Bull in Bilski's China Shop: B of A's Financial Instrument

In the previous blog post, we examined a claim to a "financial instrument" by Excel Ventures that appeared to slip through to issuance.

With incredible timing, the Board of Patent Appeals and Interferences last week looked at a set of claims with an eerily similar feel:

Ex Parte Birle Application 10/064,745 Assignee: Bank of America [Merrill Lynch] 10. A financial instrument issued by a stock company and held by a holder, shares of stock of the company trading at a price, the instrument having a market price, the instrument comprising: a provision obligating the company to repay the principal according to a predetermined term; a provision making the instrument convertible into a predetermined number of shares of stock of the company at a predetermined conversion price; a provision obligating the company to make a payment to the holder with respect to passage of a time interval in the event the market price of the instrument is in a predetermined relationship to an accreted value thereof, the accreted value defined as the issue price of the instrument plus an economic accrual of a portion of a difference between the issue price and the principal amount at maturity.

Deja vu? Can one really make a distinction between this claim and Excel's with respect to the patentability of its subject matter?

Merrill's appeal brief, filed in 2007, argued by analogy to Beauregard claims:

For many years, Examiners routinely rejected claims direct to computer-readable media containing novel and unobvious content, but these refusals stopped after In re Lowry. Since that time, Examiners have been directed not to reject claims to such computer-readable media, as discussed for example at MPEP section [2106.01]: "When functional descriptive material is recorded on some computer-readable medium, it becomes structurally and functionally interrelated to the medium and will be statutory in most cases since use of technology permits the function of the descriptive material to be realized." By analogy, when functional descriptive material, such as the material set forth in the present rejected claims, is recorded on a "financial instrument" or an "offering document," it likewise "becomes structurally and functionally interrelated to the medium and will be statutory in most cases." Use of the financial instruments or offering documents "permits the function of the descriptive material to be realized."

The BPAI, armed with the Supreme Court's Bilski opinion, was unpersuaded:

We agree with the Appellants that the recitation of a “financial document” and an “offering document” does not automatically cause the claimed invention to be nonstatutory. However, with the exception of the recitation in the preamble of the claims of a “financial instrument” or “offering document,” all the elements of the claims relate to a mental concept or an abstract idea of how to make money. In this regard, the claims relate to an idea related to a financial arrangement between a stock company and a holder of shares of the stock. The claims recite various ways that a holder of shares of stock can make money by, for instance, receiving principal paid according to a predetermined term, receiving a share of stock of a company and receiving money in accordance with an accredited value. In this way, the claims recite a way of converting money paid to a company for value in terms of shares of stock, or accredited value. It is merely an abstract idea of how to make money. Moreover, the claims cover any known and unknown use of the concept. The steps could be performed by any machine, existing or futuredevised. Furthermore, the processes as claimed could be accomplished by human activity alone, including through mental processes. In the words of Gottschalk v. Benson, 409 U.S. 63, 72 (1972), the claimed processes “would wholly pre-empt the [payment to a holder with respect to passage of a time interval] and in practical effect would be a patent on the [concept] itself.” The recitation in the preamble of a “financial document” or an “offering document” does not convert the otherwise nonstatutory subject matter to statutory subject matter. First, as the recitations are in the preamble of the claims and do not appear in the body of the claim, the recitation of a “financial instrument” or an “offering document” is introductory language that does not breath life and meaning into the claims. Therefore, this introductory language does not limit the scope of the claims. In re Pearson, 494 F.2d 1399, 1403 (CCPA 1974); Gerber Garment Tech., Inc. v. Lectra Sys., Inc., 916 F.2d 683, 688 (Fed. Cir. 1990) quoting Perkin- Elmer Corp. v. Computervision Corp., 732 F.2d 888, 896 (Fed. Cir. 1984), cert. denied, 469 U.S. 857 (1984). Second, the recitation of a “financial instrument” and an “offering document” in the preamble fails to make the claims statutory subject matter because the prohibition against patenting abstract ideas “‘cannot be circumvented by attempting to limit the use of the formula to a particular technological environment’ or adding ‘insignificant postsolution activity.’” Bilski v. Kappos, 130 S. Ct. at 3230 (citing Diamond v. Diehr, 450 U.S. 175, 191-92 (1981)). Thus, limiting the implementation of what would otherwise be mental steps or abstract ideas to a “financial instrument” or an “offering document” is insufficient to place the claims into the realm of patentable subject matter under 35 U.S.C. § 101. We, therefore, affirm the Examiner’s rejection.

The story is not over, however; because the Board's rationale differed from the Examiner's, it denoted this as a new ground of rejection, thus reopening prosecution.

It will be interesting to see how B of A amends and argues to navigate through the china shop.