For many years, patent law has struggled with the question of whether a series of thoughts can be patented. Under the mental steps doctrine, the answer was no. More recently, the answer has been maybe. With In re Bilski, the U.S. Court of Appeals for the Federal Circuit, which has exclusive jurisdiction over patent appeals, recently revisited the issue. The mental steps doctrine holds that an invention is not entitled to patent protection if it involves only mental steps. The threshold question concerns whether an invention constitutes patentable subject matter under 35 USC Section 101, which outlines four categories: machines, processes, manufactures, and compositions of matter.1
Over the years, the courts have applied several differing and changing tests, from a strict no-mental-steps rule to the more recent physical-transformation rule. The physicaltransformation rule essentially states that in order for a process to be patentable, it must undergo a physical transformation during the process.2 Recently, a second proposed test—utility—surfaced.
A string of recent cases stemming from the U.S. Supreme Court's Diamond v. Diehr3 decision and continuing through the recent In re Bilski has outlined a utility-based test for patentable subject matter as it pertains to mental steps. Under the utility test, an invention is patentable subject matter under Section 101 if it produces a useful, concrete, and tangible result.4
Beginning in the 1970s and continuing through the 1980s, a series of three cases laid the groundwork for what became the transformation test for patentability of subject matter for processes. The first two cases that led to the transformation test are Gottschalk v. Benson5 and Parker v. Flook.6 In Benson, the court held that computer software was not patentable subject matter as a process since the algorithm that it encompassed was a mathematical formula and, therefore, a law of nature.7 The court specifically stated that "transformation and reduction of an article �to a different state or thing' is the clue to the patentability of a process claim that does not include particular machines."8 This sentiment was continued in Flook, in which the court held that the patent being applied for was not patentable "not because it contains a mathematical algorithm as one component" but because there is a lack of "inventive application of the principle."9 In other words, it was not the fact that the application involved a mathematical formula that doomed it (as in Benson) but the lack of application to an "invention."10
In 1981, the courts continued down this line of reasoning in the case of Diamond v. Diehr, in which the U.S. Supreme Court reiterated the reasoning from Benson and Flook, creating the transformation doctrine in which the Court held that "transformation and reduction of an article to a different state or thing is the clue to the patentability of a process claim" not involving machines.11 This "transformation" test focused solely on whether a physical transformation occurs during the process and on little else.
However, in the 27 years since the Diehr decision, the Federal Circuit has expanded upon the physical-transformation rule handed down in Diehr. In the 1998 decision of State Street Bank and Trust Company v. Signature Financial Group, Inc., the Federal Circuit held that the repetitive use of the term "any" within 35 USC Section 101 shows congressional "intent not to place any restrictions on the subject matter for which a patent may be obtained beyond those specifically recited in § 101."12 The court in State Street continued to carve out an exception for the transformation of data and began to outline the formation of a "utility-based" test for patentability of subject matter under Section 101. The court held that the transformation of data was valid subject matter since it transformed and produced a "useful, concrete, and tangible result."13 The court focused on whether the transformation of the data involved was "useful" and not whether a strict physical transformation occurred.14
Over the next 10 years, the Federal Circuit would continue to move further away from a "physical transformation" test and move closer and closer to the adopting of a utility test in tune with the congressional desire to allow "anything under the sun that is made by man" to obtain a patent.15
The Utility-Based Test In AT&T Corporation v. Excel Communications, Inc., the court noted that at one point, the "PTO published guidelines essentially rejecting the notion that computer programs were patentable. As technology progressed, the courts disagreed...and announced more expansive principles formulated with computer technology in mind."16 The Federal Circuit, mindful that it could not overrule the Supreme Court's physical-transformation test handed down in Diehr, telegraphed its intent to limit the impact of the rule when it stated that "the notion of physical transformation can be misunderstood." The physical-transformation test "is not an invariable requirement, but merely one example of how a mathematical algorithm may bring about a useful application."17 In this manner, the Federal Circuit has effectively displaced the Supreme Court's physical-transformation test and supplanted it with a utility test as the standard for patentability of subject matter under Section 101. The utility test asserts that a process is patentable if the process produces a "useful, concrete, and tangible result."18 The Federal Circuit in AT&T reinforced the trend away from requiring a physical transformation when it explained that an invention that dealt solely in numbers did not "render it non-statutory subject matter, unless, of course, its operation does not produce a �useful, concrete, and tangible result.'"19
The court's shift to the utility test from more outdated legal methodologies is also evidenced by the Federal Circuit's most recent reinterpretation of the mathematical algorithm exception established in State Street. The court explained that if a process uses a mathematical algorithm to achieve a "new and useful end, it �at the very least is not barred at the threshold by §101."20 While there are conflicting decisions in the case law, the utility test appears to have taken root as the new standard for determining patentable subject matter under Section 101.
