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
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.
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.
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.
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.”
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.
Do you remember obviousness before KSR v. Teleflex? To invalidate, the rule went, one must find an express rationale for combining references (a teaching, suggestion or motivation). The KSR ruling reminded us that the TSM test was too rigid—the proper analysis should more flexibly evaluate obviousness with the skilled artisan in mind, without rigid requirements for these rationales in the references themselves.
If we knew how to more flexibly identify rationales for obviousness post-KSR, it was not clear how to more flexibly apply patent eligibility without the machine or transformation test after Bilski and Alice. A machine, apparently, was now just a clue. But identifying how to apply the more general principles from Alice and Bilski was not as easy to apply as a flexible obviousness test. The recent Core Wireless decision may show us a more useful theme for applying a more general approach to obviousness.
I was reminded of this question, often posed by my dad to remind me not to become a slave to statistics, by two dramatic things that happened last week. On the one hand, at the IAM 2017 Patent Law and Policy conference in Washington DC, investors spoke about waning interest in the U.S. market given the increasing frequency of patent invalidations. On the other hand, the Nasdaq composite index (consisting of 86% U.S. companies) hit record closing and intraday highs. Whom are we to believe: those who say weak patent coverage is threatening our economy or those who say that patents are not, in fact, necessary for economic strength?
Or is there a third possibility—that other factors overwhelm the economic importance of patents so we can’t really give too much weight to the statistics?
The speakers at the IAM conference cited PTAB invalidation rates and post-Alice hostility to 21st century technologies as reasons that they are looking more kindly on, for example, European, Chinese, and Canadian portfolio elements. Uncertainty regarding PTO examination norms and PTAB decisions, as well as apparently inconsistent panels of the Federal Circuit, have reportedly made it more difficult to value U.S. patent assets than those of other jurisdictions. The fact that the Supreme Court in the Oil States case is considering whether PTAB review of issued patents is even constitutional gives yet more pause.
This third article in the “Surviving Alice” series examines how the USPTO’s Patent Trial and Appeal Board has responded to the U.S. Supreme Court’s June 2014 Alice decision. It also shows how applicants can use the PTAB’s recent decisions to substantially increase their chances of success before the board. We look at appeals coming out of the USPTO’s business method work groups 3620, 3680 and 3690. Applicants have had a difficult time getting business method patents allowed since Alice. The Alice decision firmly established the two part “Alice/Mayo test” as the standard for determining whether a patent’s claims were statutory under 35 U.S.C. 101. The two steps in the Alice/Mayo test are:
- “Determine whether the claims at issue are directed to a patent-ineligible concept” (e.g. abstract idea or fundamental economic practice); and
- If the claims are directed to a patent–ineligible concept then “search for an ‘inventive concept’-i.e., an element or combination of elements that is ‘sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself. “ (e.g. an improvement to another technology)
The business method work groups at the USPTO implemented the Alice/Mayo test right after the Alice decision. Allowances in some work groups (e.g. 3690 finance) plunged by a factor of 10 within a month of the decision. Even three years later, there is still over a 90% chance that an office action on a business method patent application will have a 101 rejection. In response to these repeated § 101 rejections by the examiners, many applicants have appealed their rejections to the PTAB. We are just now seeing these appeals being decided by the board, and overall the results have not been good for applicants. Only about 20% of the 101 rejections are being reversed. Nonetheless, we are gaining a significant and rapidly growing body of PTAB decisions which we can learn from. These decisions are discussed below. …
The Supreme Court’s recent decision on patent venue, TC Heartland LLC v. Kraft Foods Group Brands, may actually turn out to be a good thing for patentees when it comes to Section 101. But before we get to that, let’s do the AliceStorm numbers: The overall Alicestorm index of percentage of Section 101 ineligibility outcomes in the federal courts is up 0.6% from March, at 67.6%. The Federal Circuit contributed the most to the increase, issuing eight separate decisions finding patent eligible subject matter, with six of these decisions being Rule 36 affirmances. The number of motions on the pleadings index are up as well, by 1.2% from March, at 63.3%. Turning to the monthly numbers, after the record number (35) of Section 101 decisions in March 2017 things returned to “normal” with just 15 decisions: The bump in March contributed to a marked increase in the three-month average of ineligible decisions, jacking it up from 62% to 73%. But beneath that, we can also see that the raw number of ineligible decisions in April (13) is about the same as the high marks since August 2016, and that the raw number of eligible outcomes (2) is at its lowest level since October 2015. This puts the ratio of ineligible to eligible decisions in April 2017 at 6.5, the highest it’s been since June 2015. Whether this signals a real uptick in favor of patent defendants or just a temporary blip in the overall downward trend in ineligible outcomes remains to be seen. …