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Must a patentable invention claim an advance in a recognized field of technology or science? In Ex Parte Lundgren, issued in October, the Board of Patent Appeals and Interferences rejected an attempt by the Patent and Trademark Office to impose such a “technological arts” requirement. That decision-and interim examination guidelines published by the PTO accepting the board’s position-remove what would otherwise be a formidable obstacle to the issuance of many business-method patents. In Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980), the U.S. Supreme Court famously said, quoting from the legislative history of the 1952 Patent Act, that the subject matter of a patent may include “anything under the sun that is made by man.” Section 101 of the act broadly extends the possibility of patent protection to “any new and useful process, machine, manufacture or composition of matter.” Except for substituting the word “process” for the earlier term “art,” this statutory language is unchanged from the Patent Act of 1793, authored by Thomas Jefferson. The reach of the statute is limited, however, by the rule that no one may patent laws of nature, physical phenomena or abstract ideas. Of course, inventions use laws of nature and abstract ideas. Therefore, patents will be granted when an invention uses a law of nature or an abstract idea to “transform” an article to “a different state or thing,” or to produce “a concrete and tangible result.” This reasoning may remind copyright lawyers of the merger rule, under which ideas can’t be copyrighted, but expressions of ideas can. In patent law, the courts look for tangible “transformations” or concrete “results” to distinguish ideas from protectable inventions. Like the copyright merger rule, however, this principle of patent law is notoriously difficult to apply. Parker v. Flook, 437 U.S. 584 (1978), for example, held that a mathematical method for calculating an “alarm limit”-an indication of the point at which a chemical conversion process spins out of control-was not patentable subject matter. Diamond v. Diehr, 450 U.S. 175 (1981), however, upheld the patentability of a process for curing synthetic rubber that depended upon use of a mathematical algorithm. These lines can be even harder to draw in the case of business-method patents, which don’t “transform” matter, and may not have easily definable “results.” The Lundgren case was an attempt by the PTO examining corps to impose an additional requirement for business-method applications-one that would make some of them difficult to prosecute. The application claims a method for compensating managers that reduces incentives for collusion in an oligopolistic industry. Applicant Carl A. Lundgren argues that when managers of oligopolistic firms are compensated based on a firm’s profitability, each may have an incentive to collude with competitors in order to raise the profitability of the industry as a whole. His “invention” claims a method of choosing an “absolute performance standard,” measuring the relative performance of each firm against its competitors on that standard, and using that calculation to determine compensation. Unlike many business-method applications, the claims do not require the use of a computer or other machine. The examiner initially rejected the application on the ground that the claimed invention was outside the bounds of statutory subject matter under �101 of the 1952 patent act. A BPAI panel reversed, finding that “the claim language recites subject matter that is a practical application of shifting of physical assets to the manager.” After a remand from the BPAI, the application was rejected again, now on the ground that the invention did not fall within the “technological arts.” The examiner found the invention “to be outside the technological arts, namely an economic theory expressed as a mathematical algorithm without the disclosure or suggestion of a computer, automated means [or] apparatus of any kind.” Proponents of a “technological arts” requirement argue that it is faithful to language of the Constitution, which authorizes Congress to issue patents in order to “promote the Progress of … useful arts.” The phrase “technological arts,” they contend, is a modern translation of “useful arts.” As Graham v. John Deere Co., 383 U.S. 1, 5 (1966), held, this constitutional clause “is both a grant of power and a limitation.” In a divided opinion, the BPAI reversed the rejection. Ex parte Lundgren, Appeal No. 2003-2088, Application 8/093,516 (Precedential BPAI opinion September 2005). The majority opinion, joined by three judges, found no precedential basis for a technological-arts test and declined to create one. A concurring judge also refused to recognize a technological-arts requirement separate from the statutory classes of inventions enumerated in � 101 of the act. That judge added that, given the vagueness of the term “technology,” no such test would be “workable or fair.” The concurrence, however, would have