Software patent applications directed to business and mathematical processing applications highlight the tension between State Street and Benson.

• Author: Schallop, Michael J.

1. INTRODUCTION

   Recent decisions by the Federal Circuit Court of Appeals suggest a significant expansion of the scope of patentable subject matter for software-related inventions.(1) In particular, a recent decision by the Federal Circuit Court of Appeals in State Street Bank & Trust Co. v. Signature Financial Group, Inc.(2) has dramatically expanded the scope of patentable subject matter under patent law by essentially eliminating the method of doing business and mathematical algorithm exceptions to patentable subject matter.(3)

   Following recent decisions by the Federal Circuit Court of Appeals (Federal Circuit), and the State Street case in particular, the U.S. Patent and Trademark Office (PTO) released additional training materials on October 19, 1998 [hereinafter Training Materials] that address how to apply the Examination Guidelines for Computer-Related Inventions [hereinafter "Guidelines"](4) in the areas of business, artificial intelligence, and mathematical processing applications.(5) According to the PTO, "[e]ach of these three areas has shown a high growth rate and increased examining complexity."(6) In particular, the PTO released the Training Materials which include five examples that illustrate the application of the Guidelines in these complex and controversial areas.

   The PTO purports to provide the Training Materials in response to "a high growth rate and increased examining complexity" of business and mathematical processing applications.(7) However, it is apparent that the Training Materials represent an attempt by the PTO to bring the Guidelines and their application in line with the recent State Street case. Accordingly, the legal background for computer-related inventions, and the State Street case in particular, are discussed in detail below. The recently released additional Training Materials are then analyzed in view of the State Street case.

   The Training Materials also highlight an intriguing and controversial issue that has arisen due to State Street. It has been suggested that State Street is inconsistent with the U.S. Supreme Court's decision in Gottschalk v. Benson.(8) Through certain mathematical processing examples and the analysis of those examples, the Training Materials attempt to distinguish these different holdings. Accordingly, these holdings will be analyzed and compared to determine whether or not State Street should be viewed as being inconsistent with Benson. Also, the proper scope and application of these holdings will also be explored in greater detail in view of the examples provided and analyzed in the Training Materials.

2. LEGAL BACKGROUND FOR SOFTWARE-RELATED INVENTIONS

   According to the U.S. Supreme Court, patentable subject matter includes "anything under the sun that is made by man."(9) However, the patent statute imposes two important restrictions upon the scope of patentable subject matter: (1) four categories of patentable subject matter; and (2) utility.(10) First, an inventor can obtain a utility patent for only the following four enumerated categories of subject matter: processes, machines, articles of manufacture, and compositions of matter.(11) Second, the invention must be "useful."(12) For example, abstract ideas, laws of nature, and natural phenomena are outside the scope of the four categories of patentable subject matter under 35 U.S.C. [sections] 101. Moreover, abstract ideas, laws of nature, and natural phenomena are not useful for purposes of 35 U.S.C. [sections] 101, that is, they are not limited to a practical application or use of an idea, law of nature, or natural phenomenon. Patentable subject matter must meet both of the statutory requirements.

   1. Software-Related Inventions as Patentable Processes

      In 1972, the U.S. Supreme Court addressed the patentability of claims that involved a computer program implementing a mathematical algorithm(13) in Gottschalk v. Benson.(14) Benson involved a method of converting binary-coded decimal numerals directly into binary numerals for use with a general purpose computer. The Court held that the patent recited non-statutory subject matter, because "[t]he claims were not limited to any particular art or technology, to any particular apparatus or machinery, or to any particular end use. They purported to cover any use of the claimed method in a general-purpose digital computer of any type."(15)

      In 1978, the Court similarly found that claims that involved a program implementing an abstract mathematical formula were not statutory subject matter in Parker v. Flook.(16) The Court specifically held that conventional or post-solution activity is not sufficient to transform an unpatentable principle into a patentable process.(17)

      However, neither Benson nor Flook suggested that software inventions could not recite statutory subject matter.(18) But these two decisions left the patentability of software inventions uncertain.

