In January, the USPTO announced it would seek comments on the new Guidance it had published on patent subject matter eligibility. We have previously discussed this Guidance and won’t repeat ourselves here. Instead, this post will highlight the wide range of views expressed by the thousands of comments that the USPTO received. Although the comment period ended on March 8, the USPTO cautioned that its web page posting the comments might not be complete for a couple of weeks thereafter. By now, all the submitted comments likely have been posted so it’s time to take a look at them.

Not surprisingly, both the “new Guidance is great” and the “new Guidance doesn’t follow Alice” camps were very well represented.

Comments Supporting the Guidance

The Licensing Executives Society offered nothing but praise for the Guidance, stating that it “answers the call for greater clarity, certainty, and adherence to traditional notions of patent eligible subject matter in a practical and prudent manner that better ensures society will reap the full benefit of our patent system, and we fully support its full implementation.” LES expressed concern that recent precedent has “increased risk and uncertainty,” the effect of which “can be expected to diminish American innovation.” LES praised the Guidance as going a long way toward enhancing innovation, business creation and economic activity, stating, “LES is of the view that legislation will nonetheless be necessary to fully achieve these objectives … We encourage you to work with your colleagues in Congress toward that end.”

The Intellectual Property Owners Association likewise wasted no time in making its position clear: “IPO supports the overall intent of the 2019 Guidance to provide examiners with a way of finding eligible subject matter consistent with Supreme Court guidance, rather than articulating myriad ways to reject a claim as ineligible.” While the IPO detailed several areas in which the Guidance “could benefit from further analysis and clarification,” these were mainly areas in which further refinements, ongoing updates, and more detailed definitions might be provided to make it easier for examiners to apply the Guidance.

The Pharmaceutical Research and Manufacturers of America specifically praised various aspects of the Guidance for providing clarity in areas that had been confusing. PhRMA particularly pointed out the benefit of the Guidance in clarifying “that a claim is not ‘directed to’ a judicial exception that is ‘integrated into a practical application of the exception.’” A prior Bilski Blog post discussed various ways that the phrase “directed to” could be interpreted and how different interpretations could lead to quite different results.

Likewise, biopharma companies submitted supportive responses. Amgen’s comments unambiguously supported the Guidance but simply asked for “additional examples with fact patterns relevant to biopharma patents” with additional corresponding training of examiners. Genentech’s comments echoed this request. And Novartis chimed in similarly, also praising in particular one aspect of the Guidance: “[W]e believe one of the most critical aspects of the Revised Guidance is the paragraph advising examiners that sometimes ‘it is the combination of elements that provide the practical application’ rather than an ‘additional element’ alone, and that ‘examiners should give careful consideration to both the element and how it is used or arranged in the claim as a whole’” (emphasis original).

In the tech space, IBM seemed primarily to commend the USPTO for starting the important conversation about eligibility and not waiting for Congress to act. In agreeing with the “spirit” of the Guidance, IBM repeatedly emphasized that “confusion surrounding subject matter eligibility will remain until Congress acts on a legislative approach.” From the big to the little in tech, BrainThrob Laboratories (in the data/computer science space) pleaded with the PTO adopt the Guidance, stating, “It would be a huge mistake to discard, water-down, or dismiss these proposed guidelines.” BrainThrob urged that without the additional certainty provided by the Guidance, such companies would be compelled to “seek alternatives to protect our technology by concealing it and protecting it under the shroud of trade secrets.”

Comments Rejecting the Guidance

Compared with the organizations discussed above, the Electronic Frontier Foundation had quite a different view. EFF, on behalf of “its more than 39,000 dues-paying members,” said that the Guidance “effectively instructs examiners on how to narrow the Alice v. CLS Bank decision instead of how to apply it correctly,” and calls it “contrary to law.” EFF faulted the Guidance for defining ineligible abstract ideas to include only mental processes, mathematical formulas, and methods of organizing human activity; EFF asserted that cases have identified others “that do not neatly fit into those three narrow categories.” EFF also asserted that the Guidance creates “an entirely new and unprecedented step” for eligibility. EFF argued that even if the Federal Circuit can resolve patent-eligibility as a matter of law at the first step, “the same is not true for examiners,” who EFF argued should “conduct the full, two-step patent-eligibility analysis in the first instance” to fend off “a loophole that allows applicants to avoid the inventive concept requirement.” EFF noted that the Guidance sets up a situation in which “examiners will apply a substantially different test than district courts.”

