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Marketing methods not patentable subject matter: no machine or transformation

April 21, 2009
Post by Blog Staff

In a recent decision, the Federal Circuit applied the machine-or-transformation test from Bilski to affirm the rejection of all pending claims in a patent application by the Board of Patent Appeals and Interferences. The claims at issue related to methods of marketing products and "paradigms" for marketing software. The Board held all claims were not directed to patentable subject matter because they were directed to an "abstract idea."

The Federal Circuit, armed with the machine-or-transformation test, had little trouble affirming the Board. The court observed Bilski was dispositive on the method claims, as there was no "particular machine or apparatus," nor did the methods "transform any article into a different state or thing."

Similarly, the paradigm claims failed to recite statutory subject matter. The applicants argued the "company" recited in the claims was analogous to a "machine," and therefore statutory. The court disagreed, citing In re Nuijten, noting the claims recite no "concrete thing, consisting of parts, or of certain devices and combination of devices."

Of note, the court confirmed its rejection of the "useful, concrete, and tangible result" test from State Street. The parties had focused on that test in their briefing (which was complete before Bilski was decided).

The applicants here have two sets of claims in their application, one set directed to methods of marketing products and the other to a paradigm for marketing software. Claims 1 and 24 are representative of the two types of claims:

1. A method of marketing a product, comprising:
developing a shared marketing force, said shared marketing force including at least marketing channels, which enable marketing a number of related products;
using said shared marketing force to market a plurality of different products that are made by a plurality of different autonomous producing company, so that different autonomous companies, having different ownerships, respectively produce said related products;
obtaining a share of total profits from each of said plurality of different autonomous producing companies in return for said using; and
obtaining an exclusive right to market each of said plurality of products in return for said using.

24. A paradigm for marketing software, comprising:
a marketing company that markets software from a plurality of different independent and autonomous software companies, and carries out and pays for operations associated with marketing of software for all of said different independent and autonomous software companies, in return for a contingent share of a total income stream from marketing of the software from all of said software companies, while allowing all of said software companies to retain their autonomy.

The examiner initially made several rejections under §§ 102, 103, and 112. The applicants appealed these rejections to the Board of Patent Appeals and Interferences, which reversed the examiner's rejections, but issued a new ground of rejection of all claims under § 101. After two requests for rehearing resulting in a modified opinion from the Board, the applicants appealed to the Federal Circuit.

The Federal Circuit affirmed. Turning first to the method claims, the court easily held they did not meet the machine-or-transformation test from Bilski. A machine, as defined in In re Nuijten, is a "concrete thing, consisting of parts, or of certain devices and combination of devices." Here, the applicants argued the marketing force in the method claims was a "machine." The court easily rejected this argument.

Turning to the transformation prong, the court held the transformation of "legal relationships in the structuring of a sales force" was not sufficient. As stated in Bilski, manipulation or transformation "simply of public or private legal obligations or relationships, business risks, or other such abstractions" are insufficient to meet the transformation test. As a result, under Bilski, the court affirmed the Board's rejection of the method claims.

The "paradigm" claims fared no better. At the outset, the court noted a "paradigm" does not fall within one of the enumerated classes of patentable subject matter in § 101. The applicants argued they claimed a "machine," because "a company is a physical thing, and as such analogous to a machine." Again citing the definition of a machine from Nuijten, the Federal Circuit rejected this argument. As stated by the court: "Applicants do no more than provide an abstract idea—a business model for an intangible marketing company." As a result, the court affirmed the rejection of all claims.

The court also took the opportunity to again reject the "useful, concrete, and tangible result" test from State Street. Judge Newman took issue with this in a concurring opinion, stating:

My colleagues err in asserting that the “machine-or-transformation” test is that of the Supreme Court. See Gottschalk v. Benson, 409 U.S. 63, 71 (1972) ("We do not so hold."). And in their purported "clarification" of the Bilski decision, my colleagues suggest that Bilski overturned not only State Street Bank but also other precedent including that based on the Freeman-Walter-Abele test, the "technological arts" test, and the "physical steps" test. Maj. op. at 7 n.3. This sweeping rejection of precedent simply enlarges the taint on the thousands of patents that were granted on application of these tests. Indeed, this court in Bilski reaffirmed the holding of State Street Bank that the "'business method exception' was unlawful and that business method claims (and indeed all process claims) are 'subject to the same legal requirements for patentability as applied to any other process or method.'"

To read the full decision in In re Furguson, click here.


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