The twin cases of In re Comiskey21 and In re Nuijten,22 decided in late 2007, epitomize the struggle over whether the physical-transformation test retains any applicability. Although the decisions were published on the same day, they came to different conclusions concerning the patentability of mental steps processes. The court in Comiskey effectively held that an invention must include a physical transformation in order for it to be the type of thing for which a patent is granted. This conclusion was reached by following a line of cases that had ultimately held that mental steps processes must be tied to another category of subject matter in order to be patentable.23 The court in Comiskey breathed renewed life into the mental steps doctrine by once again concluding that mental steps were not patentable subject matter and likened them to abstract concepts.24
However, the Nuijten court ultimately avoided the question of the patentability of mental steps processes by holding that the proposed invention, a method for embedding a "watermark-type" signal within an audio or video format, did not fall into any category of Section 101 and therefore was not patentable subject matter since it was neither a process (as the court defined it), method, composition of matter, nor a machine.25 Comiskey and Nuijten illustrate the continuing struggle of courts to apply the physicaltransformation test and the utility test, as well as whether mental steps processes are patentable.
For example, after granting an en banc hearing and collecting some 100 plus amici curiae briefs, the Federal Circuit Court of Appeals decided in Bilski that the utility test was not the test that should be used in order to ascertain whether a process application indicates Section 101 patentable subject matter. In Bilski, the court held that "while looking for a �useful, concrete, and tangible result' may in many instances [be useful]...that inquiry is insufficient to determine whether a claim is patent-eligible under §101."26 The court then proceeded to reaffirm the preeminence of the transformation test, stating that in order to denote patentable subject matter, the process must be tied to a particular machine, or transform an article "to a different state or thing."27 However, while the court completely dismissed the utility test, it left open the possibility—discussed in the appellant's supplemental brief—that a patentable process could involve, if not be based completely on, several mental steps.
In explaining this new reasoning, the court held that "the proper inquiry under Section 101 is not whether the process claim recites sufficient �physical steps,' but rather the claim meets the machine-or-transformation test....A claim that purportedly lacks any �physical steps' but is still tied to a machine or achieves an eligible transformation passes muster under §101."28 As to what constitutes an "eligible transformation," the court was a little unclear. The court did hold that the "transformation" must be one that "is central to the purpose of the claimed process" and that the patentability of a process that involves a "chemical or physical transformation of physical objects or substances" was "virtually self-evident."29 Whether the purported transformation could take place entirely in the ether of computer circuitry is less certain.
The court, however, reaffirmed a previous ruling in which it held that the transformation of raw data into a particular visual depiction of a physical object on a display "was sufficient to render that more narrowly-claimed process patent-eligible."30 As the court stated: "[T]he claim was not required to involve any transformation of the underlying physical object that the data represented."31 The court continued on—perhaps leaving the door of mental steps patentability open—by stating: "[S]o long as the claimed process is limited to a practical application of a fundamental principle to transform specific data, and the claim is limited to a visual depiction that represents specific physical-objects or substances," the claim would not be preemptive and would be patentable under Section 101.
Mental Steps after Bilski To understand why mental steps should be patentable, a review of first principles is in order. The patent system is mandated by the U.S. Constitution in order to "promote the Progress of Science and the useful Arts."32 To achieve this goal, the patent system stimulates "the creative activity of authors and inventors by the provision of a special reward [a limited monopoly], and [allowing] the public access to the products of the genius after the limited period of exclusive control has expired."33By allowing a creator to establish a limited monopoly over the invention, the sciences and useful arts are promoted. Society reaps the benefits of the invention during and after the grant of monopoly. The Supreme Court has stated that the patent system was created to foster productive efforts that, in turn, will have a positive effect on society.34 This is the constitutional and public policy backdrop against which the debate about patenting of mental processes is conducted.