More generally, EFF argued that “Alice has been a critical tool” in helping software developers and users “defend against meritless patent lawsuits and litigation threats.” EFF attributed a rise in R&D spending on “software & Internet” as attributable to Alice; it said the Guidance would “guarantee that patents on basic ideas continue to issue despite Alice, and thus continue to tax and impede research and innovation….”

EFF’s attempt to elicit input from opponents of the guidelines also experienced significant success. The organization’s “Save Alice” campaign provided model language for detractors to paste into their comments, and many individuals did just that. There were about 2,500 comments submitted to the USPTO by individuals, and a sampling suggests that the vast majority of these comments were cut-and-paste from the text EFF suggested for this campaign. By way of comparison, in the “pro-Guidance” camp, a far smaller but still significant number of comments were cut-and-paste from campaigns of one or more inventors’ associations. The number of bespoke comments from individuals paled in comparison to the cut-and-paste numbers.

Also somewhat critical of the Guidance was the Software & Information Industry Association. SIIA noted that its “members have benefitted greatly from the patents they own. Yet they also rely on the limits of patent protection, as those limits preserve and protect their ability to innovate. As such, SIIA’s collective membership sits at the crossroads of the countervailing interests….” SIIA asserted that synthesizing just a few categories from the judicial decisions resulted in pairings of cases and categories that “may or may not fit.” SIIA proposed “a fourth category to capture all precedent,” thereby allowing examiners to reject claims more directly based on a prior judicial opinion. SIIA said that with such a category, examiners would have more freedom to make initial rejections in appropriate circumstances without the need for higher level approval. In addition, SIIA worried that, “By specifying that the abstract idea must be ‘recited on [its] own per se,’ the 2019 Guidance may encourage clever drafting efforts to avoid explicitly reciting an exception in the claim.” SIIA saw this as a departure from prior guidance and the caselaw. Finally, SIIA said that the USPTO “should be clearer with respect to the specificity of the computer implementation necessary to amount to an integrated practical application.”

The Internet Association expressed similar concerns, saying that the Guidance “creates a structural bias against ineligibility rejections when the claims-at-issue do not fit neatly into the categories provided.” IA also sought clarification on the categorization in the Guidance, asserting for example that, “The ‘mathematical concepts’ category, if interpreted in the strictest sense, may not capture the breadth of the caselaw, which extends the abstract idea exception to ‘collecting information, analyzing it, and displaying certain results of the collection and analysis.” Like the SIIA, the IA was concerned about the way the Guidance links eligible subject matter to improvement in the functioning of a computer or other technical field. “The Guidance appears to stretch too far beyond the Alice safe harbors when it extends eligibility to the mere use of a judicial exception ‘in conjunction with a machine or manufacture’ or in ‘a transformation or reduction of a particular article.’” The IA further suggested that the Guidance “recognize the legal distinction between claims reciting a result or function without specifying the mechanism that achieves that result or function and claims that recite a technological advance.”

Additional Comments Suggesting Improvements to the Guidance

While the American Intellectual Property Law Association comments were largely supportive of the Guidance, they suggested a number of areas where increased coverage or clarity would be helpful. To begin with, AIPLA noted that the “distillation” of case law in the Guidance resulted in a “framework [that] is necessarily imprecise.” That said, AIPLA suggested either expressly dealing with diagnostic methods or stating that the Guidance does not apply to such methods. The AIPLA found half a dozen or so phrases used by the USPTO in the Guidance unclear, and in particular called for the guidance to include the word “and” in the phrase “well understood, routine, conventional” as taken from Berkheimer. A prior Bilski Blog post examined this issue extensively. AIPLA also agreed with the Guidance that “a mental process that ‘cannot be practically performed in the mind’ should not be considered an abstract idea.”

The ABA’s Section of Intellectual Property Law had quite similar comments—generally supportive but suggesting areas where further clarification would be helpful (and worrying that the Guidance may not adequately address “the judicial exceptions applicable to the life sciences industry”). The ABA comments, however, included a strongly worded paragraph stressing that the guidelines are just that and do not amount to substantive rulemaking, much less law, writing, “This is why the Section strongly supports efforts to enact a legislative amendment to section 101 that resolves the ambiguity and confusion that has been injected into the eligibility determination by Supreme Court and lower court jurisprudence. Legislative reform is needed to restore predictability to the patent system and maintain incentives to invest in future technologies and discoveries.”

