CITE:  149 F.3d 1368
CMON:  July 1998
PLAIN: State Street Bank & Trust Co.
DEFND: Signature Financial Group, Inc.
COURT: United States Court of Appeals for the Federal Circuit
DATE:  July 23, 1998

HISTORY:
Bank brought action against assignee of patent for computerized accounting
system used to manage mutual fund investment structure, seeking
declaratory judgment that patent was invalid and unenforceable.  The
United States District Court for the District of Massachusetts, Judge
Patti B. Saris, 927 F.Supp. 502, granted summary judgment for bank, and
assignee appealed.  The Court of Appeals, Rich, Circuit Judge, held that:
(1) patent was directed to machine, not process; (2) invention was not
unpatentable under mathematical algorithm exception to patentability; 
and (3) there is no "business method" exception to patentability.
REVERSED and REMANDED.

SUMMARY:
  Economic methods that produce a useful, concrete and tangible result
  are patentable.

JUDGE: RICH, Circuit Judge.
Before RICH, PLAGER, and BRYSON, Circuit Judges.

DECISION:

Signature Financial Group, Inc. (Signature) appeals from the decision of the
United States District Court for the District of Massachusetts granting a
motion for summary judgment in favor of State Street Bank & Trust Co.
(State Street), finding U.S. Patent No.  5,193,056 (the '056 patent) invalid
on the ground that the claimed subject matter is not encompassed by 35 U.S.C.
Section 101 (1994). See State Street Bank & Trust Co. v. Signature Financial
Group, Inc., 927 F. Supp. 502 (D. Mass. 1996). We reverse and remand because
we conclude that the patent claims are directed to statutory subject matter.

BACKGROUND

Signature is the assignee of the '056 patent which is entitled "Data
Processing System for Hub and Spoke Financial Services Configuration." 
The '056 patent issued to Signature on 9 March 1993, naming R. Todd Boes
as the inventor.  The '056 patent is generally directed to a data processing
system (the system) for implementing an investment structure which was
developed for use in Signature's business as an administrator and accounting
agent for mutual funds.  In essence, the system, identified by the
proprietary name Hub and Spoke (R), facilitates a structure whereby mutual
funds (Spokes) pool their assets in an investment portfolio (Hub) organized
as a partnership. This investment configuration provides the administrator
of a mutual fund with the advantageous combination of economies of scale
in administering investments coupled with the tax advantages of a partnership.

State Street and Signature are both in the business of acting as custodians
and accounting agents for multi-tiered partnership fund financial services.
State Street negotiated with Signature for a license to use its patented data
processing system described and claimed in the '056 patent. When negotiations
broke down, State Street brought a declaratory judgment action asserting
invalidity, unenforceability, and noninfringement in Massachusetts district
court, and then filed a motion for partial summary judgment of patent
invalidity for failure to claim statutory subject matter under Section 101.
The motion was granted and this appeal followed.

DISCUSSION

On appeal, we are not bound to give deference to the district court's grant
of summary judgment, but must make an independent determination that the
standards for summary judgment have been met.  Vas-Cath, Inc. v. Mahurkar,
935 F.2d 1555, 1560 (Fed. Cir. 1991). Summary judgment is properly granted
where there are no genuine issues of material fact and the moving party is
entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The
substantive issue at hand, whether the '056 patent is invalid for failure
to claim statutory subject matter under Section 101, is a matter of both claim
construction and statutory construction. "We review claim construction de novo
including any allegedly fact-based questions relating to claim construction."
Cybor Corp. v. FAS Techs., 138 F.3d 1448, 1451 (Fed. Cir. 1998) (in banc).
We also review statutory construction de novo. See Romero v. United States,
38 F.3d 1204, 1207 (Fed. Cir. 1994). We hold that declaratory judgment
plaintiff State Street was not entitled to the grant of summary judgment
of invalidity of the '056 patent under Section 101 as a matter of law,
because the patent claims are directed to statutory subject matter.

