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Murky Parts Of The New USPTO Patent Eligibility Guidance

Posted on Jan 16, 2019 in News

New guidelines for determining patent subject matter eligibility were recently announced, and the news was accompanied with much fanfare. The revised guidelines will certainly be helpful to many applicants, but they have limitations of which practitioners need to be aware.

Any attorney, agent or applicant that deals with patenting software knows that the case law dealing with this subject is incredibly complex and sometimes unclear. When the U.S. Supreme Court published the Alice opinion,[1] a great many “junk” patents became unenforceable, and frivolous patent lawsuits were avoided. There were also consequences for legitimate patent holders and applicants. For example, while the Alice court held that “abstract ideas” are unpatentable, the opinion’s lack of a clear definition for the phrase “abstract ideas” created both inconsistency and uncertainty in how the Alice decision has been applied. As a result, some applicants and patent owners have struggled, and sometimes failed, to obtain the intellectual property protection that they deserve.

In this sea of uncertainty, the U.S. Court of Appeals for the Federal Circuit issued opinions that have been very helpful for understanding when claims meet Alice patent subject matter eligibility requirements. The U.S. Patent and Trademark Office, to its credit, has also issued guidelines and other materials to improve certainty and consistency in the patent application examination process.

The USPTO recently issued new guidelines, titled “2019 Revised Patent Subject Matter Eligibility Guidance.” My response to the publication of this document is to say, “Thank you.” It is a well-written document that relies on considerable case law to support its position. It is also obvious that significant effort and resources went into making the document as accurate as possible. The document does, however, have certain limitations.

First, while the guidelines went into effect on Jan. 7, 2019, the USPTO has requested public comments regarding the guidelines by March 8, 2019. It is possible that the contents will be modified after the comment period is closed. Be on the lookout for revisions.

Next the USPTO makes clear that the guidelines are for a very limited application: “This guidance does not constitute substantive rulemaking and does not have the force and effect of law.” But, the guidance takes its limitations a step further. While all personnel are expected to follow the guidance, “[f]ailure of USPTO personnel to follow the guidance, however, is not, in itself, a proper basis for either an appeal or a petition.” For a practitioner like myself who argues before the Patent Trial and Appeal Board, relying solely on the guidelines in an appeal brief will not be helpful.

The more immediate concerns are twofold: (1) whether the guidelines reflect a position that would not be agreed to by a federal court; and (2) whether a USPTO examiner would interpret the guidelines in a manner that would not be agreed to by a federal court. The differences between these two concerns are subtle, but important.

Dealing with the latter issue first, many examiners properly examine software-related patent applications, but there are limitations in the process as a result of time constraints, skill and experience. That is why the USPTO has an arsenal of support systems to improve the examination process, such as special programs examiners, quality assurance specialists and “second level review.” The examination process, however, is not perfect — as evidenced by the many software patents that, upon being asserted, are later deemed by federal courts to be invalid.

Examining software patents, however, is particularly challenging because the case law based on Alice is so complex. The recently published guidelines are 26 pages long, and they are certainly not “easy reading.” One footnote alone is 27 lines long and cites 11 opinions to support a single statement. Following the guidelines requires keeping track of many concepts, each one difficult by itself, before concluding whether an invention is patent subject matter eligible. That is why earlier USPTO guidelines broke the analysis down into a one-page flowchart diagram that, while not being comprehensive, was easier to follow than pages and pages of text. The current guidelines are truly in the position of a Catch-22: The explanation of Alice principles is a great way to improve examination quality, but the sheer complexity of the explanation creates an opportunity for errors.

The next question, then, is whether following the guidelines will result in a software patent that a federal court would deem to be valid. In other words, do the guidelines correctly follow the current state of Alice based law?

While it is entirely possible that a federal court opinion may refer to the guidelines to help support the court’s position, a federal court will not defer to the guidelines. Indeed, the federal courts have been showing growing skepticism to Auer deference (federal court deference to administrative agency interpretation of its own regulations), and the Supreme Court has now agreed to consider the constitutionality of that doctrine. Some scholars believe that with the appointment of Justice Brett Kavanaugh to the Supreme Court, Chevron deference (federal court deference to administrative agency interpretation of certain federal statutes) is on borrowed time. Thus, federal courts may look to the guidelines on a passing basis, but only to the extent it is believed to coincide with the case law.

One topic on which the guidelines get murky is that of “practical application.” This is a critically important issue, because in my experience, when an application has an Alice “look” to it, patentability often hinges on whether the “practical application” requirement has been met.

Before proceeding, and in the interests of a clear explanation, let’s review the procedure set forth in the revised guidelines for determining whether a claim is patent subject matter eligible. It is a two-step process:

Step 1: Is the claimed subject matter within the four categories for patentable subject matter (35 U.S.C. 101): process, machine, manufacture, or composition of matter? If the claimed subject matter is within one of those categories, then the subject matter is patent eligible and the analysis is done. Otherwise proceed to Step 2.

Step 2: The USPTO has broken down Step 2 into Step 2A (Prong 1 and Prong 2) and Step 2B.

Step 2A, Prong 1: Does the claim recite a judicial exception? The judicial exceptions are: an abstract idea, a law of nature or a natural phenomenon. If the claim does not recite a judicial exception, then the analysis is complete and the claim is patent eligible.

