EPC, but a separate requirement of patentability.

(E) For examining patentability of an invention in respect of a claim, the claim must be construed to determine the technical features of the invention, i.e. the features which contribute to the technical character of the invention.

(F) It is legitimate to have a mix of technical and "non-technical" features appearing in a claim, in which the non-technical features may even form a dominating part of the claimed subject matter. Novelty and inventive step, however, can be based only on technical features, which thus have to be clearly defined in the claim. Non-technical features, to the extent that they do not interact with the technical subject matter of the claim for solving a technical problem, i.e. non-technical features "as such", do not provide a technical contribution to the prior art and are thus ignored in assessing novelty and inventive step.

(G) For the purpose of the problem-and-solution approach, the problem must be a technical problem which the skilled person in the particular technical field might be asked to solve at the relevant priority date. The technical problem may be formulated using an aim to be achieved in a non-technical field, and which is thus not part of the technical contribution provided by the invention to the prior art. This may be done in particular to define a constraint that has to be met (even if the aim stems from an a posteriori knowledge of the invention).

The requirement of technical character is not met by "purely abstract concepts devoid of any technical implications" whereas technical character is implied by the features of a technical product or activity, or is conferred to a non-technical activity by the use of technical means (T 258/03 "Auction method/HITACHI" of 21 April 2004; OJ EPO, No. 4.5; see also T 154/04, Nos. 18 – 22). These principles are applicable for assessing the patentability of any subject-matter claimed.

1.3 In the field of business methods, this means

  • that abstract business or financial concepts are not patent-eligible subject-matter, but
  • that such concepts become (at least in principle) patent-eligible if they employ a technical means, e.g. if they are tied to a standard computer.

Whether they get over the second hurdle of inventive step depends on the obviousness of the combination of those features that contribute to the requisite technical character. As experience shows, business methods will not easily overcome this hurdle since they regularly amount to nothing more than the straightforward automation of a (possibly innovative) non-technical economic concept. However, applying principle (C) above, it cannot be excluded once and for all that business aspects might also contribute to the technical character and would therefore have to be taken into account when assessing inventive step (see also T 258/03, No. 5.8). Business methods will therefore only be patentable if they are tied to technical means and if those of their features that make a technical contribution involve an inventive step.

1.4 The Enlarged Board of Appeal did its best to foster harmonisation with national case law of the Contracting States by inviting two high-ranking national judges to the bench and citing various national decisions in its opinion. Whether this captatio benevolentiae will contribute to a favourable reception throughout Europe remains to be seen. It appears that recent decisions in Germany (see e.g. BGH X ZB 22/07 - Steuerungseinrichtung für Untersuchungsmodalitäten of 20 January 2009; Xa ZB 20/08 - Dynamische Dokumentengenerierung of 22 April 2010) are approaching the European position while the UK (at least up to now) follows a different line of argument (see e.g. [2008] EWCA Civ 1066- Symbian Ltd. v. Comptroller General of Patents of 8 October 2008).

2. Bilski and its ramifications

2.1 Before the Supreme Court of the United States, three arguments were advanced for the proposition that the claimed invention (a procedure of hedging against the risk of price fluctuations) was outside the scope of patent law:

(Ι) it was not tied to a machine and did not transform an article;

(ΙΙ) it involved a method of conducting business; and

(ΙΙΙ) it was merely an abstract idea.

2.2 According to the majority opinion of the U.S. Supreme Court, adopting the machine-or transformation test as the sole test for what constitutes a "process"  violates statutory interpretation principles, in particular the principles of interpreting words as taking their ordinary, contemporary, common meaning and refraining from imposing limitations that were inconsistent with the text and the statute's purpose and design. Any suggestion in the U.S. Supreme Court's case law that the Patent Act's terms deviated from their ordinary meaning had only been an explanation for the exceptions of laws of nature, physical phenomena and abstract ideas which were not patentable. Concerns about attempts to call any form of human activity a "process" could be met by making sure the claim fulfilled the requirements referred to in 35 U.S.C.§101, including novelty, non-obviousness and full disclosure.

