In Re Ferguson - Federal Circuit Decision

Federal Circuit Decision

The method claims fell within the dictionary concept of a ’process,” but were excluded from the statutory meaning of that term by the decision in Bilski. That decision holds that the Supreme Court’s machine-or-transformation test is the “definitive test to determine whether a process claim is tailored narrowly enough to encompass only a particular application of a fundamental principle rather than to pre-empt the principle itself.” Claim 1 does not satisfy either prong of the machine-or-transformation test. “Applicants’ method claims are not tied to any particular machine or apparatus. Although Applicants argue that the method claims are tied to the use of a shared marketing force, a marketing force is not a machine or apparatus,” because it is not a “mechanical device or combination of mechanical powers and devices to perform some function and produce a certain effect or result.’”

Furthermore, the method does not cause a transformation of an article into a different state or thing:

At best it can be said that Applicants’ methods are directed to organizing business or legal relationships in the structuring of a sales force (or marketing company). But as this court stated in Bilski, “urported transformations or manipulations simply of public or private legal obligations or relationships, business risks, or other such abstractions cannot meet the test because they are not physical objects or substances, and they are not representative of physical objects or substances.”

Therefore, Ferguson’s method does not satisfy the machine-or-transformation test.

Because they preceded Bilski, the Board's opinion and the parties' briefs and arguments extensively discussed the “useful, concrete, and tangible” test. “To avoid confusion,” therefore, the court decided to “clarify here that in Bilski, this court considered whether this ‘test’ is valid and useful and concluded that it is not.” The court then turned to attorney Harris’s proposed new test for patent-eligibility — “Does the claimed subject matter require that the product or process has more than a scintilla of interaction with the real world in a specific way?” In the light of Bilski’s “clear statements that the ‘sole,’ ‘definitive,’ ‘applicable,’ ‘governing,’ and ‘proper’ test for a process claim under § 101” was the machine-or-transformation test, the court refused to consider the proposed alternative test. The court then said that it would “reaffirm that the machine-or-transformation test is the singular test for a process claim under § 101” and “we decline to consider Applicants’ method claims other than through the lens of the machine-or-transformation test.”

The court then turned to the so-called paradigm claims. The court agreed with the Board that a paradigm falls within none of the four statutory categories and is therefore patent-ineligible. Nonetheless, the applicants argued that “ company is a physical thing, and as such analogous to a machine.” The court responded that the paradigm was just a business model for organizing a marketing company; it was not a machine because it was not a combination of physical parts. As attorney Harris had conceded during oral argument, “you cannot touch the company.” The court therefore ruled: “Indeed, it can be said that paradigm claims are drawn quite literally to the ‘paradigmatic “abstract idea.”’” Accordingly, they were patent-ineligible.

Judge Newman dissented, arguing that there was still some life in State Street. Moreover, she challenged the machine-or-transformation test as being the sole remaining test of patent-eligibility.