Ferguson’s Marketing Paradigm Not Patentable – Federal Circuit

Holding:

In a precedential opinion, the U.S. Court of Appeals for the Federal Circuit has ruled that a marketing paradigm for bringing products to the market is not patentable since it does not fall under any category for patent-eligibility under Section 101 of the Patent Act. Applying the machine-or-transformation test laid down in In re Bilski, 545 F. 3d 950, the Federal Circuit held that the method claims of applicants Lewis Ferguson, Scott C. Harris, and Darryl Costin (“appellants”) are not tied to any machine or apparatus nor transforms any article into a different state of thing. In so stating, the Federal Circuit reaffirmed the machine-or-transformation test under In re Bilski as the sole and governing test for a process claim. According to the Federal Circuit, appellants “do no more than provide an abstract idea – a business model for an intangible marketing company.” In addition, the Federal Circuit rejected the new test proposed by appellants in determining patentability: 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? The Federal Circuit therefore affirmed the decision of the Board of Appeals and Interferences (“BPAI”).

Detailed Summary:

Ferguson, Costin and Harris (collectively, “applicants” or “appellants”) appealed from the final decision of the BPAI sustaining the rejection of all sixty-eight claims of their U.S. Patent Application Serial No. 09/387,823 (“the ’823 application). Specifically, applicants argued that the BPAI erroneously decided that the claims are not directed to patent-eligible subject matter under 35 U.S.C. § 101.

The patent application is directed to a marketing paradigm for bringing products to market. The examiner rejected each of claims 1–68 under 35 U.S.C. §§ 102, 103 and/or 112.

On appeal, the BPAI analyzed the previous decisions of the Supreme Court and of the Federal Circuit and its predecessor and concluded that, pursuant to those precedents, applicants’ claims were not directed to statutory subject matter under Section 101. On petition for rehearing, the BPAI affirmed its previous rejection.In this appeal, the Federal Circuit affirmed the BPAI’s ruling, citing the requirements for patent-eligibility under Section 1: Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefore, subject to the conditions and requirements of this title. Opinion, p. 5, citing 35 U.S.C. § 101.

According to the Federal Circuit, the statute recites four categories of subject matter: processes, machines, manufactures, and compositions of matter. But even if a claim may be deemed to fit literally within one or more of the statutory categories, it may not be patent eligible. Id., citing In re Bilski at 952.  Under machine-or-transformation test of In re Bilski, “A claimed process is surely patent-eligible under § 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.” Id., p. 6, citing In re Bilski.

Here, the Federal Circuit held that appellants’ method claims are not tied to any particular machine or apparatus. Although applicants argued that the method claims are tied to the use of a shared marketing force, the Federal Circuit determined that a marketing force is not a machine or apparatus. Appellants’ method claims are not tied to any concrete parts, devices, or combination of devices.

Nor do appellants’ methods, as claimed, transform any article into a different state or thing. At best it can be said that appellants’ methods are directed to organizing business or legal relationships in the structuring of a sales force.

In addition, the Federal Circuit rejected the new test proposed by appellants in determining patentability: 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? The Federal Circuit reasoned that the “sole,” “definitive,” “applicable,” “governing,” and “proper” test for a process claim under § 101 is the Supreme Court’s machine-or-transformation test.  Appellants’ proposed test would lead, therefore, both to ambiguity and to conflict with Supreme Court precedents.

Going back to Section 101, the Federal Circuit held that appellants’ claims do not fall under the four categories enumerated in this provision of law: process, machine, manufacture, and composition of matter.  To the contrary, appellants do no more than provide an abstract idea—business model for an intangible marketing company. Id., p. 11. The Federal Circuit concluded that absent identity with any statutory category, appellants’ paradigm claims are, therefore, unpatentable as not directed to statutory subject matter.

On the basis of the foregoing, the Federal Circuit affirmed the BPAI decision.

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