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In Re Bilski Majority

In Re Bilski Majority

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Published by: Legal Writer on Apr 13, 2009
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United States Court of Appeals for the Federal Circuit
2007-1130(Serial No. 08/833,892)IN RE BERNARD L. BILSKIand RAND A. WARSAWAppeal from the United States Patent and Trademark Office, Board of Patent Appealsand Interferences. __________________________ DECIDED: October 30, 2008 __________________________ Before MICHEL, Chief Judge, NEWMAN, MAYER, LOURIE, RADER, SCHALL,BRYSON, GAJARSA, LINN, DYK, PROST, and MOORE, Circuit Judges.Opinion for the court filed by Chief Judge MICHEL, in which Circuit Judges LOURIE,SCHALL, BRYSON, GAJARSA, LINN, DYK, PROST, and MOORE join. Concurringopinion filed by Circuit Judge DYK, in which Circuit Judge LINN joins. Dissentingopinion filed by Circuit Judge NEWMAN. Dissenting opinion filed by Circuit JudgeMAYER. Dissenting opinion filed by Circuit Judge RADER.MICHEL, Chief Judge.Bernard L. Bilski and Rand A. Warsaw (collectively, "Applicants") appeal from thefinal decision of the Board of Patent Appeals and Interferences ("Board") sustaining therejection of all eleven claims of their U.S. Patent Application Serial No. 08/833,892("
892 application"). See Ex parte Bilski, No. 2002-2257, 2006 WL 5738364 (B.P.A.I.Sept. 26, 2006) ("Board Decision"). Specifically, Applicants argue that the examiner erroneously rejected the claims as not directed to patent-eligible subject matter under 35 U.S.C. § 101, and that the Board erred in upholding that rejection. The appeal wasoriginally argued before a panel of the court on October 1, 2007. Prior to disposition by
the panel, however, we sua sponte ordered en banc review. Oral argument before theen banc court was held on May 8, 2008. We affirm the decision of the Board becausewe conclude that Applicants' claims are not directed to patent-eligible subject matter,and in doing so, we clarify the standards applicable in determining whether a claimedmethod constitutes a statutory "process" under § 101.I.Applicants filed their patent application on April 10, 1997. The applicationcontains eleven claims, which Applicants argue together here. Claim 1 reads:A method for managing the consumption risk costs of a commodity sold bya commodity provider at a fixed price comprising the steps of:(a) initiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumerspurchase said commodity at a fixed rate based upon historicalaverages, said fixed rate corresponding to a risk position of saidconsumer;(b) identifying market participants for said commodity having a counter-risk position to said consumers; and(c) initiating a series of transactions between said commodity provider and said market participants at a second fixed rate such that saidseries of market participant transactions balances the risk positionof said series of consumer transactions
892 application cl.1. In essence, the claim is for a method of hedging risk in the field of commodities trading. For example, coal power plants (i.e., the "consumers") purchasecoal to produce electricity and are averse to the risk of a spike in demand for coal sincesuch a spike would increase the price and their costs. Conversely, coal miningcompanies (i.e., the "market participants") are averse to the risk of a sudden drop indemand for coal since such a drop would reduce their sales and depress prices. Theclaimed method envisions an intermediary, the "commodity provider," that sells coal to2007-1130 2
the power plants at a fixed price, thus isolating the power plants from the possibility of aspike in demand increasing the price of coal above the fixed price. The same provider buys coal from mining companies at a second fixed price, thereby isolating the miningcompanies from the possibility that a drop in demand would lower prices below thatfixed price. And the provider has thus hedged its risk; if demand and prices skyrocket, ithas sold coal at a disadvantageous price but has bought coal at an advantageous price,and vice versa if demand and prices fall. Importantly, however, the claim is not limitedto transactions involving actual commodities, and the application discloses that therecited transactions may simply involve options, i.e., rights to purchase or sell thecommodity at a particular price within a particular timeframe. See J.A. at 86-87.The examiner ultimately rejected claims 1-11 under 35 U.S.C. § 101, stating:"[r]egarding . . . claims 1-11, the invention is not implemented on a specific apparatusand merely manipulates [an] abstract idea and solves a purely mathematical problemwithout any limitation to a practical application, therefore, the invention is not directed tothe technological arts." See Board Decision, slip op. at 3. The examiner noted thatApplicants had admitted their claims are not limited to operation on a computer, and heconcluded that they were not limited by any specific apparatus. See id. at 4.On appeal, the Board held that the examiner erred to the extent he relied on a"technological arts" test because the case law does not support such a test. Id. at 41-42. Further, the Board held that the requirement of a specific apparatus was alsoerroneous because a claim that does not recite a specific apparatus may still bedirected to patent-eligible subject matter "if there is a transformation of physical subjectmatter from one state to another." Id. at 42. Elaborating further, the Board stated:2007-1130 3

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