2.3 Section 101 similarly precluded the broad contention that the term "process" categorically excluded business methods. The term "method", which was within §100(b)'s definition of "process", might include at least some methods of doing business. The U.S. Supreme Court was unaware of any argument that the ordinary, contemporary, common meaning of "method" excluded business methods, nor was it clear how far a prohibition on business methods patents would reach. A categorical exclusion of business methods was further undermined by the fact that federal law under 35 U.S.C. §273 (b) (1) explicitly contemplated the existence of at least some business method patents. However, while §273 appeared to leave open the possibility of some business method patents, it did not suggest broad patentability of such claimed inventions.

2.4 Even though the petitioners' application was not categorically outside of §101 under the above-mentioned approaches (1) and (2) rejected by the Supreme Court in their categorical form, that did not mean it was a "process" under §101. Rather than adopting categorical rules that might have wide-ranging and unforeseen impacts, the Supreme Court resolved the case narrowly on the basis of its guidepost decisions in Gottschalk v. Benson, 409 U.S. 63 (1972) of 20 November 1972, Parker v. Flook, 437 U.S. 584 (1978) of 22 June 1978 and Diamond v. Diehr, 450 U.S. 175 (1981) of 3 March 1981, which showed that petitioners' claims were not patentable processes because they were attempts to patent abstract ideas. Hence, there was no need to define further what constituted a patentable "process".

2.5 Since the patent application could be rejected under the precedents on non-patentability of abstract ideas, the U.S. Supreme Court once again declined to impose limitations on the Patent Act that were inconsistent with the Act's text. However, nothing in the present opinion should be read as endorsing interpretations of §101 that the Federal Circuit had used in the past (see, e.g., State Street Bank & Trust Co. v. Signature Financial Group Inc., 149 F.3d 1368 (Fed. Cir. 1998) of 23 July 1998 or AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352 (Fed. Cir. 1999) of 14 April 1999). It might be that the Federal Circuit thought it needed to make the machine-or-transformation test exclusive precisely because its case law had not adequately identified less extreme means of restricting business method patents. In disapproving an exclusive machine-or-transformation test, the U.S. Supreme Court by no means foreclosed the Federal Circuit's development of other limiting criteria.

2.6 Hence, although the machine-or-transformation test established by the CAFC was rejected as the sole test for evaluating patent-eligibility, the U.S. Supreme Court indicated that it intended neither to de-emphasise the test's usefulness nor to suggest that many patentable processes might lie beyond its reach. Whereas abstract ideas are not patentable, business methods are not categorically excluded. Other limiting criteria in this respect had to be developed by the Federal Circuit.

2.7 In the end, what constitutes a patentable process has been left open. Nor do we know how a patentable process is distinguished from an abstract idea. In the U.S. Supreme Court's view, there may be patentable subject-matter beyond the limits set by the machine-or-transformation test, but possibly not very wide-ranging. Business methods may be patentable within certain limits to be established by some unknown test and/or applying the other patentability requirements more strictly. What this surplus over the machine-or-transformation test is, and where the line has to be drawn with respect to business methods, is now (again) left to the Federal Circuit with the advice to use the precedents of Benson, Flook and Diehr as guideposts and to forget about the State Street Bank approach as a fall-back alternative.

Remarks

Whereas G 3/08 appears to settle the legal situation in the field of computer-implemented inventions in Europe for the time being and at least for some time to come, Bilski leaves important questions open in the United States. In consequence, both legal systems remain in a different state of legal certainty, and one can only speculate if and when the Federal Circuit might be able to close the existing gaps in legal construction.

From a European perspective, it is interesting to see that, on the one hand, abstract ideas are neither patentable in Europe nor in the United States and, on the other hand, business methods are not categorically excluded from patentability in both systems, in the United States because they fall under the broad meaning of "process" or "method" as patent-eligible subject-matter, in Europe because they are only excluded "as such". The delimiting criterion in Europe is the presence of technical character that is already realised by using any technical means. In so far process patentability in Europe is necessarily tied to a machine, which need not be a "particular" one. In the United States, machine involvement does not appear to be a sine qua non, while any other delimiting criterion is lacking for now. Finally, in Europe a strict weeding exercise is carried out at the second hurdle of novelty and inventive step, also hinted at by the U.S. Supreme Court in Bilski.

First published in BARDEHLE PAGENBERG IP REPORT 2010/III

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