Dann v. Johnston

• Decision Date: 31 March 1976
• Docket Number: No. 74-1033,74-1033
• Citation: 425 U.S. 219,96 S.Ct. 1393,47 L.Ed.2d 692,189 USPQ 257
• Parties: C. Marshall DANN, Commissioner of Patents and Trademarks, Petitioner, v. Thomas R. JOHNSTON
• Court: U.S. Supreme Court

425 U.S. 219

96 S.Ct. 1393

47 L.Ed.2d 692

C. Marshall DANN, Commissioner of Patents and Trademarks, Petitioner,

v Thomas R. JOHNSTON.

No. 74-1033.

Argued Dec. 9, 1975.

Decided March 31, 1976.

Syllabus

Respondent's "machine system for automatic record-keeping of bank checks and deposits," under which checks and deposits are customer labeled with code categories which are "read," and then processed by a data processor, such as a programmable electronic digital computer, having data storage files and a control system, permitting a bank to furnish a customer with an individual and categorized breakdown of his transactions during the period in question, Held unpatentable on grounds of obviousness. 35 U.S.C. § 103. Pp. 225-230.

502 F.2d 765, reversed and remanded.

Howard E. Shapiro, Washington, D. C., for petitioner.

Morton C. Jacobs, Philadelphia, Pa., for respondent.

Mr. Justice MARSHALL delivered the opinion of the Court.

Respondent has applied for a patent on what is described in his patent application as a "machine system for automatic record-keeping of bank checks and deposits." The system permits a bank to furnish a customer with subtotals of various categories of transactions completed in connection with the customer's single account, thus saving the customer the time and/or expense of conducting this bookkeeping himself. As respondent has noted, the "invention is being sold as a computer program to banks and to other data processing companies so that they can perform these data processing services for depositors." Brief for Respondent 19A; at 18, Application of Johnston, 502 F.2d 765 (CCPA 1974).

Petitioner and respondent, as well as various Amici, have presented lengthy arguments addressed to the question of the general patentability of computer programs. Cf. Gottschalk v. Benson, 409 U.S. 63, 93 S.Ct. 253, 34 L.Ed.2d 273 (1972). We find no need to treat that question in this case, however, because we conclude that in any event respondent's system is unpatentable on grounds of obviousness. 35 U.S.C. § 103. Since the United States Court of Customs and Patent Appeals (CCPA) found respondent's system to be patentable, Application of Johnston, supra, the decision of that court is accordingly reversed.

I

While respondent's patent application pertains to the highly esoteric field of computer technology the basic functioning of his invention is not difficult to comprehend. Under respondent's system a bankcustomer labels each check that he writes with a numerical category code corresponding to the purpose for which the funds are being expended. For instance, "food expenditures" might be a category coded "123," "fuel expenditures" a category coded "124," and "rent" still another category coded "125." Similarly, on each deposit slip, the customer again, through a category code, indicates the source of the funds that he is depositing. When the checks and deposit slips are processed by the bank, the category codes are entered upon them in magnetic ink characters, just as, under existing procedures, the amount of the check or deposit is entered in such characters. Entries in magnetic ink allow the information associated with them to be "read" by special document-reading devices and then processed by data processors. On being read by such a device, the coded records of the customer's transactions are electronically stored in what respondent terms a "transaction file." Respondent's application describes the steps from this point as follows:

"To process the transaction file, the . . . system employs a data processor, such as a programmable electronic digital computer, having certain data storage files and a control system. In addition to the transaction file, a master record-keeping file is used to store all of the records required for each customer in accordance with the customer's own chart of accounts. The latter is individually designed to the customer's needs and also constructed to cooperate with the control system in the processing of the customer's transactions. The control system directs the generation of periodic output reports for the customer which present the customer's transaction records in accordance with his own chart of accounts and desired accounting procedures." Pet. for Cert. 4A-5A.

Thus, when the time comes for the bank customer's regular periodic statement to be rendered, the programmed computer sorts out the entries in the various categories and produces a statement which groups the entries according to category and which gives subtotals for each category. The customer can then quickly see how much he spent or received in any given category during the period in question. Moreover, according to respondent, the system can "(adapt) to whatever variations in ledger format a user may specify." Brief for Respondent 66.