The following facts pertinent to the statutory subject matter issue are
either undisputed or represent the version alleged by the nonmovant. See
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 91 L. Ed. 2d 202,
106 S. Ct. 2505 (1986). The patented invention relates generally to a system
that allows an administrator to monitor and record the financial information
flow and make all calculations necessary for maintaining a partner fund
financial services configuration. As previously mentioned, a partner fund
financial services configuration essentially allows several mutual funds, or
"Spokes," to pool their investment funds into a single portfolio, or "Hub,"
allowing for consolidation of, inter alia, the costs of administering the
fund combined with the tax advantages of a partnership. In particular, this
system provides means for a daily allocation of assets for two or more Spokes
that are invested in the same Hub. The system determines the percentage
share that each Spoke maintains in the Hub, while taking into consideration
daily changes both in the value of the Hub's investment securities and in
the concomitant amount of each Spoke's assets.

In determining daily changes, the system also allows for the allocation
among the Spokes of the Hub's daily income, expenses, and net realized and
unrealized gain or loss, calculating each day's total investments based on
the concept of a book capital account. This enables the determination
of a true asset value of each Spoke and accurate calculation of allocation
ratios between or among the Spokes. The system additionally tracks all the
relevant data determined on a daily basis for the Hub and each Spoke, so
that aggregate year end income, expenses, and capital gain or loss can be
determined for accounting and for tax purposes for the Hub and, as a result,
for each publicly traded Spoke.

It is essential that these calculations are quickly and accurately performed.
In large part this is required because each Spoke sells shares to the public
and the price of those shares is substantially based on the Spoke's percentage
interest in the portfolio. In some instances, a mutual fund administrator is
required to calculate the value of the shares to the nearest penny within as
little as an hour and a half after the market closes. Given the complexity
of the calculations, a computer or equivalent device is a virtual necessity
to perform the task.

The '056 patent application was filed 11 March 1991. It initially contained
six "machine" claims, which incorporated means-plus-function clauses, and
six method claims. According to Signature, during prosecution the examiner
contemplated a Section 101 rejection for failure to claim statutory subject
matter.  However, upon cancellation of the six method claims, the examiner
issued a notice of allowance for the remaining present six claims on appeal.
Only claim 1 is an independent claim.

The district court began its analysis by construing the claims to be directed
to a process, with each "means" clause merely representing a step in that
process. However, "machine" claims having "means" clauses may only be
reasonably viewed as process claims if there is no supporting structure
in the written description that corresponds to the claimed "means" elements.
See In re Alappat, 33 F.3d 1526, 1540-41 (Fed. Cir. 1994) (in banc). This
is not the case now before us.

When independent claim 1 is properly construed in accordance with Section 112,
paragraph 6, it is directed to a machine, as demonstrated below, where
representative claim 1 is set forth, the subject matter in brackets stating
the structure the written description discloses as corresponding to the
respective "means" recited in the claims.

  1. A data processing system for managing a financial services
  configuration of a portfolio established as a partnership, each partner
  being one of a plurality of funds, comprising:

  (a) computer processor means [a personal computer including a CPU] for
  processing data;

  (b) storage means [a data disk] for storing data on a storage medium;

  (c) first means [an arithmetic logic circuit configured to prepare the
  data disk to magnetically store selected data] for initializing the
  storage medium;

  (d) second means [an arithmetic logic circuit configured to retrieve
  information from a specific file, calculate incremental increases or
  decreases based on specific input, allocate the results on a percentage
  basis, and store the output in a separate file] for processing data
  regarding assets in the portfolio and each of the funds from a previous
  day and data regarding increases or decreases in each of the funds,
  [sic, funds'] assets and for allocating the percentage share that each
  fund holds in the portfolio;

  (e) third means [an arithmetic logic circuit configured to retrieve
  information from a specific file, calculate incremental increases and
  decreases based on specific input, allocate the results on a percentage
  basis and store the output in a separate file] for processing data
  regarding daily incremental income, expenses, and net realized gain or
  loss for the portfolio and for allocating such data among each fund;

  (f) fourth means [an arithmetic logic circuit configured to retrieve
  information from a specific file, calculate incremental increases and
  decreases based on specific input, allocate the results on a percentage
  basis and store the output in a separate file] for processing data
  regarding daily net unrealized gain or loss for the portfolio and for
  allocating such data among each fund; and

  (g) fifth means [an arithmetic logic circuit configured to retrieve
  information from specific files, calculate that information on an
  aggregate basis and store the output in a separate file] for processing
  data regarding aggregate year-end income, expenses, and capital gain
  or loss for the portfolio and each of the funds.