In 1952, the 82nd Congress rewrote what was essentially a nineteenth century version of the patent laws by creating what became Title 35 of the U.S. Code.35 Two important changes were that Congress eliminated the term "art" from the categories of patentable subject matter, replacing it with the term "process," and added a definition of the term "process" in what would become Sections 100 and 101.
The legislative history contains an explanation of the intent of Congress when it changed "art" to "process." Congress explained that the change was necessary in order to clarify that Congress intended "art" in this instance to be synonymous with "process or method" and not to be the same as "useful art" or the way the term is used in "other places in the statute."36 In order to make its intent clear, Congress included a definition of the term "process" in the statute. Congress defined it to be "a process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material."37 While usage of the term "process" in its own definition is problematic, this usage indicates that the process category is a separate category of patentable subject matter independent of any of the other physical categories of subject matter (machine, manufacture, composition of matter, or material). The legislative history supports this interpretation.38
Congress placed no further limitation or restriction on the categorical definition. It is a judicially created truism that the courts "should not read into federal patent laws limitations and conditions which [the] legislature has not expressed."39 Since Congress did not divide processes into "mental" and "physical," the suggestion that somehow these two categories exist—one patentable and the other not—runs contrary to congressional intent.
Since enactment of Title 35, courts have interpreted it as an effort to "to change the slow but steady drift of judicial decision[s] that had been hostile to patents."40 This sentiment was echoed by Supreme Court Justice Robert Jackson, who wrote in 1949 that there existed a "strong passion in this Court for striking [patents] down, so that the only patent that is valid is one which this Court has not been able to get its hands on."41 Thus, when Congress changed the patent laws in 1952, the change was meant to create a broader and more patent-friendly system. As the legislative history illustrates, "anything under the sun that is made by man" and fulfills the conditions of the title is worthy of patent protection.42 The wide berth given to the subject-matter standard derives from these patent-friendly policies.
The courts have interpreted the usefulness of an invention in similar terms of benefits to society. Courts have used language such as "capacity to perform function," practicability, and accomplishment of a "purpose practically when applied in industry."43 Therefore, utility is found in the practicability and application of the process and not from the process itself or an intraprocess transformation. Under this rubric, mental steps processes that are practicable, accomplish a purpose, and are applicable to industry and do not fall into the judicially created pitfalls of unpatentable subject matter (e.g., abstract concepts) denote patentable subject matter. This formulation is also in line with congressional intent to create a system that would benefit society. A mental steps process that conforms to these practical requirements is within the applicability and social usefulness standard from which patentability derives.
Alternatively, if the physical-transformation test were to be held as the standard for patentability of a process, the utility and usefulness of the process is taken out of the equation. This would, in turn, defeat the purpose of granting a patent. Precedents and legislative history illustrate that the genius of the patent system rests in the dual benefit conferred upon inventor and society. The inventor benefits monetarily from the limited monopoly, and society benefits from the invention.44
While Bilski disavowed the utility test as the test for patentability of subject matter, it did recognize that the standard could be beneficial and did not bar the courts from using the standard entirely. Therefore, it could be argued that it would be prudent for a court to employ the utility standard in a case in which additional factors were needed in order to ascertain patentability. While the Bilski court merely mandated that the courts employ the machine or transformation standard first, it did not state that the standard should never be employed.
Additionally, cases that potentially prevent the patentability of mental steps processes run contrary to congressional intent of fostering invention and rewarding risk. Technology has evolved to the point where many processes do not have physical representations. The final product of these processes may be useful, but they would fail a physical-transformation test for subject matter, since no corresponding physical material is produced or changed. Advances in computer science and related industries are illustrative and have made it routine that nothing physical is involved in processes that have a useful result.45 Software patents typically recite how the physical components of the computer act as a result of the software's instructions. Essentially, the mental step processes in the software are being patented. Freeing software patents from physical computer components would be a major improvement in patent law.
Furthermore, the court's assertion that a process claim must be tied to another category of subject matter in order to be patentable (in this instance, the category of machines) erodes the process category as a separate category of patentable subject matter. If a process were tied to another category of subject matter, then it would cease to truly be a process. Instead, it would simply be a new and useful way to use a machine, or manufacture, or composition of matter, which would effectively eliminate the process category as a separate category of patentable subject matter. This would be a way to make a process invention truly patentable, not because it is a process under Sections 100(b) and 101 but rather because it would fall within one of the other categories of subject matter. Thus, once this position is broken down, it becomes apparent that this first prong of the court's machine-or-transformation test is essentially a pure transformation test, only by another name.
