Federal Circuit Revisits the Patent-Eligibility Test After Bilski

By Alex Nie, Foley & Lardner LLP

This article is part of our Spring 2011 edition of Legal News: China Quarterly Newsletter, Eye on China.

The U.S. Supreme Court in Bilski v. Kappos 130 S. Ct. 3218 (2010) rejected the Federal Circuit’s machine-or-transformation test as the sole test for patent-eligibility. The Court also rejected categorical exclusion of certain business method patents from eligibility. However, the Bilski opinion did not provide specific guidance on how to determine patent-eligibility. The Federal Circuit, in a recent post-Bilski decision, Research Corp. Techs. v. Microsoft Corp., No. 2010-1037 (Fed. Cir. Dec. 8, 2010), has offered some guidance, which also effectively renders obsolete the U.S. Patent and Trademark Office’s (USPTO) Interim Guidance for Determining Subject Matter Eligibility for Process Claims in View of Bilski v. Kappos, 75 Federal Register 43922 (July 27, 2010).

Plaintiff Research Corporation Technologies (RCT) brought this action against Microsoft alleging infringement of six RCT patents. The validity of relevant claims of two of these patents, U.S. Pat. Nos. 5,111,310 (‘310 patent) and 5,341,221 (‘228 patent), was challenged by Microsoft under 35 U.S.C. § 101 as not directed to patent-eligible subject matter.

A representative claim is claim No. 1 of the 310 patent, as follows:

1. A method for the halftoning of gray scale images by utilizing a pixel-by-pixel comparison of the image against a blue noise mask in which the blue noise mask is comprised of a random non-deterministic, non-white noise single valued function which is designed to produce visually pleasing dot profiles when thresholded at any level of said gray scale images.

Halftoning is an image-reproduction technology in which a limited number of colors are mixed in certain ways, generally by overlaying gray or colored dots, to present an illusion of smoother shades and colors. Unlike many claims drafted in view of the machine-or-transformation test, this claim does not use buzzwords such as “computer processor” or “computer-implemented,” although in practice halftoning is often performed using a computer.

The Federal Circuit started the patent-eligibility inquiry from within the text of the patent law. The Federal Circuit remarked that the Patent Act of 1952 sets forth categories of patent-eligible subject matter that include “process, machine, manufacture, or composition of matter.” Slip Op. at 12. Further, the Federal Circuit noted the earlier Supreme Court holding that “Congress plainly contemplated that the patent laws would be given wide scope.” Id. at 13.

In this context, the Federal Circuit observed that the Supreme Court in Bilski interpreted the term “process” to mean “process, art, or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material.” Bilski, 130 S. Ct. at 3225. As such, the Federal Circuit ruled that halftoning is a process.

The more important inquiry, however, is whether the claimed subject matter falls into the category of abstract ideas. The Federal Circuit notes the Supreme Court’s warning that courts should not read into the patent laws limitations and conditions that the legislature has not expressed. Slip Op. at 13. Further, only three exceptions to the patent-eligibility principles have been recognized: laws of nature, physical phenomena, and abstract ideas. Id.

The Supreme Court did not provide a rigid formula or definition for abstractness. The Federal Circuit, however, goes a step further by noting that abstractness is also a disclosure problem.

Accordingly, first, as provided by the Supreme Court, the patent-eligibility inquiry should only be a threshold test, and the patent law “does not permit a court to reject subject matter categorically.” Id. In this context, the Federal Circuit reads Bilski to refocus “the eligibility inquiry on the statute,” and to advise that eligibility “should not become a substitute for a patentability analysis related to prior art, adequate disclosure, or the other conditions and requirements of Title 35.” Id. The Federal Circuit notes that an abstract invention may nonetheless lack sufficient disclosure to be invalid as indefinite under 35 U.S.C. § 112 because the invention would not provide sufficient particularity and clarity to inform the skilled artisan of the bounds of the claim.

Under the above principle, the Federal Circuit sees nothing abstract in the claimed halftoning method and further notes that the invention “presents functional and palpable applications in the field of computer technology.” Id. at 15.

Finally, the Federal Circuit observes that the claimed method incorporates algorithms and formulas that admittedly are a significant part of the claimed method. The incorporation of algorithms and formulas, however, does not bring the invention even close to abstractness, and the invention does not seek to patent a mathematical formula. Instead, the invention is directed to a process in computer applications. Id. at 15-16.

It is apparent that the Federal Circuit objects to the USPTO’s widespread practice of rejecting claims solely based on § 101, and in particular under the machine-or-transformation test. Under the new case law, it is likely that a § 101 rejection alone, without an accompanying § 112 rejection, might not be deemed appropriate.