Each claim component, recited as a "means" plus its function, is to be read,
of course, pursuant to Section 112, paragraph 6, as inclusive of the
"equivalents" of the structures disclosed in the written description
portion of the specification. Thus, claim 1, properly construed, claims
a machine, namely, a data processing system for managing a financial
services configuration of a portfolio established as a partnership, which
machine is made up of, at the very least, the specific structures disclosed
in the written description and corresponding to the means-plus-function
elements (a)-(g) recited in the claim.  A "machine" is proper statutory
subject matter under Section 101. We note that, for the purposes of a Section
101 analysis, it is of little relevance whether claim 1 is directed to a
"machine" or a "process", as long as it falls within at least one of the
four enumerated categories of patentable subject matter, "machine" and
"process" being such categories.

This does not end our analysis, however, because the court concluded that the
claimed subject matter fell into one of two alternative judicially-created
exceptions to statutory subject matter. {1} The court refers to the first
exception as the "mathematical algorithm" exception and the second
exception as the "business method" exception. Section 101 reads:

  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.

The plain and unambiguous meaning of Section 101 is that any invention
falling within one of the four stated categories of statutory subject
matter may be patented, provided it meets the other requirements for
patentability set forth in Title 35, i.e., those found in Section 102,
103, and 112, P2. {2}


The repetitive use of the expansive term "any" in section 101 shows
Congress's intent not to place any restrictions on the subject matter
for which a patent may be obtained beyond those specifically recited in
Section 101. Indeed, the Supreme Court has acknowledged that Congress
intended Section 101 to extend to "anything under the sun that is made
by man".  Diamond v. Chakrabarty, 447 U.S. 303, 309, 65 L. Ed. 2d 144,
100 S. Ct. 2204 (1980); see also Diamond v. Diehr, 450 U.S. 175, 182,
67 L. Ed. 2d 155, 101 S. Ct. 1048 (1981). {3}  Thus, it is improper to
read limitations into Section 101 on the subject matter that may be
patented where the legislative history indicates that Congress clearly
did not intend such limitations. See Chakrabarty, 447 U.S. at 308 ("We
have also cautioned that courts 'should not read into the patent laws
limitations and conditions which the legislature has not expressed.'"
(citations omitted)).


The "Mathematical Algorithm" Exception

The Supreme Court has identified three categories of subject matter that are
unpatentable, namely "laws of nature, natural phenomena, and abstract ideas."
Diehr, 450 U.S. at 185. Of particular relevance to this case, the Court has
held that mathematical algorithms are not patentable subject matter to
the extent that they are merely abstract ideas. See Diehr, 450 U.S. 175,
67 L. Ed. 2d 155, 101 S. Ct. 1048, passim; Parker v. Flook, 437 U.S. 584,
57 L. Ed. 2d 451, 98 S. Ct. 2522 (1978); Gottschalk v. Benson, 409 U.S. 63,
34 L. Ed. 2d 273, 93 S. Ct. 253 (1972). In Diehr, the Court explained that
certain types of mathematical subject matter, standing alone, represent
nothing more than abstract ideas until reduced to some type of practical
application, i.e., "a useful, concrete and tangible result." Alappat,
33 F.3d at 1544. {4}

Unpatentable mathematical algorithms are identifiable by showing they are
merely abstract ideas constituting disembodied concepts or truths that are
not "useful." From a practical standpoint, this means that to be patentable
an algorithm must be applied in a "useful" way. In Alappat, we held that
data, transformed by a machine through a series of mathematical calculations
to produce a smooth waveform display on a rasterizer monitor, constituted a
practical application of an abstract idea (a mathematical algorithm, formula,
or calculation), because it produced "a useful, concrete and tangible
result" -- the smooth waveform.

Similarly, in Arrhythmia Research Technology Inc. v. Corazonix Corp.,
958 F.2d 1053 (Fed. Cir. 1992), we held that the transformation of
electrocardiograph signals from a patient's heartbeat by a machine through
a series of mathematical calculations constituted a practical application
of an abstract idea (a mathematical algorithm, formula, or calculation),
because it corresponded to a useful, concrete or tangible thing -- the
condition of a patient's heart.

Today, we hold that the transformation of data, representing discrete dollar
amounts, by a machine through a series of mathematical calculations into
a final share price, constitutes a practical application of a mathematical
algorithm, formula, or calculation, because it produces "a useful, concrete
and tangible result" -- a final share price momentarily fixed for recording
and reporting purposes and even accepted and relied upon by regulatory
authorities and in subsequent trades.

