PTAB Questions Machine-or-Transformation Claims


Just over three years ago, the United States Supreme Court issued its decision in Bilski v. Kappos. The critical question presented to the Court for consideration was whether the Federal Circuit erred by creating the so-called “machine or transformation” test, which requires a process to be tied to a particular machine or apparatus, or transform an article into a different state or thing, in order to be patentable subject matter. The Supreme Court held that the machine-or-transformation test is not the sole test for patent eligibility under §101, but is an important clue, thereby overruling the Federal Circuit who had earlier ruled that the machine or transformation test was the test to determine whether an invention is patentable subject matter.

But what practical effect has the Supreme Court ruling in Bilski v. Kappos had? Truthfully, not much. at least in terms of the day-to-day approach of patent attorneys and the U.S. Patent and Trademark Office.  (Certainly, the decision was important in that it preserved the patentability of at least some business methods and preserved the patentability of software.)

While the machine-or-transformation test is now only an important clue, it really has become a safe harbor for practitioners.  The assumption has been that you satisfy the machine-or-transformation test announced by the Federal Circuit and you have a patentable invention. Fail to satisfy the machine-or-transformation test and you may have a patentable invention, but neither the Patent Office nor any court has yet found an invention that failed the machine-or-transformation test to be patentable.

To satisfy the machine-or-transformation test, the claimed process must:

  1. be tied to a particular machine or apparatus (machine implemented); or
  2. particularly transform a particular article to a different state or thing.

Any method claim that does not require machine implementation or does not cause a transformation will likely fail the test and will be rejected under § 101.  The importance of this from a practical standpoint is that business methods not tied to a machine are likely to be rejected under § 101 and the rejection will be difficult, if not impossible, to overcome.

But what if a business method or computer-related invention were tied to a machine? Could it still be patent ineligible? The answer would have been a definitive “no” prior to the PTAB’s decision in SAP v. Versata. See Did the PTAB Just Kill Software Patents?

On Tuesday, June 11, 2013, the Patent Trial and Appeals Board issued a ruling in SAP America, Inc. v. Versata Development Group, Inc., which is the result of a Covered Business Method challenge to U.S. Patent No. 6,553,350 filed by SAP on September 16, 2012. The PTAB, per Administrative Patent Judge Michael Tierney, determined that “Versata’s ’350 claims 17, and 26-29 are unpatentable under 35 U.S.C. § 101.” Looking more closely at the ruling, however, makes it clear just how significant this ruling could become. The breadth of the 101 determination is shocking and virtually guarantees that 101 will be used by at least some patent examiners to effectively prevent software and business-method patents from issuing altogether.

In a nutshell, the PTAB ignored all the recited tangible computer elements embodied in the claims. Once the specifically articulated and necessary structure is ignored, the PTAB then concluded that the claims protect only an abstract idea.

To see what the PTAB did here, let’s take a look at an illustrative claim. Claim 29 recites [Ed.: with emphasis added to point out the tangible structure ignored by the PTAB]:

29. An apparatus for determining a price of a product offered to a purchasing organization comprising:

a processor;

a memory coupled to the processor, wherein the memory includes

computer program instructions capable of:

retrieving from a data source pricing information that is (i) applicable to the purchasing organization and (ii) from one or more identified organizational groups, within a hierarchy of organizational groups, of which the purchasing organization is a member;

retrieving from the data source pricing information that is (i) applicable to the product and (ii) from one or more identified product groups, within a hierarchy of product groups, of which the product is a member; and

receiving the price of the product determined using pricing information applicable to the one or more identified organizational groups and the one or more identified product groups according to the hierarchy of product groups and the hierarchy of organizational groups.

Of course, one of the reasons, if not the only reason, there is tangible structure in the claim is to satisfy the machine-or-transformation test created by the Federal Circuit, endorsed by the Supreme Court as an important clue that signifies patentability, and used as a safe harbor by the USPTO. In other words, the PTAB decision calls into question the safety of machine-or-transformation claiming techniques that have been adopted by many specifically to invoke that supposedly safe harbor.

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