Digest 3: UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS STATE STREET BANK AND TRUST COMPANY v. SIGNATURE FINANCIAL GROUP, INC., CIVIL ACTION NO. 94-11344-PBS

• UNITED STATES DISTRICT COURT
  DISTRICT OF MASSACHUSETTS

• STATE STREET BANK AND TRUST COMPANY, Plaintiff

v.

SIGNATURE FINANCIAL GROUP, INC., Defendant

CIVIL ACTION NO. 94-11344-PBS

Facts: The herein private respondent, Signature Financial Group and state Street Bank & Trust Company were engaged in the creation and promotion of accounting software especially that will deal with the proper handling of mutual fund. The herein private respondent, managed to creat a new system which is "Data Processing System for Hub and Spoke Financial Services Configuration," which provides a data processing system and method for monitoring and recording the information flow and data, and making all calculations, necessary for maintaining a partnership portfolio and partner fund (Hub and Spoke) financial services configuration." In order to assess the scope and nature of the claimed invention, it is first necessary to discuss briefly the financial configuration which the data processing system is designed to service.

Such patent was questioned by the herein petitioner on the ground that such patent was within the prohibition as to non-patentability of computer software and mathematical equation.

Issue: whether or not the accounting software created by Signature is patentable within the provision of U.S. Patent law?

Held: No, the U.S. Supreme Court mentioned the following:

Section 101 of Title 35 of the U.S. Code provides:

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 therefor, subject to the conditions and requirements of this title.

Thus, the statute sets out four categories of subject matter -- process, machine, manufacture, and composition of matter -- that are entitled to patent protection provided that the other requirements of patentability (i.e., novelty and non-obviousness under 35 U.S.C. §§ 102-103) are satisfied. Although § 101 has been broadly construed to "include anything under the sun that is made by man," Diamond v. Chakrabarty, 447 U.S. 303, 309-10 (1980) (quoting legislative history of 1952 recodification), "[t]his is not to suggest that § 101 has no limits or that it embraces every discovery." Id. "To include some things [in § 101] is to exclude others." In re Warmerdam, 33 F.3d 1354, 1358 (Fed. Cir. 1994).

"An idea is itself not patentable, but a new device by which it may be made practically useful is." Rubber-Tip Pencil Co. v. Howard, 87 U.S. (20 Wall.) 498, 507 (1874). Over time, the Supreme Court further explained this limit to subject matter patentability:

The laws of nature, physical phenomena, and abstract ideas have been held not patentable. Thus, a new mineral discovered in the earth or a new plant found in the wild is not patentable subject matter. Likewise, Einstein could not patent his celebrated law that E=mc2; nor could Newton have patented the law of gravity. Such discoveries are "manifestations of . . . nature, free to all men and reserved exclusively to none."

Chakrabarty, 447 U.S. at 309 (quoting Funk Bros. Seed Co. v. Kalo Innoculant Co., 333 U.S. 127, 130 (1948)) (citations omitted). Therefore, "[w1hile a scientific truth, or the mathematical expression of it, is not patentable invention, a novel and useful structure created with the aid of scientific truth may be." Mackay Radio & Telegraph Co., Inc. v. Radio Corp. of America, 306 U.S. 86, 92-94 (1939).

The reason for this rule is simple, "[p]henomena of nature, though just discovered, mental processes, and abstract intellectual concepts are not patentable, as they are the basic tools of scientific and technological work."Gottschalk v. Benson, 409 U.S. 63, 67 (1972). Granting a patent monopoly on the use of a scientific principle, rather than on its particular practical application, would impede rather than "promote the Progress of Science and useful Arts." U.S. Const. Art. I, cl. 8 (patent and copyright clause).

The creation of signature is within the prohibition as propounded by the U.S. Law on patent. Such software or mathematical formula limits people from using such to invent industrially applicable outputs.

The high court ruled that such software was non-patentable.