The district court erred by applying the Freeman-Walter-Abele test to
determine whether the claimed subject matter was an unpatentable abstract
idea.  The Freeman-Walter-Abele test was designed by the Court of Customs
and Patent Appeals, and subsequently adopted by this court, to extract and
identify unpatentable mathematical algorithms in the aftermath of Benson and
Flook. See In re Freeman, 573 F.2d 1237 (CCPA 1978) as modified by In
re Walter, 618 F.2d 758 (CCPA 1980). The test has been thus articulated:

  First, the claim is analyzed to determine whether a mathematical
  algorithm is directly or indirectly recited. Next, if a mathematical
  algorithm is found, the claim as a whole is further analyzed to
  determine whether the algorithm is "applied in any manner to physical
  elements or process steps," and, if it is, it "passes muster under
  Section 101."

In re Pardo, 684 F.2d 912, 915 (CCPA 1982)  (citing In re Abele, 684 F.2d
902 (CCPA 1982)). {5}

After Diehr and Chakrabarty, the Freeman-Walter-Abele test has little, if
any, applicability to determining the presence of statutory subject
matter.  As we pointed out in Alappat, 33 F.3d at 1543, application of the
test could be misleading, because a process, machine, manufacture, or
composition of matter employing a law of nature, natural phenomenon, or
abstract idea is patentable subject matter even though a law of nature,
natural phenomenon, or abstract idea would not, by itself, be entitled
to such protection. {6}  The test determines the presence of, for example,
an algorithm. Under Benson, this may have been a sufficient indicium of
nonstatutory subject matter. However, after Diehr and Alappat, the mere fact
that a claimed invention involves inputting numbers, calculating numbers,
outputting numbers, and storing numbers, in and of itself, would not render
it nonstatutory subject matter, unless, of course, its operation does not
produce a "useful, concrete and tangible result".  Alappat, 33 F.3d at 1544.
{7}  After all, as we have repeatedly stated,

  every step-by-step process, be it electronic or chemical or mechanical,
  involves an algorithm in the broad sense of the term. Since Section 101
  expressly includes processes as a category of inventions which may be
  patented and Section 100(b) further defines the word "process" as
  meaning "process, art or method, and includes a new use of a known
  process, machine, manufacture, composition of matter, or material",
  it follows that it is no ground for holding a claim is directed to
  nonstatutory subject matter to say it includes or is directed to an
  algorithm. This is why the proscription against patenting has been
  limited to mathematical algorithms . . . .

In re Iwahashi, 888 F.2d 1370, 1374 (Fed. Cir. 1989) (emphasis in the
original). {8}

The question of whether a claim encompasses statutory subject matter should
not focus on which of the four categories of subject matter a claim is
directed to {9} -- process, machine, manufacture, or composition of matter
-- but rather on the essential characteristics of the subject matter, in
particular, its practical utility.  Section 101 specifies that statutory
subject matter must also satisfy the other "conditions and requirements"
of Title 35, including novelty, nonobviousness, and adequacy of disclosure
and notice. See In re Warmerdam, 33 F.3d 1354, 1359 (Fed. Cir. 1994). For
purpose of our analysis, as noted above, claim 1 is directed to a machine
programmed with the Hub and Spoke software and admittedly produces a
"useful, concrete, and tangible result." Alappat, 33 F.3d at 1544.  This
renders it statutory subject matter, even if the useful result is expressed
in numbers, such as price, profit, percentage, cost, or loss.

The Business Method Exception

As an alternative ground for invalidating the '056 patent under Section
101, the court relied on the judicially-created, so-called "business
method" exception to statutory subject matter. We take this opportunity
to lay this ill-conceived exception to rest. Since its inception, the
"business method" exception has merely represented the application of
some general, but no longer applicable legal principle, perhaps arising
out of the "requirement for invention" -- which was eliminated by Section
103. Since the 1952 Patent Act, business methods have been, and should
have been, subject to the same legal requirements for patentability as
applied to any other process or method. {10}