The National Association of Patent Practitioners provided yet a third voice suggesting that analysis of Tech Sector and Life Sciences tests should be separately stated. NAPP’s comments stated, “Discussion of that difficult area [computer-related claims] separately from biotech and other ‘judicial exceptions’ is necessary and helpful; we believe that the PTO has for too long tried to use generalized language that overlooks explicit application of Section 101 principles to this field, yielding much confusion.” NAPP was also concerned with language in the Guidance stating that it cannot be enforced by applicants: “If an examiner makes a rejection under Section 101 in violation of the Guidance, what is an applicant to do? Is it really true that the applicant cannot cite the Guidance in an appeal brief to demonstrate error and expect the Board to follow it?”

Some of the more interesting comments relating to the Guidance came from Alice Corporation itself (“AC” for clarity, as used in those comments), penned by its managing director, Ian Shepherd (also inventor of the claims at issue in Alice). AC saw the Guidance as raising a number of “profound questions” such as “If a claim, any claim, including one considered to be directed to a ‘fundamental economic principle’, is found to be novel (102), non-obvious (103) and sufficiently enabled (112) – and I’ll add here, also not unreasonably preemptive of possible future inventions – how could it possibly be considered patent ineligible under the revised guidance?” (emphasis original) The AC comments suggested that “cascading conceptual flaws in SCOTUS’ reasoning” as well as the “attempt in Alice to establish a single patent eligibility test” are the underlying causes for “the gymnastics a reader of the revised guidance is required to perform” (emphasis original). Perhaps the most interesting comment from AC is found buried in a footnote: “After it has formulated its Alice-replacement patent eligibility tests (and these are adopted by Congress), I suggest that SCOTUS should then terminate its future judicial exception declaratory powers. At this point, the Court’s work … could be considered to be done, leaving it to limit itself to evaluating US law in light of the Constitution, not making it.”

The comments of BSA | The Software Alliance refreshingly admitted that “BSA members have a variety of perspectives” and therefore raised for the USPTO a number of questions to consider in connection with the Guidance, primarily calling for additional clarity regarding various phrases used in the Guidance. Clarity was likewise sought from the Computer & Communications Industry Association. CCIA worried that “some aspects of the Guidance could be misread so as to be non-compliant with existing case law.”

While the above is by no means a comprehensive review of the various comments that the USPTO received, it is sufficient to show how many (often conflicting) perspectives emerged.

Conclusion

The breadth of comments that the USPTO has received will serve two very important purposes. First, it will help the USPTO to fine-tune the Guidance based on the collective experiences of those who provided comments. Perhaps more importantly, though, these comments have provided extremely helpful juxtaposition of concerns and interests that Congress can use as it ponders revisions to Section 101. An IP subcommittee of the Senate Judiciary Committee has recently convened meetings with stakeholders toward possible legislative action. Senators Thom Tillis of North Carolina and Chris Coons of Delaware in particular have signaled that congressional action is needed, and this sentiment has been echoed widely by others in both the House and the Senate who are looking at patent subject matter eligibility. The USPTO’s decision to take a position on potentially ambiguous terms and uncertain procedures has certainly helped bring to light a number of important perspectives, jump-starting a crucial phase of the legislative process.

As my prior post on the 2019 Revised Patent Subject Matter Eligibility Guidance indicated, I initially anticipated only a modest uptick in allowability rates as a result of the new guidance.  After analyzing the accompanying examples, however, I concluded that the effect would likely be markedly more profound.  Subsequent conversations with examiners—many of whom have now agreed to drop their long-standing eligibility rejections—have only confirmed that belief.

The examples provide analyses of 10 claims as part of six new hypothetical inventions.  Significantly, of the 10 claims analyzed, only three are held to be ineligible, and those three are notable for their conspicuous brevity and breadth (44 words / two elements; 71 words / two elements; and 81 words / three elements, respectively).  Each of the inventions for which a claim is held ineligible—namely, Examples 37, 40 and 42—also includes an example of an eligible claim, thereby perhaps implying that most inventions should be able to be made eligible as long as the applicant is willing to claim them with sufficient specificity.  If so, this would be in marked contrast to earlier post-Alice PTO practice, in which examiners—perhaps due to uncomfortable uncertainty about what was eligible and what was not and fear of being reprimanded for granting a patent on something that might subsequently be found ineligible, perhaps due to the ease of making rejections by broadly applying the holdings of particular Federal Circuit cases—were frequently committed to their § 101 rejections, maintaining the rejections despite all applicant attempts at claim amendments.

