The reasoning of the Court of Appeals for the Federal Circuit in its recent decision in In Re Nuijten and its subsequent denial of a petition for rehearing en banc has the potential effect of invalidating thousands of issued patents that may fall into newly un-legislated exceptions from patentable subject matter In Re Nuijten, 500 F.3d 1346 (Fed. Cir. 2007), rehearing denied, 515 F.3d 1361 (Fed. Cir. 2008). The Federal Circuit in In Re Nuijten held that a transitory propagating signal is not patentable subject matter under 35 U.S.C. § 101.
Background:
Nuijten's patent application discloses a technique for reducing distortion induced by the introduction of "watermarks" into signals. In the context of signal processing, watermarking is a technique by which an original signal is manipulated so as to embed within it additional data. The additional data is preferably imperceptible to someone who views or listens to the signal-for instance, a listener who plays back a watermarked digital audio file would, if the watermark is sufficiently unobtrusive, not be able to distinguish between the watermarked and unwatermarked versions. An analysis of the file by software capable of detecting the watermark, however, will reveal the mark's contents. Publishers of sound and video recordings, for example, find watermarks useful to embed in the media they distribute information intended to protect that media against unauthorized copying. For these publishers and others, watermarking represents a trade-off: the desired additional data is encoded directly into the signal, but like any change to a signal, the watermark introduces some level of distortion. Thus, a key goal of watermarking techniques is to minimize the distortion so that the resulting diminution in signal quality is as minimal as possible.
Nuijten's technique improves existing watermark technology by further modifying the watermarked signal in a way that partially compensates for distortion introduced by the watermark.
Figure 2 from the Nuijten application, illustrated above, demonstrates a relatively simple form of digital audio encoding called "delta modulation." The smooth line in the upper graph (labeled 'x') represents a very small slice of the sound wave to be encoded. The lower graph represents a digital encoding of that signal. It takes on only two values to illustrate the signal. These are labeled here as '1' and '-1,' rather than the usual labeling of these binary values as one and zero. The sound wave is reconstructed from the digital signal one step at a time, left to right. If the digital signal has value '1,' then the reconstructed sound wave's value is increased slightly. If, on the other hand, the digital signal has value '-1,' then the sound wave is decreased by the same amount. Therefore, the recording is represented by the change (or "delta") over a very small increment of time, either '1' for an increase or '-1' for a decrease. Hence, the encoding scheme is known as "delta modulation." The result is a close but imperfect approximation of the original sound wave, illustrated on the upper graph by 'x' with a caret above it. The fidelity of the reconstructed sound wave to the original will depend in large part on the "sample rate"-the length of the time interval represented by each discrete value in the digital signal. Representing all of the nuances of the original sound wave in order to produce a rich, clear recording may require tens or hundreds of thousands of samples per second.
The watermark of Nuijten is imposed on the signal by altering, if necessary, every hundredth value of the digital signal. A reader seeking to extract the watermark from the digital signal would therefore view only every hundredth value, disregarding the other 99 along the way; by stringing together all such values, the watermarked data may be discerned. Every point where a portion of the watermark is found represents a possibility that the signal may be distorted. If the watermark value designated for a certain position and the original value at that same position happen to coincide, there is no need to modify the original and hence no distortion. About half of the time, though, those values will not coincide and the digital signal will be altered. The result is shown below in Figure 3 from the Nuijten application: the digital value at the point labeled '21' and illustrated by a vertical dashed line has been changed from '1' in the original to '-1.' The reconstructed signal is thus decreased where it should be increased, and the encoded signal departs from the original in a pronounced manner.
Nuijten's application teaches that the above illustrated departure may be minimized by making an additional change to the watermarked digital signal, as shown below in Figure 4:
Here, the value preceding the one that was modified by the watermark has also been modified: it was '-1' in the original signal, but is now '1.' The signal is therefore increased, and then decreased (where in the original it was decreased, and then increased). The resulting encoding has the same watermark as the above example, but as the diagram indicates, it tracks the original sound wave much more accurately. There is still some small loss in encoding quality relative to the unwatermarked original, but the magnitude of that loss has been greatly decreased.
Procedural History:
In the U.S. Patent Office ("PTO"), the Examiner rejected a number of claims in Nuijten's application for obviousness-type double patenting, and rejected Claims 14, 15, and 22-24 as directed to nonstatutory subject matter under 35 U.S.C. § 101.
On appeal, the Board of Patent Appeals ("the Board") reversed the double-patenting rejections. As to Claim 15, the Board found that "[t]he storage medium in claim 15 nominally puts the claim into the statutory category of a 'manufacture' " and thus reversed the Examiner's 35 U.S.C. § 101 rejection of that claim. The Board, however, affirmed the Examiner's 35 U.S.C. § 101 rejections of Claims 14 and 22-24 on two grounds.