The business method exception has never been invoked by this court, or the
CCPA, to deem an invention unpatentable. {11} Application of this particular
exception has always been preceded by a ruling based on some clearer
concept of Title 35 or, more commonly, application of the abstract idea
exception based on finding a mathematical algorithm. Illustrative is the
CCPA's analysis in In re Howard, 55 C.C.P.A. 1121, 394 F.2d 869 (CCPA 1968),
wherein the court affirmed the Board of Appeals' rejection of the claims
for lack of novelty and found it unnecessary to reach the Board's section
101 ground that a method of doing business is "inherently unpatentable."
394 F.2d at 872. {12}

Similarly, In re Schrader, 22 F.3d 290 (Fed. Cir. 1994), while making
reference to the business method exception, turned on the fact that the
claims implicitly recited an abstract idea in the form of a mathematical
algorithm and there was no "transformation or conversion of subject matter
representative of or constituting physical activity or objects."
22 F.3d at 294. {13}

State Street argues that we acknowledged the validity of the business
method exception in Alappat when we discussed Maucorps and Meyer:

  Maucorps dealt with a business methodology for deciding how salesmen
  should best handle respective customers and Meyer involved a 'system'
  for aiding a neurologist in diagnosing patients. Clearly, neither of
  the alleged 'inventions' in those cases falls within any Section 101
  category.

Alappat, 33 F.3d at 1541. However, closer scrutiny of these cases reveals
that the claimed inventions in both Maucorps and Meyer were rejected as
abstract ideas under the mathematical algorithm exception, not the
business method exception. See In re Maucorps, 609 F.2d 481, 484
(CCPA 1979); In re Meyer, 688 F.2d 789, 796 (CCPA 1982). {14}

Even the case frequently cited as establishing the business method exception
to statutory subject matter, Hotel Security Checking Co. v. Lorraine Co.,
160 F. 467 (2d Cir. 1908), did not rely on the exception to strike the
patent. {15}  In that case, the patent was found invalid for lack of
novelty and "invention", not because it was improper subject matter for
a patent. The court stated "the fundamental principle of the system is as
old as the art of bookkeeping, i.e., charging the goods of the employer to
the agent who takes them." Id. at 469. "If at the time of [the patent]
application, there had been no system of bookkeeping of any kind in
restaurants, we would be confronted with the question whether a new and
useful system of cash registering and account checking is such an art as
is patentable under the statute." Id. at 472.

This case is no exception. The district court announced the precepts of the
business method exception as set forth in several treatises, but noted as its
primary reason for finding the patent invalid under the business method
exception as follows:

  If Signature's invention were patentable, any financial institution
  desirous of implementing a multi-tiered funding complex modelled (sic)
  on a Hub and Spoke configuration would be required to seek Signature's
  permission before embarking on such a project.  This is so because
  the '056 Patent is claimed [sic] sufficiently broadly to foreclose
  virtually any computer-implemented accounting method necessary to manage
  this type of financial structure. 

927 F. Supp. 502, 516 (emphasis added). Whether the patent's claims are
too broad to be patentable is not to be judged under Section 101, but
rather under Sections 102, 103 and 112. Assuming the above statement to be
correct, it has nothing to do with whether what is claimed is statutory
subject matter.

In view of this background, it comes as no surprise that in the most recent
edition of the Manual of Patent Examining Procedures (MPEP) (1996), a
paragraph of Section 706.03(a) was deleted. In past editions it read:

  Though seemingly within the category of process or method, a method of
  doing business can be rejected as not being within the statutory classes.
  See Hotel Security Checking Co. v. Lorraine Co., 160 F. 467 (2nd Cir.
  1908) and In re Wait, 73 F.2d 982, 22 C.C.P.A. 822 (1934).

MPEP Section 706.03(a) (1994). This acknowledgment is buttressed by the
U.S. Patent and Trademark 1996 Examination Guidelines for Computer
Related Inventions which now read:

  Office personnel have had difficulty in properly treating claims
  directed to methods of doing business. Claims should not be categorized
  as methods of doing business. Instead such claims should be treated
  like any other process claims.

Examination Guidelines, 61 Fed. Reg. 7478, 7479 (1996). We agree that this
is precisely the manner in which this type of claim should be treated.
Whether the claims are directed to subject matter within Section 101 should
not turn on whether the claimed subject matter does "business" instead of
something else.

CONCLUSION

The appealed decision is reversed and the case is remanded to the district
court for further proceedings consistent with this opinion.

REVERSED and REMANDED.


