By Pam Bertani
The prospect of obtaining patent protection for inventive business methods has become considerably more likely in light of a recent decision by the United States Board of Patent Appeals and Interferences, and corresponding guidelines subsequently issued by the United States Patent and Trademark Office. In the case of Ex Parte Lundgren, the Board reversed a patent examiner’s rejection of Lundgren’s business method patent claims, which the examiner rejected on the grounds that the claims were not linked to a computer or other electronic device; lacked a technological basis; were therefore outside the “technological arts”; and consequently did not constitute patentable subject matter. (Ex Parte Carl A. Lundgren, Appeal No. 2003-2088 (Bd. Pat. App. & Interf. Sept. 2005.) Within a few weeks after Ex Parte Lundgren was published, the PTO issued Interim Guidelines for Examination of Patent Applications for Patent Subject Matter Eligibility, which are consistent with Ex Parte Lungren, and confirm that patent examiners are no longer allowed to reject business method claims simply because those claims are not linked to a computer, database, or other electronic device.
Prior to Ex Parte Lundgren, patent examiners routinely rejected business method patent claims that were unrelated to a computer or electronic device, on the basis that such claimed inventions lacked a technological basis, and therefore were not within the requisite “technological arts”. This policy, which has commonly become linked to the so-called “technological arts” test, became standard operating procedure at the PTO. The “technological arts” test derives, at least in part, from the In re Musgrave decision, in which the court observed that “[a]ll that is necessary, in our view, to make a sequence of operational steps a statutory ‘process’ within 35 U.S.C. �� 101 is that it be in the technological arts so as to be in consonance with the Constitutional purpose to promote the progress of ‘useful arts.’ Const. Art. 1, sec. 8.” (In re Musgrave, 431 F.2d 882 (CCPA 1970) (emphasis added).)
Lundgren’s invention involved a managerial compensation scheme, which was not claimed in conjunction with a computer or other electronic device. Claim 1, which is representative of the subject matter on appeal to the Board, covered a “method of compensating a manager who exercises administrative control over operations of a privately owned primary firm for the purpose of reducing the degree to which prices exceed marginal costs in an industry, reducing incentives for industry collusion between the primary firm and a set of comparison firms in said industry, or reducing incentives for coordinated special interest industry lobbying, said set of comparison firms including at least one firm, said primary firm having the manager who exercises administrative control over said primary firm’s operations ….” Claim 1 goes on to list 8 steps involved in the method, none of which are limited to use of a computer or electronic device.
Lundgren’s examiner, consistent with prior PTO policy, relied directly on In re Musgrave to reject Lundgren’s business method patent claims. In this regard, the examiner ruled “both the invention and the practical application to which it is directed to be outside the technological arts, namely an economic theory expressed as a mathematical algorithm without the disclosure or suggestion of computer, automated means, apparatus of any kind, the invention as claimed is found non-statutory.” In other words, the examiner characterized the claims as “outside the technological arts” because, as claimed, the method was not linked to a computer or electronic device, and therefore did not constitute patentable subject matter.
In a decision that will almost assuredly open the floodgates for business method patent filings, the Board summarily reversed the examiner’s decision, as well as years of prior PTO policy, and ruled that neither In re Musgrave nor its progeny create a separate “technological arts” test for evaluating whether a process constitutes statutory subject matter. According to the Board, “there is currently no judicially recognized separate ‘technological arts’ test to determine patent eligible subject matter under �� 101. We decline to propose to create one. Therefore, it is apparent that the examiner’s rejection can not [sic] be sustained.” Echoing Federal Circuit precedent, the Board found that a process claim that applies a mathematical algorithm to “produce a useful, concrete, tangible result without preempting other uses of the mathematical principle, on its face comfortably falls within the scope of �� 101.”
A few weeks after the Ex Parte Lundgren decision was published, the PTO issued Interim Guidelines for Examination of Patent Applications for Patent Subject Matter Eligibility, which are consistent with the Board’s Ex Parte Lundgren ruling, and likewise eliminate the “technological arts” test as a basis for rejecting patent claims. Annex III to the Guidelines is entitled Improper Tests For Subject Matter Eligibility, and specifically states that “[t]he following tests are not to be applied by examiners in determining whether the claimed invention is patent eligible subject matter: (A) ‘not in the technological arts’ test…”
Thus, unless and until the Federal Circuit lends further analysis to the “technological arts” issue, as reflected in the Ex Parte Lundgren ruling and newly issued PTO Guidelines, it is fairly safe to assume that PTO examiners can no longer validly reject business method patent claims on the basis that those claims are not tied to a computer or other electronic device. Consequently, the prospect of allowable broader claims, that do not incorporate computer or electronic device limitations, should be much more prevalent. This current shift in the business method patent landscape will encourage increased business method filings, and should significantly increase the prevalence of issued business method patents that are unrelated to electronic manipulation. Ex Parte Lundgren is – for now – a huge win for business method patent seekers.