The court then revisited its opinion in Litton Systems Inc. v. Whirlpool Corp.,4 which was the genesis of the “point of novelty” test as a second, necessary analysis for determining infringement in patent design cases. In that case, the Federal Circuit held:

For a design patent to be infringed . . . no matter how similar two items look, “the accused device must appropriate the novelty in the patented device which distinguishes it from the prior art.” That is, even though the court compares two items through the eyes of the ordinary observer, it must nevertheless, to find infringement, attribute their similarity to the novelty which distinguishes the patented device from the prior art. 5


The court acknowledged that Litton had widely been interpreted as creating a second test for design patent infringement, but noted that “[i]t had not been until much more recently” that courts found that failure to apply the test as a second, independent test was legal error.

The court went on to note that while the “point of novelty” is easily applied in cases where a single novel feature exists in a claimed design, it is more difficult to apply when there are multiple claimed points of novelty or multiple prior art references. Specifically, “applying the point of novelty test where multiple features and multiple prior art references are in play has led to disagreement over whether combinations of features, or the overall appearance of a design, can constitute the point of novelty of the claimed design.”

The ‘Ordinary Observer’ Test

In a dramatic break from its prior opinions, the court found that Litton does not impose a second “point of novelty” case, but rather, is “more properly read as applying a version of the ordinary observer test in which the ordinary observer is deemed to view the differences between the patented design and the accused product in the context of the prior art.”

As explained by the court, “when the claimed design is close to the prior art designs, small differences between the accused design and the claimed design are likely to be important to the eye of the hypothetical ordinary observer.” Thus, using the prior art as a frame of reference is particularly important in close cases where the prior art designs “can highlight the distinctions between the claimed design and the accused design as viewed by the ordinary observer.”

The court identified several advantages of the new “ordinary observer” test over the prior two-part test:

• Under the “point of novelty” test, where a design has multiple “points of novelty,” “the attention of the court may [be] focused on whether the accused design has appropriated a single specified feature of the claimed design, rather than . . . whether the accused design has appropriated the claimed design as a whole.” The “ordinary observer” approach adopted by the court, avoids the problem that, under the “points of novelty” test, “the outcome of the case can turn on which of the several candidate points of novelty the court or fact finder focuses on.”

• Designs with multiple points of novelty were disadvantaged under the “points of novelty” test in that defendants could argue their designs do not contain all of the novel features.

• Unique design elements that “depart conspicuously from the prior art” will be more easily identified as infringing under the new “ordinary observer” test.

• Under the new “ordinary observer” test, small differences will be less susceptible to exaggerated importance simply by virtue of having been designated a “point of novelty.”

The Federal Circuit did not entirely dismiss the importance of novelty in determining design patent infringement. It held that “examining the novel features of the claimed design can be an important component of the comparison of the claimed design with the accused design and the prior art.” Applying its new “ordinary observer” standard, the court found that “no reasonable fact-finder could find that EGI met its burden of showing that an ordinary observer, taking into account the prior art, would believe the accused design to be the same as the patented design.”

Burden of Production

The new “ordinary observer” test imposes a slight change to the parties’ respective burdens of production. A patentee bears the burden of proof in an infringement action. Under the old two-part rule, the patentee bore the burden of production with respect to prior art. By contrast, under the new “ordinary observer” test, the accused infringer bears the burden of production of prior art, but only if comparison to prior art is raised as part of its defense.

Claim Construction

The court also addressed the issue of whether district courts must “construe” claims in design patent cases. It concluded that, unlike utility patent cases, there was no such requirement in design patent cases. The court noted that for design patents, an illustration is often more effective than a detailed verbal description, but indicated that it might nevertheless be helpful for a court to “point out . . . various features of the claimed design as they relate to the accused design and the prior art.” The court also identified the risks inherent in a verbal description “such as the risk of placing undue emphasis on particular features of the design and the risk that a finder of fact will focus on each individual, described feature in the verbal description rather than on the design as a whole.” Ultimately, the court found that the trial court has broad discretion in determining what level of detail should be used in describing the design.

Conclusion

Although in this case the plaintiff’s claim was dismissed, the “ordinary observer” test articulated by the Federal Circuit may make it easier for plaintiffs to prove design patent infringement claims. Moreover, for the reasons articulated by the court, the “points of novelty” test arguably benefited defendants, particularly where there were multiple novel design elements, or multiple instances of prior art.