The new guidelines change the way Step 2A is performed by the USPTO — by providing groupings of subject matter that are considered to be abstract ideas. Now, if an examiner considers a claim limitation to be an abstract idea, the examiner must determine under which of the new groupings of subject matter the claim limitation resides. Those groupings are:

  1. a) Mathematical concepts — mathematical relationships, mathematical formulas or equations, mathematical calculations;b) Certain methods of organizing human activity — fundamental economic principles or practices … commercial or legal interactions, managing personal behavior or relationships or interactions between people;c) Mental processes — concepts performed in the human mind …; andd) A to-be-rarely-used “tentative abstract idea” when the previous groupings do not apply.

Step 2A, Prong 2: Does the claim integrate the judicial exception into a practical application? The guidelines provide examples of (possible) integration into a practical application. The examples are supported by case law and include: improving the functioning of a computer or other technology, implementing a judicial exception with a particular machine, or transformation of an article into a particular state. The guidelines also provide examples in which a judicial exception is not integrated into a practical application and include: implementing an abstract idea on a computer, insignificant extra-solution activity and general linking of a judicial exception to a particular technological environment.

If the judicial exception is integrated into a practical application, then the claim is patent subject matter eligible.

What is important about the above is, in the words of the guidelines, “that revised Step 2A specifically excludes consideration of whether the additional elements represent well-understood, routine, conventional activity. Instead [that] analysis is done in Step 2B.”

Step 2B: If the claim recites a judicial exception (that was not found to be integrated into a practical application), then this step is performed. In Step 2B, the claim is evaluated to determine whether it provides an inventive concept.

It is at this point that I have trouble following the guidelines, and to be frank, I question whether the cited case law supports the USPTO’s position.

The reason stated by the guidelines for providing Step 2B is because “[i]t is possible that a claim that does not ‘integrate’ a recited judicial exception is nonetheless patent eligible.” While this step gives the patent applicant “another bite at the apple,” is this consistent with the federal case law?

The guidelines state that “the Federal Circuit has held claims eligible at the second step of the Alice/Mayo test (USPTO Step 2B) because the additional elements recited in the claims provided ‘significantly more’ than the recited judicial exception.” But, the cases provided in the footnote (Amdocs,[2] Bascom,[3] DDR Holdings[4]) do not support the USPTO’s position that these were examples of patentability only “because the additional elements were unconventional in combination.”

Amdocs, for example, stated that the claim’s limitation requires generic components to “operate in a unconventional manner to achieve an improvement in computer functionality.” While Bascom refers to “an inventive concept,” the opinion concludes that there is subject matter eligibility because “the claims may be read to “improve an existing technological process.” DDR is of arguable applicability to the USPTO’s position when it states that “the claimed solution amounts to an inventive concept …, rendering the claims patent-eligible.” But, the opinion reaches that conclusion because “the claimed solution is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks.” To me, overcoming a problem in the realm of computer networks is the same thing as an improvement to technology (see Step 2A, Prong 2).

Exergen[5] is cited in a footnote to this section as well. Exergen questions whether a claim element is “conventional,” concludes that it is not, and finds the claim to be patent subject matter eligible. But Exergen also explains that claims at issue improve the technology because “prior art temperature detectors did not provide the unique combination of elements which enable consistent measurements of core temperature by scanning across a superficial artery.” It is also unfortunate that the USPTO is relying on a court opinion that was a nonprecedential split.

Berkheimer[6] also appears in a footnote to this section. Berkheimer was well-received by the patent bar, particularly when the USPTO issued a memo that clarified examination procedure based on the opinion. The opinion indeed discusses “inventive concept.” It is noteworthy, however, that the opinion also states that there might be patent subject matter eligibility in several dependent claims, which recite a feature that “improves system operating efficiency and reduces storage costs.” The opinion adds, “These claims recite a specific method of archiving that … provides benefits that improve computer functionality.”

To be clear, the USPTO might have a point in the validity of their “Step 2B,” but I wish they would make their argument in support of that step a lot stronger. So, while I will rely on that “Step 2B” if I need to, I would prefer to resolve an issue of patent subject matter eligibility no later than Step 2A (prong 2).

This area of the law will continue to evolve. It is thus important to continuously monitor the applicable case law to provide applicants with the most effective advocacy.

By Lawrence E. Ashery

This article originally appeared in Law360 on January 15, 2019.

[1] Alice Corp. v. CLS Bank International, 573 U.S. 208, 134 S. Ct. 2347 (2014).

[2] Amdocs (Israel) Ltd. v. Openet Telecom, Inc., 841 F.3d 1288 (Fed. Cir. 2016).

[3] Bascom Global Internet Services v. AT&T Mobility, 827 F. 3D 1341 (Fed. Cir. 2016).

[4] DDR Holdings, LLC v., L.P., 773 F.3d 1245 (Fed. Cir. 2014).

[5] Exergen Corp. v. Kaz USA, Inc., No. 16-2315 (Fed. Cir. 2018).

[6] Berkheimer v. HP Inc., No. 17-1437 (Fed. Cir. 2018)


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