The physical-transformation test was workable in a world where most inventions were physical things. But it is arguably an outdated test of patentability in the twenty-first century. The Bilski court's reemphasis on the machine-or-transformation test, however, indicates the court's unwillingness to move forward and evolve the patent law system. Nevertheless, even under the recently affirmed machine-or-transformation test, mental steps processes, in their current forms, are not unpatentable per se. Instead, an added layer of judicial scrutiny must be applied in order to ascertain whether or not the process is patentable. In the end, the courts must finally recognize that mental steps processes are essential to the evolution of both technology and society and deserve protection. ▪
1 35 U.S.C. §101 (2000). 2 Gottschalk v. Benson, 409 U.S. 63 (1972). 3 Diamond v. Diehr, 450 U.S. 175 (1981). 4 State Street v. Signature Fin. Group, Inc., 149 F. 3d 1368, 1374 (Fed. Cir. 1998). 5 Gottschalk, 409 U.S. 63. 6 Parker v. Flook, 437 U.S. 584 (1978). 7 An algorithm is "a mathematical or logical process consisting of a series of steps, designed to solve a specific type of problem." BLACK'S LAW DICTIONARY (8th ed. 2004). 8 Gottschalk, 409 U.S. at 70. 9 Parker, 437 U.S. at 594. 10 Id. 11 Diamond v. Diehr, 450 U.S. 175, 184 (1981). 12 State Street v. Signature Fin. Group, Inc., 149 F. 3d 1368, 1373 (Fed. Cir. 1998). 13 Id. at 1373. 14 Id. at 1374. 15 Id. at 1373 n.3. 16 AT&T Corp. v. Excel Commc'ns, Inc., 172 F. 3d 1352, 1356 (Fed. Cir. 1999). 17 Id. at 1359. 18 See State Street, 149 F. 3d at 1374. 19 AT&T Corp., 172 F. 3d at 1359. 20 Id. at 1357. 21 In re Comiskey, 499 F. 3d 1365 (Fed. Cir. 2007). 22 In re Nuijten, 500 F. 3d 1346 (Fed. Cir. 2007). 23 In re Comiskey, 499 F. 3d 1365, 1377 (Fed. Cir. 2007). 24 Id. at 1377-78. 25 Nuijten, 500 F. 3d 1346. 26 In re Bilski, 545 F. 3d 943, 88 U.S.P.Q. 2d 1385 (Fed. Cir. 2008)(en banc), available at http://www.cafc .uscourts.gov/opinions/07-1130.pdf (visited Oct. 30 2008). 27 Id. at 956. 28 Id. at 961. 29 Id. at 962. 30 Id. at 963. 31 Id. 32 U.S. CONST. art. I, §8. 33 Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 429 (1984). 34 Kewanee v. Bicron, 416 U.S. 470, 480 (1974). 35 ROBERT PATRICK MERGES & JOHN FITZGERALD DUFFY, PATENT LAW AND POLICY: Cases and Materials 10 (Lexis 2007). 36 1952 U.S.C.C.A.N. (66 Stat.) 2398. 37 35 U.S.C. §100(b). 38 1952 U.S.C.C.A.N. (66 Stat.) 2410. 39 Diamond v. Chakrabarty, 447 U.S. 303, 308 (1980). 40 Reiner v. I. Leon Co., 285 F. 2d 501, 503 (2d Cir. 1960). 41 Jungerson v. Otsby & Barton Co., 335 U.S. 560, 572 (1949). 42 1952 U.S.C.C.A.N. (66 Stat.) 2399. 43 See Curtis-Wright Corp. v. Link Aviation, Inc., 182 F. Supp. 106 (N.D. N.Y. 1959); Isenstead v. Watson, 157 F. Supp. 7 (D.C. D.C., 1957); General Steel Prods. Co. v. Lorenz, 337 F. 2d 726 (5th Cir. 1964). 44 See Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 429 (1984). 45 In In re Bilski, the process for which a patent was sought has no physical substance but is useful in that it helps shield users from risks due to fluctuations in the markets due to demand.
Michael A. Shimokaji is a partner of Shimokaji IP, in Irvine, California, where his practice includes patent litigation. Philip L. Gahagan is a second-year law student and Center for International and Comparative Law Fellow at Whittier Law School in Costa Mesa.