In further description of the control system that is used in the invention, respondent's application recites that it is made up of a general control and a master control. The general control directs the processing operations common to most customers and is in the form of a software computer program, I. e., a program that is meant to be used in a general-purpose digital computer. The master control, directing the operations that vary on an individual basis with each customer, is in the form of a separate sequence of records for each customer containing suitable machine-instruction mechanisms along with the customer's financial data. Respondent's application sets out a flow chart of a program compatible with an IBM 1400 computer which would effectuate his system.

Under respondent's invention, then, a general purpose computer is programmed to provide bank customers with an individualized and categorized breakdown of their transactions during the period in question.

II

After reviewing respondent's patent application, the patent examiner rejected all the claims therein. He found that respondent's claims were invalid as being anticipated by the prior art, 35 U.S.C. § 102, and as not "particularly pointing out and distinctly claiming" what respondent was urging to be his invention. § 112.

Respondent appealed to the Patent and Trademark Office Board of Appeals. The Board rejected respondent's application on several grounds. It found first that under § 112, the application was indefinite and did not distinctly enough claim what respondent was urging to be his invention. It also concluded that respondent's claims were invalid under § 101 because they claimed nonstatutory subject matter. According to the Board, computer-related inventions which extend "beyond the field of technology . . . are nonstatutory," Pet. for Cert. 31A. See Application of Foster, 58 CCPA (Pat.) 1001, 1004, 438 F.2d 1011, 1015 (1971); Application of Musgrave, 57 CCPA (Pat.) 1352, 431 F.2d 882 (1970), and respondent's claims were viewed to be "non-technological." Finally, respondent's claims were rejected on grounds of obviousness. 35 U.S.C. § 103. The Board found that respondent's claims were obvious variations of established uses of digital computers in banking and obvious variations of an invention, developed for use in business organizations, that had already been patented. Dirks, U.S.Patent No. 3,343,133.

The CCPA, in a 3-2 ruling, reversed the decision of the Board and held respondent's invention to be patentable. The court began by distinguishing its view of respondent's invention as a " 'record-keeping Machine system for financial accounts' " from the Board's rather negative view of the claims as going solely to the " 'relationship of a bank and its customers.' " 502 F.2d, at 770 (emphasis in CCPA opinion). As such, the CCPA held, respondent's system was "clearly within the 'technological arts,' " Id., at 771, and was therefore statutory subject matter under 35 U.S.C. § 101. Moreover, the court held that respondent's claims were narrowly enough drawn and sufficiently detailed to pass muster under the definiteness requirements of § 112. Dealing with the final area of the Board's rejection, the CCPA found that neither established banking practice nor the Dirks patent rendered respondent's system "obvious to one of ordinary skill in the art who did not have (respondent's) specification before him." 502 F.2d, at 772.

In order to hold respondent's invention to be patentable, the CCPA also found it necessary to distinguish this Court's decision in Gottschalk v. Benson, 409 U.S. 63, 93 S.Ct. 253, 34 L.Ed.2d 273 (1972), handed down some 13 months subsequent to the Board's ruling in the instant case. In Benson, the respondent sought to patent as a "new and useful process," 35 U.S.C. § 101, "a method of programming a general-purpose digital computer to convert signals from binary-coded decimal form into pure binary form." 409 U.S., at 65, 93 S.Ct., at 254, 34 L.Ed.2d at 276. As we observed: "The claims were not limited to any particular art or technology, to any particular apparatus or machinery, or to any particular end use." Id., at 64, 93 S.Ct., at 254, 34 L.Ed.2d, at 275. Our limited holding, Id. at 71, 93 S.Ct., at 257, 34 L.Ed.2d, at 279, was that respondent's method was not a patentable "process" as that term is defined in 35 U.S.C. § 100(b).¹

The Solicitor of the Patent Office argued before the CCPA that Benson's holding of nonpatentability as to the computer program in that case was controlling here. However, the CCPA concluded that while Benson involved a claim as to the patentability a "process," respondent in this case was advancing claims as to the patentability of an "apparatus" or "machine" which did not involve discoveries so abstract as to be unpatentable:

" 'The issue considered by the Supreme Court in Benson was a narrow one, namely, is a formula for converting binary coded decimal numerals into pure binary numerals by a series of mathematical calculations a patentable Process? ' (Emphasis added.) (Quoting In re Christensen, 478 F.2d 1392, 1394 (CCPA 1973).)

"(T)he instant claims in...