by Dennis Crouch

In Bilski v. Kappos, the Supreme Court issued three separate opinions — although all the justices agreed that physicality — machine-or-transformation — offers at least an important clue for deciding the issue.

Five Justice majority opinion: “The machine-or-transformation test is not the sole test for deciding whether an invention is a patent-eligible ‘process.’ . . . [Rather, it is] just an important and useful clue.” Four Justice minority opinion: Arguing that a “business method” is not a “process” under Section 101, and that physicality “is a critical clue” for determining eligibility. Two Justice minority opinion: Explaining their view that only a “few patentable processes lie beyond” the machine-or-transformation test.

In InvestPic, LLC v. SAP America, Inc., No. 18-1199 (Supreme Court 2019), the question of physicality has been raised again. In that case, the patentee argues that the Federal Circuit has again recreated a physicality test for eligibility.

To reach [its conclusion of ineligibility], the Federal Circuit focused exclusively on whether the patent’s claims encompassed an invention in the “physical realm,” a requirement found nowhere in the Patent Act or this Court’s jurisprudence. The claimed novel process here

is a process that can only be performed by a computer; a human cannot perform the process. The Federal Circuit determined that the computer-executed invention does not touch the “physical realm” and therefore held it patent-ineligible.

With that basis, the patentee has asked the Supreme Court for its guidance on the following question:

Does the Federal Circuit’s “physical realm” test contravene the Patent Act and this Court’s precedent by categorically excluding otherwise patentable processes from patent eligibility?

Looking at the Federal Circuit’s decision in this case — it appears that the court has created a dichotomy with the world of ideas fitting into either (1) the physical realm or (2) the realm of abstract ideas. The following excerpt from the Fed. Cir. decision is on point:

The claims in McRO were directed to the creation of something physical—namely, the display of “lip synchronization and facial expressions” of animated characters on screens for viewing by human eyes. . . . Similarly, in Thales Visionix Inc. v. United States, 850 F.3d 1343 (Fed. Cir. 2017), the improvement was in a physical tracking system. . . . Here, in contrast, the focus of the claims is not a physical-realm improvement but an improvement in wholly abstract ideas—the selection and mathematical analysis of information, followed by reporting or display of the results. . . . Some of the claims require various databases and processors, which are in the physical realm of things. But it is clear, from the claims themselves and the specification, that these limitations require no improved computer resources InvestPic claims to have invented, just already available computers, with their already available basic functions, to use as tools in executing the claimed process.

Note here, that the court did not give itself Bilski-style wiggle-room by suggesting that its physical-realm identity offered a “clue” to eligibility. Rather, the court held that the invention was not in the physical-realm (other than its use of computers) and therefore was abstract. Now, to be clear, I believe that the InvestPic decision could be interpreted a different way. However, the easiest reading of the case is that the court meant what it said – the claim is directed either to something abstract or something physical.

In addition to the Bilski analogy above, this case here also runs parallel to Vanda where the court created the if-then rule that treatment claims are eligible. The petition here also provides a list of Federal Circuit cases that the patentee identifies as not grounded in precedent:

Intellectual Ventures I LLC v. Capital One Bank, 792 F.3d 1363 (Fed. Cir. 2015) (using a § 101 analysis as a proxy for the independent § 112 inquiry);

Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1336 (Fed. Cir. 2016) (looking to whether a software program improves computer capabilities);

Exergen Corp. v. Kaz USA, Inc., 725 F. App’x 959, 966 (Fed. Cir. 2018) (finding a patent eligible in part because it took “years and millions of dollars” to invent).

The problem for the patentee in this case are the claims themselves. Claim 1 of U.S. Patent 6,349,291 (as modified by reexamination and certificates of correction) reads as follows:

A method for calculating, analyzing, and displaying investment data comprising the steps of: (a) selecting a sample space, wherein the sample space includes at least one investment data sample; (b) generating a distribution function using a re-sampled statistical method and a bias parameter, wherein the bias parameter determines a degree of randomness in sample selection in a resampling process; and (c) generating a plot of the distribution function.

The idea here is good — use a bootstrapping method to determine an appropriate predictive distribution of investment data rather than rely upon a predetermined distribution (such as the normal distribution). However, the abstract idea analysis here could look a lot like it did in Bilski.

[Read the Petition Here]