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Federal Circuit Revises Original Opinion to Remand Machine Claims to the PTO to Consider Whether Claims Recite Patentable Subject Matter

06-1286
January 26, 2009
Arner, Erika Harmon

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Last Month at the Federal Circuit - February 2009

Judges: Michel, Dyk (author), Prost

[Appealed from: Board]

In In re Comiskey, No. 06-1286 (Fed. Cir. Jan. 26, 2009), revising No. 06-1286 (Fed. Cir. Jan. 13, 2009), the Federal Circuit issued a revised opinion in which the outcome remained the same as its prior opinion: the Court affirmed the Board’s decision rejecting claims to a mandatory arbitration process in U.S. Patent Application No. 09/461,742 by Stephen W. Comiskey. Although the Board had affirmed the examiner’s rejections based on prior art under 35 U.S.C. § 103, the Federal Circuit did not consider that reasoning and instead affirmed the rejections of Comiskey’s method claims on the ground that they did not recite patentable subject matter under 35 U.S.C. § 101. As for the machine claims, the Court remanded to the PTO to consider the § 101 question in the first instance.

Comiskey’s application claimed methods and systems for performing mandatory arbitration resolution regarding one or more legal documents. The PTO examiner rejected the claims under 35 U.S.C. § 103(a) as obvious over a combination of prior art references. The rejections were affirmed by the Board, and Comiskey appealed to the Federal Circuit. During oral arguments, the Federal Circuit raised the question of whether Comiskey’s claims recited patentable subject matter under 35 U.S.C. § 101 because the method claims did not require any machine or computer and the system claims were broader than any computer-implemented system. Afterwards, the Court requested supplemental briefing on the § 101 issue.

In both its original decision (now vacated) and the revised decision, the Court expressly did not reach the obviousness rejections affirmed by the Board, instead finding that many of the claims were barred by the threshold requirement of compliance with § 101.

In its discussion, largely unchanged by the revised decision, the Court began by addressing Comiskey’s argument that the issue of patentable subject matter could not properly be raised by the reviewing Court. Based on the Administrative Procedure Act, Comiskey argued that the Federal Circuit’s review should be limited to the record before the PTO, which did not include rejections under § 101. The Court rejected this argument and cited the Supreme Court’s holding in SEC v. Chenery Corp., 318 U.S. 80 (1943), that a reviewing court can and should affirm an agency decision on legal grounds not relied on by the agency when there is no issue of fact, policy, or agency expertise. Noting that whether claims recite statutory subject matter under § 101 is a question of law reviewed without deference, the Court continued to address the merits.

Beginning with the constitutional provision authorizing Congress to grant patents to promote the “useful Arts,” the Court examined the scope of subject matter that falls within the four categories set forth in the Patent Act of 1952, namely, any new and useful process, machine, manufacture, or composition of matter. The scope of patentable subject matter under the Act may be “extremely broad,” but the Court noted that not every process is patentable.

Regarding the prohibition against patenting abstract ideas, the Court noted that an abstract concept that has no claimed practical application is not patentable. Furthermore, the Court stated, “a claim reciting an algorithm or abstract idea can state statutory subject matter only if, as employed in the process, it is embodied in, operates on, transforms, or otherwise involves another class of statutory subject matter, i.e., a machine, manufacture, or composition of matter.” Slip op. at 18.

The Court next analyzed Supreme Court cases finding a process containing an abstract idea to be patentable if the process is tied to a machine or if it acts to transform subject matter to a different state or thing. See, e.g., Diamond v. Diehr, 450 U.S. 175 (1981); Tilghman v. Proctor, 102 U.S. 707 (1880); Cochrane v. Deener, 94 U.S. 780 (1876). The Court also considered its earlier decisions that found processes patentable because they claimed practical applications and were tied to specific machines. See, e.g., AT&T Corp. v. Excel Commc’ns, Inc., 172 F.3d 1352 (Fed. Cir. 1999); State St. Bank & Trust Co. v. Signature Fin. Group, 149 F.3d 1368 (Fed. Cir. 1998); In re Alappat, 33 F.3d 1526 (Fed. Cir. 1994) (en banc). The Court therefore held that “a claim that involves both a mental process and one of the other categories of statutory subject matter (i.e., a machine, manufacture, or composition) may be patentable under § 101.” Slip op. at 19.

Considering the nature of business method patents, the Court noted that business methods are patentable subject to the same legal requirements for patentability as applied to any process or method. Therefore, according to the Court, “the present statute does not allow patents to be issued on particular business systems—such as a particular type of arbitration—that depend entirely on the use of mental processes.” Id. at 22.

Turning to Comiskey’s application, the Court held that the claims reciting methods for mandatory arbitration resolution, which Comiskey admitted did not recite any computer or other apparatus, were impermissible attempts to patent the use of “human intelligence in and of itself.” Id. at 23. Thus, the Court affirmed the rejections of Comiskey’s method claims on the ground that they recited only abstract ideas and were therefore ineligible for patenting.

Regarding Comiskey’s system claims, the Court’s revised decision omitted the original holding that the system claims, which did recite computer components, recited patentable subject matter under § 101. Instead, the Court noted that the system claims recited the use of a machine and remanded the case to the PTO to consider in the first instance whether the system claims satisfy § 101. The Court reasoned that remanding the case to the PTO would afford Comiskey the opportunity to amend his claims in light of the newly applied § 101 rejections. (The full text of the original revised opinion, which issued on January 13, 2009, is available on the Federal Circuit’s website as Dkt. # 06-1286.pdf, and the revision to the revised opinion, which issued on January 26, 2009, is available as Dkt. # 06-1286r.pdf.)