FOOTNOTES:

{1} Indeed, although we do not make this determination here, the judicially
created exceptions, i.e., abstract ideas, laws of nature, etc., should be
applicable to all categories of statutory subject matter, as our own precedent
suggests. See Alappat, 33 F.3d at 1542; see also In re Johnston, 502 F.2d
765 (CCPA 1974) (Rich, J., dissenting).

{2} As explained in In re Bergy, 596 F.2d 952, 960 (CCPA 1979) (emphases
and footnote omitted):

  The first door which must be opened on the difficult path to
  patentability is section 101 .... The person approaching that door is
  an inventor, whether his invention is patentable or not .... Being an
  inventor or having an invention, however, is no guarantee of opening
  even the first door. What kind of an invention or discovery is it?
  In dealing with the question of kind, as distinguished from the
  qualitative conditions which make the invention patentable, Section 101
  is broad and general; its language is: "any * * * process, machine,
  manufacture, or composition of matter, or any * * * improvement thereof."
  Section 100(b) further expands "process" to include "art or method, and
  * * * a new use of a known process, machine, manufacture, composition
  of matter, or material." If the invention, as the inventor defines it
  in his claims (pursuant to section 112, second paragraph), falls into
  any one of the named categories, he is allowed to pass through to the
  second door, which is section 102; "novelty and loss of right to patent"
  is the sign on it. Notwithstanding the words "new and useful" in section
  101, the invention is not examined under that statute for novelty
  because that is not the statutory scheme of things or the 
  long-established administrative practice.

{3}  The Committee Reports accompanying the 1952 Act inform us that Congress
intended statutory subject matter to "include anything under the sun that is
made by man." S. Rep. No. 82-1979 at 5 (1952); H.R. Rep. No. 82-1923 at 6
(1952).

{4}  This has come to be known as the mathematical algorithm exception.
This designation has led to some confusion, especially given the
Freeman-Walter-Abele analysis. By keeping in mind that the mathematical
algorithm is unpatentable only to the extent that it represents an
abstract idea, this confusion may be ameliorated.

{5}  The test has been the source of much confusion. In In re Abele, 684 F.2d
902 (CCPA 1982), the CCPA upheld claims applying "a mathematical formula
within the context of a process which encompasses significantly more than
the algorithm alone." Id. at 909. Thus, the CCPA apparently inserted an
additional consideration -- the significance of additions to the algorithm.
The CCPA appeared to abandon the application of the test in In re Taner,
681 F.2d 787 (CCPA 1982), only to subsequently "clarify" that the
Freeman-Walter-Abele test was simply not the exclusive test for detecting
unpatentable subject matter. In re Meyer, 688 F.2d 789, 796, 215 (CCPA 1982).

{6} See e.g.  Parker v. Flook, 437 U.S. 584, 590, 57 L. Ed. 2d 451,
98 S. Ct. 2522 (1978) ("[A] process is not unpatentable simply because
it contains a law of nature or a mathematical algorithm."); Funk Bros.
Seed Co. v. Kalo Inoculant Co., 333 U.S. 127, 130, 92 L. Ed. 588,
68 S. Ct. 440 (1948) ("He who discovers a hitherto unknown phenomenon
of nature has no claim to a monopoly of it which the law recognizes. If
there is to be invention from such a discovery, it must come from the
application of the law to a new and useful end."); Mackay Radio & Tel.
Co. v. Radio Corp. of Am., 306 U.S. 86, 94, 83 L. Ed. 506, 59 S. Ct. 427
(1939)  ("While a scientific truth, or the mathematical expression of it,
is not a patentable invention, a novel and useful structure created with
the aid of knowledge of scientific truth may be.").

  When a claim containing a mathematical formula implements or applies that
  formula in a structure or process which, when considered as a whole, is
  performing a function which the patent laws were designed to protect
  (e.g., transforming or reducing an article to a different state or
  thing), then the claim satisfies the requirements of Section 101.

Diehr, 450 U.S. at 192; see also In re Iwahashi, 888 F.2d 1370, 1375  (Fed.
Cir. 1989); Taner, 681 F.2d at 789. The dispositive inquiry is whether the
claim as a whole is directed to statutory subject matter. It is irrelevant
that a claim may contain, as part of the whole, subject matter which would
not be patentable by itself. "A claim drawn to subject matter otherwise
statutory does not become nonstatutory simply because it uses a mathematical
formula, computer program or digital computer." Diehr, 450 U.S. at 187.