First, the Board noted that "[t]he signal ... has no physical attributes and merely describes the abstract characteristics of the signal and, thus, it is considered an 'abstract idea' " unpatentable under Diamond v. Diehr, 450 U.S. 175, 185, 101 S.Ct. 1048, 67 L.Ed.2d 155 (1981). Second, the Board determined that the claims at issue fell into none of the four statutory categories of patentable subject matter: "process, machine, manufacture, or composition of matter." 35 U.S.C. § 101.
In the Board's view, the claims were not directed to a process because they did not "recite acts"; not a machine because "the signal ... has no concrete tangible physical structure"; and "not composed of matter and [therefore] clearly not a 'composition of matter.'" Finally, the Board noted that "[t]he signal does not have any physical structure or substance and does not fit the definition of a 'manufacture' which requires a tangible object." Accordingly, the Board rejected Claims 14 and 22-24 solely on the basis of unpatentability under 35 U.S.C. § 101. Nuijten timely appealed the Board's decision to the Court of Appeals for the Federal Circuit.
The Allowed Claims:
Claim 1 of the Nuijten application is the broadest process claim allowed by the PTO. It reads:
A method of embedding supplemental data in a signal, comprising the steps of:
encoding the signal in accordance with an encoding process which includes the step of feeding back the encoded signal to control the encoding; and modifying selected samples of the encoded signal to represent the supplemental data prior to the feedback of the encoded signal and including the modifying of at least one further sample of the encoded signal preceding the selected sample if the further sample modification is found to improve the quality of the encoding process.
Nuijten's Claims 11-13, also allowed by the PTO, are directed to "[a]n arrangement for embedding supplemental data in a signal," including "encoder means for encoding the signal" and other structural features that carry out the above process. Finally, Nuijten's allowed Claim 15 is directed to "[a] storage medium having stored thereon a signal with embedded supplemental data," where the stored signal has essentially the encoding properties described above. Thus, Nuijten was allowed claims by the PTO to: a) the process of generating the signals, b) a device that performs that process, and c) a storage medium holding the resulting signals.
The Claims on Appeal:
The claims on appeal seek to cover the resulting encoded signals themselves. Claim 14 of Nuijten's application is the only independent claim of the four rejected by the PTO. It reads:
A signal with embedded supplemental data, the signal being encoded in accordance with a given encoding process and selected samples of the signal representing the supplemental data, and at least one of the samples preceding the selected samples is different from the sample corresponding to the given encoding process.
Claims 22, 23, and 24 depend on Claim 14, respectively adding requirements that the embedded data be a watermark, that the signal be a video signal, and that the signal be an audio signal.
The Reasoning of the Federal Circuit:
The Federal Circuit determined that the transitory propagating signal claims of Nuijten were not a process, a machine, a manufacture, or a composition of matter – hence not patentable subject matter under 35 U.S.C. § 101 as follows:
Process:
Because a process claim must cover an act or series of acts and Nuijten's signal claims do not, the Federal Circuit held that claims were not directed to a process. In re Nuijten at 1355.
Machine:
Because a machine claim must cover a device used to generate an act or series of acts and Nuijten's signal claims do not, the Federal Circuit held that claims were not directed to a machine. In re Nuijten at 1355-56.
Manufacture:
The Federal Circuit stated that the "Supreme Count has defined 'manufacture' (in its verb form) as the 'production of articles for use from raw or prepared materials by giving to these materials new forms, qualities, properties, or combinations, whether by hand-labor or by machinery.'" In re Nuijten at 1356 (citing Diamond v. Chakrabarty, 447 U.S. 303, 308, 100 S.Ct. 2204, 65 L.Ed.2d 144 (1980) (emphasis in original).
The Federal Circuit further stated that the term "manufacture" is used as a noun in the statute, and therefore refers to "articles" resulting from the process of manufacture. In re Nuijten at 1356. The Federal Circuit then stated that the same dictionary that the Supreme Court relied upon for its definition of "manufacture" in Chakrabarty in turn defines "article" as "a particular substance or commodity: as, an article of merchandise; an article of clothing; salt is a necessary article." In re Nuijten at 1356 (citing 1 Century Dictionary 326 (William Dwight Whitney ed., 1895) (emphasis in original).
Summing up, the Federal Circuit then concluded that the above definitions address "articles" of "manufacture" as being tangible articles. In re Nuijten at 1356. As such, the Federal Circuit then ruled that "[a] transient electric or electromagnetic transmission does not fit within [the definition of manufacture – and, hence the signal claims of Nuijten are not patentable subject matter under 35 U.S.C. § 101]. In re Nuijten at 1356.
