| The patenting of software and business methods, | | | | when applying the ‘machine-or-transformation' |
| one of the more controversial strands of | | | | test. First, ‘the use of a specific machine or |
| protection offered by intellectual property regimes | | | | transformation of an article must impose |
| in modern times, has traditionally been more | | | | meaningful limits on the claim's scope to impart |
| accessible to inventors in the United States than | | | | patent-eligibility'. Second, "the involvement of the |
| to their European counterparts. | | | | machine or transformation in the claimed process |
| Persuasive arguments exist both against and in | | | | must not merely be insignificant extra-solution |
| favour of protection. Apologists contend that | | | | activity". |
| software patents provide newcomers with a | | | | Each prong of the machine-or-transformation test |
| powerful tool with which to secure themselves a | | | | has been applied in the courts, in Bilski itself the |
| place in the market when faced with towering | | | | CAFC concerned itself only with the second issue, |
| competition from established corporations, such as | | | | leaving to future cases the ‘elaboration of the |
| IBM and Microsoft. On the other hand critics | | | | precise contours of machine implementation, as |
| suggest that patent stockpiles and cross-licensing | | | | well as the answers to particular questions, such |
| agreements between these large companies | | | | as whether or when recitation of a computer |
| make the market inaccessible to smaller | | | | suffices to tie a process claim to a particular |
| innovative companies, who lack the corporate | | | | machine'. To understand the court's analysis a little |
| clout to secure such arrangements, and must | | | | background of the pertinent claims in Bilski is |
| tread carefully through a minefield of potential | | | | required. |
| litigation. In a different vein, computer scientists | | | | Transformation of a particular article into a |
| demonstrate inconsistency in the law through | | | | different state or thing: Bilski |
| semantic analyses of legislation, arguing that | | | | The invention claimed relates to the provision to |
| algorithms ought to be excluded from protection | | | | consumers of a fixed-price contract for |
| as abstract mathematical formulae. | | | | ‘commodities' such as coal, oil or gas. It is |
| Irrespective of the position taken, this class of | | | | clearly described in the applicant's petition to the |
| protection is of immense importance to | | | | Supreme Court for a writ of certiorari, which |
| innovators operating in markets which rely on | | | | refers to the higher court the question of |
| technology, where a firm grasp of this branch of | | | | whether the machine-or-transformation test is |
| the law is vital. Difficulty lies in the pace at which | | | | appropriate to use when determining |
| the law is developing to cope with emerging | | | | patent-eligibility for this type of invention. The |
| markets, and to accommodate the polarised | | | | claims relate to a system whereby an |
| views of influential players. | | | | intermediary, operating between consumers and |
| A gradual shift towards patent-eligibility | | | | commodity suppliers such as a gas provider, may |
| In the years leading up to 2008 the state of the | | | | hedge the related risks. Simply put, a |
| law in the US was regarded as relatively receptive | | | | mathematical formula is employed, along with |
| to this type of patent, however, the scene had | | | | statistical analysis of the risks involved, in order to |
| initially been set by three cases decided by the | | | | determine a fixed price payment plan for the |
| Supreme Court: In Gottschalk v. Benson it was | | | | consumer which aims to protect the supplier from |
| held that algorithms, by their nature abstract | | | | a drop in demand due to unforeseen |
| ideas, were not patentable by themselves; In | | | | circumstances (such as a warmer winter leading |
| Parker v. Flook it was explained that an invention | | | | to a reduced demand for gas), and simultaneously |
| which fails the test of novelty, but for a new | | | | obviate the risk to the consumer from increased |
| algorithm, is not rendered patentable by that | | | | costs due to a surge in demand (for example a |
| development; and in Diamond v. Diehr the court | | | | higher gas bill after a colder winter). |
| held that while software itself was not eligible for | | | | The CAFC held in Bilski (now Bilski v. Doll) that the |
| protection, the inclusion of a software element in | | | | legal obligations and business risks on which their |
| an application would not disqualify it if the invention | | | | invention operate do not satisfy the second prong |
| claimed was otherwise patentable. | | | | of the test because "they are not physical |