Continue Reading The 2019 Eligibility Guidance by Example

[This post was updated on Jan. 17, 2019]

On Jan. 4, the Patent Office released the long-awaited 2019 Revised Patent Subject Matter Eligibility Guidance, which governs the Office’s examination procedure for evaluation of patent subject matter eligibility under 35 U.S.C. § 101.

The new guidance distinctly changes the tone of § 101 discourse to one more in favor of eligibility than in years past.  In the same way that the tone of prior Office guidance in the wake of Alice v. CLS Bank appeared to lean in favor of findings of ineligibility, despite a lack of concrete legal standards compelling this result, the more pro-patent feel of the new guidance will likely by itself lead to an uptick in allowance rates.  Tone aside, however, beyond signaling an increase in the perceived permissibility of examiners finding patents eligible, there appears to be little additional substance in the new guidance that could be used to compel a skeptical examiner to find a given claimed invention to be patent-eligible.

Continue Reading The 2019 Eligibility Guidance: A Change in Tone, if Not in Substance

Much ink has been spilled in recent times on the standards for, and outcomes of, patent eligibility questions under § 101.  Consider, for example, USPTO Director Andrei Iancu’s remarks in September about providing additional guidance to Patent Office examiners, and various analyses of invalidation rates in the federal courts. (We touched on invalidation rates ourselves in our Bilski Blog update in August, at which time the Federal Circuit’s cumulative invalidation rate since July 2014 was hovering north of 88 percent.)

One topic has received little attention, however: The rulings of the Patent Trial and Appeal Board on pre-grant § 101 examiner rejections appealed by applicants.  In my opinion, this constitutes the proverbial elephant in the room for patent prosecutors.

Continue Reading Still No Path Out of the 101 Swamp?

Since our last update in June 2017, all the invalidation averages for decisions finding lack of subject matter eligibility have trended slightly downward in the federal courts. Specifically:

  • The overall percentage of decisions invalidating patents under § 101 since we started tracking statistics in July 2014 has fallen slightly—from 67.5% to 66.0%—year over year.
  • The 12-month and three-month average invalidation rates have likewise fallen (from 64.7% to 61.9%, and from 72.1% to 48.4%, respectively).
  • The three-month average recently hit its lowest rate—48.4%—falling below 50% for the first time.

Presumably Berkheimer and its progeny (Aatrix and Exergen)—which held that the “well-understood, routine and conventional” inquiry of Step 2B is a question of fact—have contributed to the declining rates by making courts less inclined to invalidate patents at early stages of litigation. (Of course, as subsequent cases such as Voter Verified v. Election Systems, SAP v. Investpic, and Interval Licensing v. AOL, make plain, successfully establishing the genuine issue of material fact needed for a patentee to survive early dismissal is by no means as simple as it may appear.) Of the 70 post-Berkheimer decisions through the end of June 2018, there were 25 decisions containing at least one citation to Berkheimer; 20 decisions containing at least one citation to Aatrix; and five decisions containing at least one citation to Exergen. Ironically, however, of the 25 decisions citing Berkheimer, 15 found invalidity, with only 10 finding validity, a higher invalidation rate than that of the recent cases not citing Berkheimer. Apparently courts primarily cite Berkheimer in order to acknowledge it before distinguishing it! On the Federal Circuit-watching front, Judge Moore now has the sole distinction of being part of the greatest number of Section 101 decisions (35), as well as the greatest number of pro-eligibility decisions (7). Judges Clevenger, Mayer and Schall, in contrast, have yet to join a pro-eligibility decision in any of the cases that we’ve analyzed.

If the focus on fact finding in Aatrix, Berkheimer, and Exergen from earlier this year helped provide additional clarity on the analysis of “something more,” the SAP America decision, at least to my mind, failed to clarify, and possibly further muddied, the analysis.

Reaching This Result Could Have Been Easy

First, a representative claim:

1. A method for calculating, analyzing and displaying investment data comprising the steps of:

(a) selecting a sample space, wherein the sample space includes at least one investment data sample;

(b) generating a distribution function using a re-sampled statistical method and a bias parameter, wherein the bias parameter determines a degree of randomness in a resampling process; and,

(c) generating a plot of the distribution function.

