August 22, 2009

It’s The Network

By Gregory A. Stobbs, Principal

Scott C. Harris was all set to go eBay one better, with his “Real Time Auction with End Game.” Bidders would use their computers to submit their bids in secret, along with times when those bids should be executed. An agent-based system submitted those bids at the appointed time and then when the agent sensed the bidding was nearing the endgame, the system would send messages to the bidders to notify them that they should now log on to compete for the prize. The whole thing was designed to work over a network comprising a central server and remote terminals. Harris applied for a patent on his system in February 2001 but lost his bid for a patent during the prosecution endgame.

The Patent examiner rejected Harris’ claims as not being drawn to patent-eligible subject matter. The Board of Appeals affirmed, applying In re Bilski. Ex parte Harris. In re Bilski, as we know, held that an inventive method may be patent-eligible if it is “tied to a particular machine or apparatus.”

You might think that a network-based bidding system would certainly qualify as patent-elibible subject matter. After all, isn’t a computer network a form of particular machine? You might think that, but according to the Board of Appeals, you would be wrong.

Just so we have some context to the dispute, here is an example of one of Harris’ method claims:

28. A method comprising:

conducting an auction over a network by accepting bids for items, and establishing a highest bid for an item as being a winning bid; and

treating a bid received within a predetermined period of time before an end time of an auction less favorably than bids received prior to said predetermined period.

In the Board’s mind, the term “network” is broader than what you might think. Of course it does encompass the computer network described in Harris’ application; but the Board found it also encompasses the “societal networks of auction houses (e.g. Christies, from 1766).” Perhaps a quote from Maxwell Smart, Agent 86, is in order:

“Would you believe that at this very moment the ebb and flow of our entire economy is controlled by a sophisticated computer network that turns thousands of mouse clicks into cash?”

“Max, I find that hard to believe.”

“Well would you belive a network of Girl Scouts?”

“Selling cookies?”

“That’s right. I just bought a box of Thin Mints myself.”

“That’s ridiculous, Max.”

In this case Harris had argued that the presence of a real life business operation is evidence that the claims are drawn to real as contrasted with abstract subject matter “This billion dollar business model is certainly not an ‘illusion.’” Harris argued. Harris felt that his claims were not drawn to an abstract idea because major businesses are built on auctions, thus any claim that includes conducting an auction must be statutory.

This argument, the Board said, does not account for the actual scope of the step of conducting an auction. The scope is undefined. If the scope includes instances in which the only conduct is the reception and treatment of bids, because no complete transaction occurs in such instances, there is no concrete and tangible result. Because any step that nominally would be part of an auction process is sufficient to be this step, the scope would include such instances. The Board reasoned that certainly the remaining steps in claim 28 are sufficient to constitute conducting an auction. Thus, the step of conducting an auction over the internet does no more than choose a network as a vehicle for communication for the remaining bid reception and treatment steps in those claims.

There is a lesson to be learned here. Do not assume that mere recitation of a computer network will render a method claim statutory. If the purpose of the computer network is simply to communicate information between buyer and seller you run the risk of claiming a societal network.

Wanna buy some Girl Scout cookies?