‘In re Bilski’

• The “Machine or Transformation” Test Stands Alone for Process Patents. On Oct. 30, 2008, the Federal Circuit issued another en banc opinion in the case of In re Bilski,6 This time, the opinion was not unanimous, with dissents by Judges Pauline Newman, Haldane Robert Mayer and Randall R. Rader. The court held that all process patents must meet the “machine or transformation” test articulated by the Supreme Court in Gottschalk v. Benson,7 rejecting the use of the “useful, tangible, and concrete” test previously articulated in State Street Bank & Trust Co. v. Signature Financial Group,8 as a separate test.

The patent at issue in In re Bilski was a method of hedging risk in the field of commodities trading. The Board of Patent Appeals and Interferences had sustained the rejection of the claimed patent. After the appeal was argued, but before an opinion was issued, the Federal Circuit sua sponte ordered en banc review.

Process Patents

• “Machine or Transformation.” The court, relying on the Supreme Court’s opinion in Benson, limited the test for process patents to situations were a patent meets the “machine or transformation” test. That is, a process is patent-eligible if “(1) it is tied to a particular machine or apparatus, or, (2) it transforms a particular article into a different state or thing.”

The court reasoned that “[a] claimed process involving a fundamental principle that uses a particular machine or apparatus would not pre-empt uses of the principle that do not also use the specified machine or apparatus in the manner claimed. And a claimed process that transforms a particular article to a specified different state or thing by applying a fundamental principle would not pre-empt the use of the principle to transform any other article, to transform the same article but in a manner not covered by the claim, or to do anything other than transform the specified article.”

Close Door, Open Window

The court found that the “machine or transformation” test was the only applicable test, despite the Supreme Court’s cautionary statement in Benson that “we do not hold that no process patent could ever qualify if it did not meet the requirements of our prior precedents.” At the same time, the court left open the possibility that “future developments in technology and the sciences may present difficult challenges to the machine or transformation test, just as the widespread use of computers and the advent of the Internet has begun to challenge it in the past decade.” Thus, the court concluded “the Supreme Court may ultimately decide to alter or perhaps even set aside this test to accommodate emerging technologies.”

Rejection

• Of the “Useful, Concrete and Tangible Result” Test. In limiting its test to the “machine or transformation” test, the court rejected several other analyses that have been used as separate tests with respect to process applications. The most significant of these was the “useful, concrete and tangible result” test, often referred to as the State Street test. In State Street, the court held that “transformation of data, representing discrete dollar amounts, by a machine through a series of mathematical calculations into a final share price, constitutes a [patent-eligible invention] because it produces ‘a useful, concrete and tangible result.’”

The court held that “while looking for ‘a useful, concrete and tangible result’ may in many instances provide useful indications of whether a claim is drawn to a fundamental principle or a practical application of such a principle, that inquiry is insufficient to determine whether a claim is patent-eligible.”

‘Business Method Patents’

Because the patent applicants had admitted that the claimed process was not limited to any machine or apparatus, the court limited its analysis to the transformation aspect of the “machine or transformation” test. In so doing, it recognized the relationship between business processes and implementation of those processes through computer programs, stating “[w]e leave to future cases the elaboration of the precise contours of machine implementation, as well as the answer to particular questions, such as whether or when recitation of a computer suffices to tie a process claim to a particular machine.”

The court ultimately concluded that the applicant’s claimed invention was not transformative. It held that “applicants here seek to claim a nontransformative process that encompasses a purely mental process of performing requisite mathematical calculations without the aid of a computer or any other device, mentally identifying those transactions that the calculations have revealed would hedge each other’s risks and performing the post-solutions step of consummating those transactions.” Moreover, the process was not patentable because it would “effectively pre-empt any application of the fundamental concept of hedging and mathematical calculations inherent in hedging (not even limited to any particular mathematical formula.)”

Looking Forward

After the Bilski decision, patent applications should likely refer to computers and other apparatus claims in an effort to fit process patents into the “machine” prong of the “machine or transformation” test.

Robert C. Scheinfeld is the head of the intellectual property group in the New York office of Baker Botts. Parker H. Bagley is a partner at Goodwin Procter in its intellectual property and litigation practice. Chelsea Teachout, a Goodwin Procter associate in the IP litigation department, assisted in the preparation of this article.

Endnotes:

1. 543 F.3d 665 (2008).

2. 81 U.S. 511 (1871).

3. Id. at 528.

4. 728 F.2d 1423 (Fed. Cir. 1984).

5. 728 F.2d at 1444 (citations omitted).

6. No. 2007-1130, F.3d, 2008 WL 4757110 (C.A. Fed. Oct. 30, 2008).

7. 409 U.S. 63 (1972).

8. 149 F.3d 1368 (Fed. Cir. 1998).