rejected the application on the ground that it seeks patent protection for an “abstract idea.” A dissenter would have recognized the test, defining “technological arts” as requiring “nothing more than a threshold nexus to some field of technology.” That requirement would rule out patent protection for “inventions that cover nothing more than human conduct or thought processes that are totally unrelated to any science or technology.” In the dissent’s view, it is “ludicrous” to “think that the writers of the Constitution would have found the idea of providing compensation to an executive, as claimed, to be something that would qualify for a patent.” The dissent hoped the case would “open a public discourse” about a technological-arts requirement. Notwithstanding Lundgren, litigants will be free to advocate a technological-arts test in infringement litigation, as a BPAI opinion will not bind a federal court. The PTO, however, will no longer be debating the technological-arts test. On Oct. 26, in the wake of Lundgren, it issued new “Interim Guidelines for Examinations of Patent Applications for Patent Subject Matter Eligibility,” which explicitly declare that there is no technological-arts standard. The guidelines state that the United States “strongly supports patent protection for all subject matter regardless of whether there is a ‘technical aspect’ or the invention is in the ‘technological arts.’” They do stress the requirement that a process that does not transform an article may be patented only if it produces a useful, tangible and concrete result. A tangible result is one with “real-world” application; a concrete result must be “substantially repeatable.” During the coming term, the Supreme Court is likely to consider again the boundary between a patentable invention and an unprotectable idea, although not in the context of a business-method patent. In October, the court granted certiorari in Metabolite Lab. Inc. v. Laboratory Corp. of America Holdings, 370 F.3d 1354 (Fed. Cir. 2004), cert. granted, 126 S. Ct. 601 (2005), in which the U.S. Court of Appeals for the Federal Circuit sustained a patent claiming a method for detecting a vitamin B deficiency. The method consists simply of measuring the level of certain amino acids, noticing whether the levels are elevated and, if so, concluding that the deficiency exists. Because it is not limited to the use of any particular machine or assay method, the patent appears to claim nothing more than the insight that amino acid levels are linked to the deficiency. The high court will consider whether the patent is invalid under the rule that one cannot patent “laws of nature, natural phenomena, and abstract ideas.” While a finding of invalidity would not support a technological-arts requirement, it might create difficulties for applications like Lundgren’s that are not linked to a machine or computer and arguably claim nothing more than an abstract idea. Meanwhile, applicants continue to test the limits of patentability. One of the more audacious attempts is a group of applications for patents on a story line, filed by inventor Andrew Knight, an attorney whose firm advertises that it is “The First and Best in Storyline Patents(tm).” One of Knight’s applications claims a “process of relaying a story,” where the story involves allegedly unique plot elements, centering on a character who wishes to remain unconscious until a particular event happens, and becomes unable to recall events during a particular time period, although the character was actually “an active participant in a plurality of events” during that time. U.S. Patent App. 2005/0244804. It is unlikely that Hollywood has much to fear from such applications. Beyond the difficulty of showing that a method of producing a novel is statutory subject matter, and that a claimed plot line is novel and not obvious-given the huge amount of “prior art” story lines in existence-a “story line” applicant will have difficulty showing that the application is sufficiently definite, is enabling and produces a concrete-i.e., repeatable-result. When the Federal Circuit emphatically held in State Street Bank & Trust Co. v. Signature Financial Group Inc., 149 F.3d 1368 (Fed. Cir. 1998), that business methods were patentable, there were fears that such patents could cause chaos. While the number of business-method applications has increased severalfold, the number of patents granted remains small, a tiny fraction of the PTO’s activity. And there is no evidence that business-method patents cause greater mischief than any other kind of invention. Business-method patents will, however, continue to cause controversy out of proportion to their numbers. Lewis R. Clayton is a litigation partner in the New York office of Paul, Weiss, Rifkind, Wharton & Garrison, and co-chairman of the firm’s intellectual property litigation group. He can be reached at [email protected]. Aaron Delaney, an associate with the firm, assisted in the preparation of this article.

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