Patentable Subject Matter: Do the 2005 USPTO Interim Guidelines Intersect StateStreet at a Roundabout?

AuthorCharles A. Damschen
PositionJ.D., The University of Iowa College of Law, 2007
Pages01

J.D., The University of Iowa College of Law, 2007; B. Ch. E., B.S., University of Minnesota, 2003. I must first thank my wonderful wife, Erika, for her love, encouragement, and support throughout law school-you are my best friend. Also, thanks to the Iowa Law Review editors and members of Volumes 92 and 93 for their help and great attention to detail. Finally, thanks to my family, all of whom provide long-distance support in every aspect of my life.

Page 1891

I Introduction

The U.S. software market is enormous.1 The Software and Information Industry Association estimated that the total worldwide revenue for packaged software2 generated in 2004 alone was $179 billion, and the "United States is estimated to hold approximately a 50% share of the world market," with revenues for 2005 estimated to grow by five to six percent.3 To continue the growth of the software industry, the law must provide software developers with adequate assurance that they will be able to benefit from development costs.4 often, patents are the most attractive form of such protection and many software developers pursue patents on their products.5As some commentators point out, the increased availability of patent protection for software programs has not had a deleterious effect on the software industry as a whole.6 Page 1892

In the last thirty-five years, the Federal Circuit and the Supreme Court have decided an increasing number of cases regarding how patent claims directed toward software7 fit within the statutory framework of patentable subject matter.8 In the interests of efficiency and consistency, the USPTO must properly instruct patent examiners how to assess the patentability of software-related claims in accordance with judicial precedent. Furthermore, clear guidelines with respect to eligible subject matter better enable patent practitioners to draft software-related claims and provide guidance when litigation involves a patent containing software-related claims.

Part II of this Note provides the relevant background relating to the scope of patent protection and delineates the types of inventions that are patentable according to the statutory and legal framework. Part II.A provides a brief history and overview of the statutory scheme for patentability and a brief introduction to the judicial precedent relevant to subject matter eligible for patent protection.9 Parts II.B.1 and II.B.2 discuss in detail precedent relevant to judicial exceptions to statutory subject matter, including the business-method exception and the mathematical-algorithm exception.10 Part II.B.3 focuses on the case law preceding the Federal Circuit's decision in State Street Bank & Trust Co. v. Signature Financial Group, Page 1893 Inc. 11 regarding whether software-related inventions are eligible subject matter. Part II.B.4 details the Federal Circuit's decision in State Street and the resulting standard for eligible subject matter.

Part III shifts focus to the current standards for eligible subject matter that courts and the USPTO apply. Part III.A explains the USPTO October 2005 Interim Guidelines ("Interim Guidelines") examiners use in determining whether a claimed invention qualifies as eligible subject matter.12 Part III.B compares the Interim Guidelines with State Street and posits that although the USPTO sought to clarify subject-matter eligibility, an examiner closely following the Interim Guidelines could find that a patent application claimed ineligible subject matter when the same claim would be patentable under State Street. To illustrate the possible divergent outcomes, this Note uses a method claim for calculating a baseball player's contribution to a fantasy team's score.13 Part III.C provides an alternative approach to either the Interim Guidelines or State Street for courts and the USPTO to use when determining subject-matter eligibility.14 Page 1894

II Background and Legal Framework
A Statutory Scheme and Judicial Exceptions to Eligible Subject Matter

The U.S. Constitution empowers the federal government to grant patents.15 For an invention to be eligible for a patent, it must meet certain statutorily defined criteria: the invention must fit within the statutorily prescribed eligible subject matter,16 and it must be useful,17 novel,18 and nonobvious.19 These statutory requirements help ensure that the potential benefit to society from the invention's availability justifies the limited monopoly a patent owner receives.20 whether a particular invention is patentable subject matter under 35 U.S.C. § 101 is a threshold issue that the invention must satisfy before the USPTO will assess other statutory requirements.21

Since the original Patent Act of 1793, neither the justifications for granting patents nor the statutory definition of patentable subject matter has changed significantly.22 The power that the Constitution grants to Congress contains no explicit limitation on the subject matter available for patent protection, but instead states the ends Congress should achieve when it Page 1895 grants a patent and lists the means Congress may employ to achieve these ends.23

The first patent laws, which Congress promulgated in the 1793 Patent Act, defined patentable subject matter as "any new and useful art, machine, manufacture[,] or composition of matter, or any new and useful improvement [thereof]."24 Congress replaced the word "art" with "process" in 195225-the only change made regarding patentable subject matter in 159 years. This was not a substantive change; Congress implemented the change "to avoid the necessity of expla[ining] . . . the word 'art,'" because it was being "interpreted by the courts to be practically synonymous with process or method."26 Also in 1952, Congress stated its intention that patentable subject matter "include anything under the sun that is made by man."27

In today's patent system, some scholars maintain that the scope of patentable subject matter is very broad and assert that under the current system, "if you can name it, you can claim it."28 This categorization of the patent system is an overstatement.29 However, the intention to include any man-made invention, coupled with only one minor change to the relevant statutory language in 213 years, demonstrates that Congress intended that a broad scope of subject matter be eligible for patent protection.30 In light of this history and the wording of the current statute, it stands to reason that any invention that is a "process, machine, manufacture[,] or composition of matter"31 should be patentable subject matter.

Despite the broad spectrum of patentable subject matter that this legislative history evinces, the Supreme Court has carved out some subject matter, based on the language of the Constitution, that is not available for patent production even though the subject matter appears to fall within Page 1896 § 101>. This subject matter includes laws of nature,32 abstract ideas,33 and natural phenomena.34 The Supreme Court developed these exceptions to patentable subject matter because the language of the Constitution permits Congress to issue patents only to promote science and useful arts.35 The Supreme Court's main rationale used in developing these exceptions was the belief that everyone should have free access to abstract ideas, natural phenomena, and laws of nature, "as they are the basic tools of scientific and technological work."36

More recently, two additional exceptions to eligible subject matter emerged that are adapted particularly to the patent eligibility of software- related inventions.37 Even though these exceptions relate more directly to the patentability of software,38 they are still merely pointed examples of the traditional judicial exceptions discussed above.39

B Patentability Of Software
1. Business-Method Exception

Generally, courts view business methods as any method or process that recites a particular business technique.40 For example, a claim reciting a method of doing business in which certain items were sold at a loss to attract customers to higher-margin items is a business-method claim.

This exception has been a source of much confusion for courts. With no citation to relevant case law, the district court judge in State Street determined that "[a]s established by a series of older cases, business Page 1897 methods are unpatentable abstract ideas."41 However, on appeal, the Federal Circuit denied the existence of the business-method exception and asserted that neither the Federal Circuit nor its predecessor, the Court of Customs and Patent Appeals ("CCPA"), had ever used the exception to declare an invention unpatentable due to lack of patentable subject matter.42 The Federal Circuit stated that "business methods have been, and should have been, subject to the same legal requirements for patentability as applied to any other process or method."43 Accordingly, although it is unclear what case gave rise to the business-method exception, it is clear what case disposed of any notion that it should be an exception to statutory subject matter.43

2. Mathematical-Algorithm Exception

In its 1972 decision, Gottschalk v. Benson, the Supreme Court announced the mathematical-algorithm exception.45 For purposes of patentability, a mathematical algorithm consists of a method that includes either "inputting numbers, calculating numbers, outputting numbers, [or]...

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