Claims to a “method for mandatory arbitration resolution” not drawn to statutory subject matterSeptember 24, 2007

In the second of two decisions regarding the scope of patentable subject matter on Thursday, the Federal Circuit found claims in a patent application directed toward a "method for mandatory arbitration resolution" as not directed toward statutory subject matter under § 101. The USPTO had not addressed the statutory subject matter issue, rather the Federal Circuit had requested supplemental briefing on the issue after the applicant appealed the BPAI's affirmance of the examiner's obviousness rejections.

Similar claims, however, that included reference to some sort of machine (such as a computer), were held to be statutory.More detail of In re Comiskey after the jump.

The applicant, Comiskey, filed a patent application related to several variations on a method and system for mandatory arbitration resolution. Comiskey's claims were rejected by the USPTO as obvious over various prior art references. Comiskey appealed these rejections to the Federal Circuit. The court, however, asked for supplemental briefing on the issue of whether the claims were directed toward patentable subject matter.

As an initial matter, the Federal Circuit addressed whether it could affirm the USPTO's rejection on the alternative ground of patentable subject matter, even though that ground was not addressed by the USPTO. Quoting a 1943 Supreme Court decision, the court noted that an administrative order must be affirmed even if the order under review was on the wrong grounds or based on incorrect reasoning. As such, the court was free to reach the issue of whether the claims were directed toward statutory subject matter.

Turning to the substance of the issue, the court identified the claims as in "the general category of 'business method' patents." Further, while State Street held that business methods are not unpatentable merely because they are business methods, they still must meet the statutory subject matter standard. The issue, as stated but the court, was "the requirements of § 101 in determining whether Comiskey's claims . . . for a method of mandatory arbitration for unilateral and contractual documents claim statutory subject matter."

The court's answer to this question is "no." After tracing the history of patentable subject matter from the English Statute of Monopolies. Based on these early acts, the court noted that the framers of the Constitution "consciously acted to bar Congress from granting letters patent in particular types of business," instead limiting patents to "advancing the useful arts," or "the process today called technological innovation."

The court did note, however, that the scope of patentable subject matter is "extremely broad." Like the other case decided Thursday regarding the scope of patentable subject matter, the court cited Diamond v. Chakrabarty and the Supreme Court's analysis of the legislative history of the 1952 Patent Act.

Of particular relevance here is that both the Supreme Court and the Federal Circuit have consistently held that "abstract ideas" are not patentable. As stated by the court, "when an abstract concept has no claimed practical application, it is not patentable." However, when the abstract concept has "a practical application," it may be patentable. Specifically:

a claim reciting an algorithm or abstract idea can state statutory subject matter only if, as employed in the process, it is embodied in, operates on, transforms, or otherwise involves another class of statutory subject matter, i.e., a machine, manufacture, or composition of matter.

Further, mental processes "standing alone are not patentable even if they have practical application." Based on these principles, the court stated it was "clear that the present statute does not allow patents to be issued on particular business systems—such as a particular type of arbitration—that depend entirely on the use of mental processes."

Applying these principles to the claims at issue, the court held that the claims directed toward "a method for mandatory arbitration resolution" were not directed toward statutory subject matter. These claims do not require a machine, do not describe a process of manufacture, or a process for altering a composition of matter. As such, there was no "practical application" tied to another form of statutory subject matter. "Comiskey's independent claims 1 and 32 seek to patent the use of human intelligence in and of itself." Accordingly, these claims were not patentable.

Other claims in the application, however, were drawn to the use of "modules." The court noted that, given their "broadest reasonable interpretation, could require the use of a computer as part of Comiskey's arbitration system." Therefore, because the mental process, combined with a machine, may produce patentable subject matter. As a result, these claims at least meet the threshold requirement of § 101. The court remanded consideration of the question of the obviousness of these claims to the USPTO for consideration in light of the Federal Circuit's post-KSR jurisprudence. However, the court included a proviso:

Here, claims 17 and 46 at most merely add a modern general purpose computer to an otherwise unpatentable mental process and claims 15, 30, 44, and 48 merely add modern communication devices. The routine addition of modern electronics to an otherwise unpatentable invention typically creates a prima facie case of obviousness. Moreover, there is no pertinent evidence of secondary considerations because the only evidence offered is of long-felt need for the unpatentable mental process itself, not long-felt need for the combination of the mental process and a modern communication device or computer.

It looks like an uphill battle for Comiskey back at the USPTO.

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