The Federal Circuit then enumerated why it felt that the claimed signal of Nuijten was not a tangible article:
"While such a transmission is man-made and physical - it exists in the real world and has tangible causes and effects - it is a change in electric potential that, to be perceived, must be measured at a certain point in space and time by equipment capable of detecting and interpreting the signal. In essence, energy embodying the claimed signal is fleeting and is devoid of any semblance of permanence during transmission. (Emphasis added). Moreover, any tangibility arguably attributed to a signal is embodied in the principle that it is perceptible - e.g., changes in electrical potential can be measured. All signals within the scope of the claim do not themselves comprise some tangible article or commodity. This is particularly true when the signal is encoded on an electromagnetic carrier and transmitted through a vacuum-a medium that, by definition, is devoid of matter."
In re Nuijten at 1356-57.
Composition of Matter:
The Federal Circuit held that since a signal comprising a fluctuation in electric potential or in electromagnetic fields is not a "chemical union," nor a gas, fluid, powder, or solid, Nuijten's signals are not "composition[s] of matter." In re Nuijten at 1357.
A Transitory Propagating Signal Is A Manufacture:
The Federal Circuit based its holding on the definition of "manufacture" quoted by the Supreme Court in American Fruit Growers, Inc. v. Brogdex Co., 283 U.S. 1, 11, 51 S.Ct. 328, 75 L.Ed. 801 (1931), and again in Diamond v. Chakrabarty, 447 U.S. 303, 308, 100 S.Ct. 2204, 65 L.Ed.2d 144 (1980): "the production of articles for use from raw or prepared materials by giving to these materials new forms, qualities, properties, or combinations, whether by hand-labor or by machinery." Notably, however, when the Supreme Court defined "manufacture" as referenced above, the Supreme Court emphasized that "[i]n choosing such expansive terms as 'manufacture' ... modified by the comprehensive 'any,' Congress plainly contemplated that the patent laws would be given wide scope." Chakrabarty, 447 U.S. at 308, 100 S.Ct. 2204. Because the signal claim of Nuijten contemplates "some physical carrier of information," In Re Nuijten at 1353, the claim requires that some input "material"-whether a pulse of energy or a stone tablet-has been given a "new form[ ]," "qualit[y]," or "propert[y]" by direct human action or by a machine. The resulting signal is thus a "manufacture" in the "expansive" sense of 35 U.S.C. § 101 as contemplated by Congress.
The Federal Circuit's Ruling Creates Newly Un-Legislated Categories of Exceptions from Patentable Subject Matter:
The Federal Circuit further justified its holding by creating entirely new categories of exceptions from patentable subject matter (at least in the context of a manufacture): (a) things that are only perceptible by measuring equipment; (b) things that are fleeting; and (c) things are not tangible. In Re Nuijten at 1356-58. As a result, the reasoning of the Federal Circuit's decision has the potential effect of invalidating thousands of issued patents that may fall into these newly un-legislated exceptions from patentable subject matter.
In Chakrabarty, for example, the Supreme Court sustained the patentability of a "human-made micro-organism." 447 U.S. at 305. A micro-organism is, by definition, an organism so small that it cannot be perceived without the aid of a microscope. There are numerous other examples of other patents that have issued on structures that are only perceptible using highly sophisticated measuring equipment in technological areas such as, for example, semiconductor fabrication, biotechnology, and nanotechnology. Thus, the Federal Circuit's ruling, if upheld, has potentially serious consequences in any number of technological areas.
Furthermore, there is no legal precedent for the proposition that a thing's "fleeting" nature somehow bears on the degree to which that thing may be patented. And, this is ignoring the inherent vagueness of the term "fleeting" that the Federal Circuit has introduced in its decision such as, for example, the timeline to be used. The use of such a vague definition creates an unworkable rule by which to determine whether a thing's nature is "fleeting."
Finally, there is no requirement within 35 U.S.C. § 101 that a thing must be tangible in order to be patentable. Furthermore, the Federal Circuit's decision even admits that the signal of Nuijten is man-made and physical – yet concludes that the signal is not tangible because it must be measured. In re Nuijten at 1356-57. This position is illogical.
Looking Ahead:
The Federal Circuit's decision in In Re Nuijten is problematic. Fortunately, a petition for a writ of certiorari has been filed by Nuijten. Hopefully, the Supreme Court will accept certiorari and once again reverse another decision of the Federal Circuit. Otherwise, all patents may be fleeting ...
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