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AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352 (1999) was a case in which the United States Court of Appeals for the Federal Circuit reversed the decision of the United States District Court for the District of Delaware, which had grant­ed sum­ma­ry judg­ment to Excel Com­mu­ni­ca­tions, Inc. and decided that AT&T Corp. had failed to claim statutory subject matter with U.S. Patent No. 5,333,184 (the '184 patent) under. The United States Court of Appeals for the Federal Circuit remanded the case for further proceedings.

Together with the State Street case, this case is the most referred case on business method patent with a ‘useful concrete and tangible result’ test by US Courts at least until In re Bilski.

The Two Sides
AT&T Corp., originally the American Telephone & Telegraph, is an American telecommunications company that provides voice, video, data, and Internet telecommunications and professional services to businesses, consumers, and government agencies. AT&T has a long history and was the world's largest telephone/cable television service provider. Today, the company is a subsidiary of AT&T Inc. and its subsidiary AT&T Communications still provides long distance service across the United States.

Excel Communications was founded in 1988 by Dallas entrepreneur Kenny Troutt as a long distance reseller in the US telecom sector at the birth of telecom deregulation. It started its business by selling franchises through the business model of network marketing or multi-level marketing (MLM) and was the youngest billion-dollar-annual company in the history.

Event History
In 1992, the '184 patent was filed and in 1994, the patent status was granted by The U.S. Patent and Trademark Office (USPTO).

In 1996, AT&T filed an infringement suit against Excel, including some specific method or process claims related to the step of "“generating a message record for an interexchange call between an originating subscriber and a terminating subscriber,” and the use of primary interexchange carrier (PIC) indicator in the message record.

On March 27, 1998, the District Court of Delaware concluded that the invention was not patentable subject matter because the claims implicitly recite a mathematical algorithm. The trial court, on summary judgment, held all of the method claims at issue invalid for failure to qualify as statutory subject matter.

On April 14, 1999, the U.S. Court of Appeals Federal Circuit found that the claimed subject matter was properly within the statutory scope of, and reversed the district court’s judgment of invalidity on this ground and remanded the case for further proceedings.

Summary of the U.S. Patent No. 5,333,184
The U.S. Patent No. 5,333,184 (or the '184 patent), entitled 'Message Recording for Telephone Systems', described described a method to take advantage of adding more data into a message record in order to provide appropriate billing for subscribers, based on whether or not the subscriber and call recipient subscribe to the same long-distance carrier. This data is called Primary interexchange carrier indicator (PIC).

In a direct-dialed long distance call, a call-related data and message record, named "automatic message account" (AMA), was generated. It includes further information, such as the originating and terminating telephone numbers, and the length of time of the call. The records with AMAs are stored in an electronic format that can be transmitted between computers and reformatted for processing and billing, which later comes to customer in form of hard copy via mails.

The Federal Court Opinions
In order to justify the case, the Federal Circuits first refers to the with the definition of patentable invention in the language of, and found that AT&T's business method fell in the "process" category and the patent claims fell within the judicially created "mathematical algorithm" exception to statutory subject matter. In addition, because the system takes data representing discrete dollar amounts through a series of mathematical calculations to determine a final share price – a useful, concrete, and tangible result, the Court affirmed that the processing system proposed by AT&T was patentable subject matter and should be protected.

"'Process' is defined in as: 'a process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or any new and useful improvement thereof.' However, the court consider the scope of  to be the same regardless of the form - machine or process - in which a particular claim is drafted."

Excel then argued that "method claims containing mathematical algorithms are patentable subject matter only if there is a "physical transformation" or conversion of subject matter from one state into another." To answer, the Court explained that physical transformation can be considered as long as it results in an useful, concrete and tangible outcome/application, relying on the Supreme Court's opinion on Diamond v. Diehr, which said: "(...)'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 101.'"

Therefore, although the District Court of Delaware previously viewed the patent and its claims as the “mathematical algorithm” exception, the Federal Court referred to previous cases and especially the cases of In re Alappat and State Street Bank v. Signature Financial Group and opposed to the District Court's opinion and considered that "at the time of the trial court, the District court did not know these referred cases of the mathematical algorithm issue".

Impact
As also discussed in Gene Quinn's paper, this case has put an end (or at least a full stop) to a question whether mathematical algorithms need to be involved in physical elements or process to be eligible as patentable subject matter. The result of this case also contributes to put the well-known Freeman-Walter-Abele Test to an outdated judicial status and reaffirms that a mathematical algorithm that produces "useful, concrete and tangible result" is a statutory subject matter and patentable. This case even made AT&T as a patent troll in some press coverages. To date, before granting a patent status to a claimed invention, USPTO personnel must examine if the claim(s) in the invention "falls within at least one of the four enumerated categories of patentable subject matter recited in (i.e., process, machine, manufacture, or composition of matter)".

Evidently, after the State Street case this case is one of the most referred cases in courts related to business method inventions. However, it is also still arguable how to define patentable business method inventions and if the "useful, concrete and tangible result test" is sufficient to determine the patent-eligibility of a claim. In re Bilski is one of the most famous cases that fell into this controversial situation after AT&T v. Excel. In this particular case, the Federal Circuit agreed with the United States Patent and Trademark Office on rejecting the patent claims by In re Bernard L. Bilski on a business method and even stated that “those portions of our opinions in State Street... relying solely on a ‘useful concrete and tangible result’ analysis should no longer be relied on”. As the result, although referring to previous well-known cases, In re Bilski still failed to persuade the judges to view his claims patentable. With this case, the Federal Court significantly narrowed down the patent eligibility when looking at business method innovation. However, the Supreme Court later with majority opinion affirmed that "the door to patent eligibility remains open for business methods, as well as emerging technologies, so long as such inventions do not run afoul of the three well-established exceptions to patent-eligibility ('laws of nature, physical phenomena, and abstract ideas'), as well as (novelty),  (nonobvious), and   (fully and particularly described)."

See more

 * United States Patent and Trademark Office
 * Excel Communications Inc. Homepage
 * EXCEL Communications Inc. History