      In Diamond v. Diehr,(19) the Supreme Court reexamined the patentability of a program implementing a mathematical algorithm. This case, the Court's third and most recent software patent decision, held that a computer-related process can constitute statutory subject matter and resolved much of the confusion caused by Benson and Flook.(20) In particular, the Court held that the claimed process for curing rubber constituted statutory subject matter despite the claim's recitation of a step involving a computer programmed with a mathematical formula.(21)

      In reaching this conclusion., the Court distinguished Benson and Flook.(22) The Court reasoned that in those cases the patentee merely sought to patent abstract mathematical formulas, whereas in Diehr, the patentee did "not seek to patent a mathematical formula. Instead, they [sought] ... a process of curing synthetic rubber."(23) In addition to utilizing a programmed computer to calculate Arrhenius' equation, Diehr's claimed process involves "molding raw, uncured synthetic rubber into cured precision products."(24) The Diehr Court concluded that a "claim drawn to subject matter otherwise statutory does not become nonstatutory simply because it uses a mathematical formula, computer program, or digital computer."(25) The Diehr Court, therefore, clarified that computer-related processes, when properly disclosed and claimed, can constitute statutory subject matter under 35 U.S.C. [sections] 101.(26)

      Following the Diehr decision, In re Pardo(27) held that a compiler program for converting source code programs into object code programs constituted statutory subject matter. The court reasoned that the program provides a method for controlling the internal operations of a computer to govern the manner in which programs are executed.(28)

      Additionally, the post-Diehr case of Paine, Webber, Jackson & Curtis v. Merrill Lynch, Inc.(29) held that financial application programs are statutory subject matter. Specifically, the court held that claims which drafted a "method" for cash management constituted statutory subject matter.(30) Such a method would be nonstatutory if carried out by hand; however, the court believed that the apparatus's claims required machine implementation and thus did not preempt the general method.(31) Further, the court noted that "the focus of the analysis should be on the operation of the program on the computer."(32) Consequently, the court held that the claims constituted subject matter, because the claims recite a new "method of operat[ing] a computer to effectuate a business activity."(33)

   2. Software-Related Inventions as Patentable Machines and Articles of Manufacture

      In re Alappat(34) represents perhaps the most significant post-Diehr software-related patent case decided by the Federal Circuit. The patent at issue in Alappat disclosed a method of varying the intensity of the pixels of an oscilloscope screen so as to create a smoother wave depiction.(35) The Federal Circuit, en banc, held that the claimed apparatus(36) constituted statutory subject matter when considered "as a whole."(37)

      The CAFC reasoned that a claim is not non-statutory simply because it reads on a general purpose digital computer as a means to perform various steps under program control.(38) On the contrary, the Federal Circuit held that "such programming creates a new machine, because a general purpose computer in effect becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from program software."(39) Thus, the Federal Circuit concluded that although Alappat's claimed apparatus recited disclosed electronic circuitry elements that performed mathematical calculations, the claimed invention as a whole was directed to a combination of elements that constituted a machine for creating anti-aliased waveform from discrete waveform data input.(40)

      In particular, Judge Rich, writing for the majority, did not apply the Freeman-Walter-Abele test, which was developed by the Federal Circuit's predecessor court (the C.C.P.A.).(41) Rather, the Alappat majority emphasized that the Supreme Court in Diehr, Flook, and Benson never intended for mathematical algorithms to represent a fourth category of nonpatentable subject matter under 35 U.S.C. [sections] 101.(42) Noting that mathematics is the language of science and the technological arts (e.g., a chemical process can be represented in mathematical terms), the Alappat majority asserted that the issue is simply whether the claimed subject matter falls within one of the three excluded categories: "laws of nature, natural phenomena, and abstract ideas."(43) Thus, although a mathematical algorithm can fall within any one of these three categories, an invention that merely recites a mathematical algorithm as a component of otherwise clearly patentable subject matter, does not necessarily fall within one of the categories, particularly, the abstract ideas category.(44) This analysis, which may be characterized as the abstract idea test, determines if a claim...