{7}  As the Supreme Court expressly stated in Diehr, its own holdings in
Benson and Flook "stand for no more than these long-established principles"
that abstract ideas and natural phenomena are not patentable. Diehr,
450 U.S. at 185 (citing Chakrabarty, 447 U.S. at 309 and Funk Bros.,
333 U.S. at 130.).

{8}  In In re Pardo, 684 F.2d 912 (CCPA 1982), the CCPA narrowly limited
"mathematical algorithm" to the execution of formulas with given data.
In the same year, in In re Meyer, 688 F.2d 789 (CCPA 1982), the CCPA
interpreted the same term to include any mental process that can be
represented by a mathematical algorithm. This is also the position taken
by the PTO in its Examination Guidelines, 61 Fed. Reg. 7478, 7483 (1996).

{9} Of course, the subject matter must fall into at least one category of
statutory subject matter.

{10}  As Judge Newman has previously stated,

  [The business method exception] is . . . an unwarranted encumbrance
  to the definition of statutory subject matter in section 101, that
  [should] be discarded as error-prone, redundant, and obsolete. It
  merits retirement from the glossary of section 101. . . . All of the
  "doing business" cases could have been decided using the clearer
  concepts of Title 35. Patentability does not turn on whether the
  claimed method does "business" instead of something else, but on
  whether the method, viewed as a whole, meets the requirements of
  patentability as set forth in Sections 102, 103, and 112 of the
  Patent Act.

In re Schrader, 22 F.3d 290, 298, (Fed. Cir. 1994) (Newman, J., dissenting).

{11}  See Rinaldo Del Gallo, III, Are 'Methods of Doing Business' Finally out 
of Business as a Statutory Rejection?, 38 IDEA 403, 435 (1998).

{12}  See also Dann v. Johnston, 425 U.S. 219, 47 L. Ed. 2d 692, 96 S. Ct.
1393 (1976) (the Supreme Court declined to discuss the section 101 argument
concerning the computerized financial record-keeping system, in view of the
Court's holding of patent invalidity under section 103); In re Chatfield,
545 F.2d 152 (CCPA 1976); Ex parte Murray, 9 U.S.P.Q.2D (BNA) 1819, 1820
(Bd. Pat. App. & Interf. 1988) ("The claimed accounting method [requires]
no more than the entering, sorting, debiting and totaling of expenditures
as necessary preliminary steps to issuing an expense analysis statement. .
. .") states grounds of obviousness or lack of novelty, not of non-statutory
subject matter.

{13} Any historical distinctions between a method of "doing" business and
the means of carrying it out blur in the complexity of modern business
systems. See Paine, Webber, Jackson & Curtis v. Merrill Lynch, 564 F. Supp.
1358, 218 (D. Del. 1983), (holding a computerized system of cash
management was held to be statutory subject matter.)

{14} Moreover, these cases were subject to the Benson era
Freeman-Walter-Abele test -- in other words, analysis as it existed
before Diehr and Alappat.

{15} See also Loew's Drive-In Theatres v. Park-In Theatres, 174 F.2d 547, 552
(1st Cir. 1949) (holding that the means for carrying out the system of
transacting business lacked "an exercise of the faculty of invention"); In re
Patton, 29 C.C.P.A. 982, 127 F.2d 324, 327-38 (CCPA 1942) (finding claims
invalid as failing to define patentable subject matter over the references of
record.); Berardini v. Tocci, 190 F. 329, 332 (C.C.S.D.N.Y. 1911); In re Wait,
22 C.C.P.A. 822, 73 F.2d 982, 983 (CCPA 1934) ("Surely these are, and always
have been, essential steps in all dealings of this nature, and even conceding,
without holding, that some methods of doing business might present patentable
novelty, we think such novelty is lacking here."); In re Howard, 55 C.C.P.A.
1121, 157 USPQ 615, 617, 394 F.2d 869 (CCPA 1968) ("We therefore affirm
the decision of the Board of Appeals on the ground that the claims do not
define a novel process...[so we find it] unnecessary to consider the issue
of whether a method of doing business is inherently unpatentable.").
Although a clearer statement was made in In re Patton, 29 C.C.P.A. 982,
127 F.2d 324, 327, (CCPA 1942) that a system for transacting business,
separate from the means for carrying out the system, is not patentable
subject matter, the jurisprudence does not require the creation of a
distinct business class of unpatentable subject matter.