The other independent claims differ a bit from claim 1, but like claim 1 recite “resampling” of the data set and, in claim 11, doing so with a “bias parameter.” According to the patent, this resampling of investment data permits analysis that doesn’t assume a normal distribution of the data.

On a judgment on the pleadings, the district court found all claims ineligible and the Federal Circuit affirmed.

Continue Reading Two Steps Forward, One Step Back

My last post focused on definitions for the terms “well-understood,” “routine,” and “conventional”—or W-URC—from the subject matter eligibility test set forth in Mayo and further described in Alice. Those terms relate to one part of the current test only. It seems fair to consider another important term in the test, one that’s considered before even reaching the W-URC issue: Whether the claim is “directed to” patent-ineligible subject matter, e.g., a law of nature.

I was particularly reminded of the need to address this when reading last week’s Federal Circuit opinions in Vanda Pharmaceuticals v. West-Ward Pharmaceuticals. Not only did Judge Prost pen a stark dissent from Judge Lourie’s opinion for the court, but both the majority and dissenting opinions focused on this phrase over and over. The opinion of the court referenced “directed to” 17 times and the dissent used it 10 times. Further, the phrase was used either in italics or quotes five times, emphasizing the importance of the term. So it’s worthwhile to give a look to what “directed to” means.

Continue Reading Our Attention is Now Directed To: “Directed To”

The Federal Circuit has now had enough opportunity to address Mayo’s “well-understood, routine, conventional” test that we should have a good understanding of it. We don’t (or at least I don’t).

To begin with, the Federal Circuit cases don’t seem to differentiate among these terms. The cases also universally connect the three terms with “and” rather than “or,” but curiously most of the cases don’t seem to actually require all three to be explicitly met for a determination of ineligibility. See, e.g., Content Extraction, where the Federal Circuit noted only that the patent owner had conceded one function as being “routine.” Finally, there seems to be real disagreement about the extent to which these terms address facts as opposed to legal standards. In this post, I’m not going to comprehensively analyze all these issues, but instead will focus primarily on what these common terms mean.

Continue Reading How Well-Understood is the Meaning of “Well-Understood”?

With counterpoint by Gregory Hopewell

In reading post-Mayo/Alice decisions, some seem more comfortable than others. I’ve been having a tough time getting my head and heart around a recent decision from Judge Leonard Stark of the District of Delaware.  The case is American Axle & Manufacturing v. Neapco Holdings and Neapco Drivelines.  From the party names alone, this does not appear to be a likely candidate for Section 101 invalidity.

The claims that the court found representative for Section 101 analysis confirm that we’re not talking about social media applications or financial methods here, but instead “a method for manufacturing a shaft assembly of a driveline system.”  Classic auto industry innovation dispute between two Detroit area companies, with a bonus that the judge also hails from Detroit.  Spoiler Alert: To my surprise, the first sentence of the opinion’s discussion section said, “As explained below, the Court has determined that the Asserted Claims are not directed to patentable subject matter.”

Continue Reading Good Vibrations, Bad Vibrations: American Axle v. Neapco Ruling

In my own prosecution practice I’ve noted a recent uptick in the allowance rate of many examiners in the 36XX art units, with several examiners that had hitherto never allowed a single case allowing multiple cases during calendar year 2017.  This piqued my interest, and I decided to conduct a more robust statistical evaluation to see whether my personal experience would bear out more generally.

Signs of Recovery

My evaluation computed the aggregate allowance-to-abandonment ratio in each of the 36XX art units in calendar years 2013 through 2017.  As expected, the allowance-to-abandonment ratio plunged precipitously in calendar year 2015—the first year that the effects of Alice truly began to be felt—and continued to decline in 2016.  However, the ratio begins to increase again in 2017, with a year-over-year ratio change of 1.62 (a 62% increase) across all the 36XX art units, following a ratio change of 0.9 (a modest decline) the year before.  Perhaps more tellingly, the art units entitled “Data Processing: Financial, Business Practice, Management, or Cost/Price Determination”—traditionally the hardest-hit by Alice—experienced a mean ratio change of 2.68 (a significant increase) from 2016 to 2017, after a ratio change of 0.67 (a moderate decline) the prior year.  The hard-hit 2680s and 2690s experienced even greater recoveries.

Continue Reading Thawing in the 3600s? An Updated Look at Allowance Rates Post Alice