| The Court of Appeals for the Federal Circuit | | | | objects or substances, and they are not |
| (CAFC), in the case of In Re Alappat, deemed | | | | representative of physical objects or substances". |
| software employed to improve the appearance | | | | Bilski did not make a case to satisfy the first |
| of information shown on a display patentable, | | | | prong of the test, and so the subject matter was |
| formulating the ‘useful, concrete, and tangible | | | | held patent-ineligible. A writ of certiorari has |
| result' test, which would later be reaffirmed in | | | | recently been granted, and the Supreme Court |
| State Street. While on a first reading this test | | | | will weigh in with a final ruling on the matter, but |
| may appear to restrict patentable software to | | | | the case has already been relied upon in |
| that which produces real-world physical effects, | | | | subsequent decisions, which have elaborated on |
| separate from its own execution, it encompassed | | | | the first issue. |
| a far broader range of applications. For example, | | | | Tied to a particular machine or apparatus: |
| the court found, in the case of In Re Lowry, that | | | | DealerTrack |
| data structures (means of arranging and | | | | The Board of Patent Appeals and Interferences |
| accessing information in computer memory) | | | | has held in a number of cases that claims which |
| achieved such results by affecting the state of | | | | assert that their subjects are tied to general |
| electrical or magnetic structural elements in | | | | purpose machines will not meet the required |
| memory, and thereby providing increased | | | | threshold. Reference to some of these can be |
| efficiency in computer operation. | | | | found in the case of DealerTrack v. Huber, in |
| In State Street the court later held that | | | | which the defendants successfully employed the |
| mathematical algorithms were patentable in the | | | | machine-or-transformation test to obtain |
| context of applications meeting the test set out in | | | | summary judgment of invalidity against the |
| Alappat, namely those yielding a ‘useful, | | | | holders of a patent bringing a suit for infringement. |
| concrete, and tangible result', and simultaneously | | | | In DealerTrack the complainants argued that the |
| stated that business methods were not prima | | | | claims of their patent satisfied the test by virtue |
| facie excluded from protection, holding that they | | | | of being tied to: "a specially programmed |
| should be treated the same way as any other | | | | computer hardware and database"; a "remote |
| process. The ruling led to an influx of software | | | | application entry and display device"; and a |
| and business method applications, classes within | | | | "remote funding source terminal device". The |
| which the number of patents filed has grown | | | | court rejected these arguments, reducing the |
| rapidly. | | | | elaborately named devices to "any device", and |
| The machine-or-transformation test | | | | noting that the patent did not specify how the |
| In light of the recent developments in the | | | | computer hardware and database were "specially |
| jurisprudence provided by the cases of In Re | | | | programmed". The second prong of the test was |
| Bilski and DealerTrack v. Huber, the security of | | | | not at issue and the patent was held to be invalid. |
| this investment in intellectual property is uncertain. | | | | Concluding remarks |
| Bilski revolved around a patent for a method of | | | | In conclusion, while the US patent regime has |
| ‘managing the consumption risk costs | | | | traditionally been relatively permissive to software |
| associated with a commodity sold at a fixed price | | | | and business method inventions, it appears that |
| for a given period'. The CAFC held that the earlier | | | | the courts are regressing in their interpretation of |
| ‘useful, concrete, and tangible' test was | | | | the law as set out by 35 U.S.C. § 101 (governing |
| inappropriate, and instead distilled a new | | | | patentable subject matter) towards the position |
| formulation from the jurisprudence of the | | | | taken by the Supreme Court in the Benson, |
| Supreme Court. To meet the requisite criteria for | | | | Flook, and Diehr trio of cases. We eagerly await |
| patentability as a process under Bilski an invention | | | | the opinion of the Supreme Court in the Bilski |
| must either: | | | | case, which will hopefully clarify things, and |
| (a) be tied to a particular machine or | | | | potentially deal a considerable blow to the value of |
| apparatus, or | | | | countless patent portfolios. Until then prospective |
| (b) transform a particular article into a | | | | applicants would do well to exercise caution when |
| different state or thing | | | | deciding to file for a patent. |
| Two considerations were held to be important | | | | |