Post-2019 USPTO Guidance: Inconsistency Remains
On January 7, 2019, the USPTO issued new guidance ("2019 Guidance") aimed at making patent eligibility analyses more consistent and predictably applied. In the months since, decisions of the Patent Trial and Appeal Board ("PTAB") and the Federal Circuit still highlight inconsistency in the patent eligibility landscape.
This article begins with a brief overview of 35 U.S.C. § 101, the 2014 Alice decision, and difficulties in predicting subject matter eligibility since. Discussion of the recent PTAB and Federal Circuit decisions starts at Part II.
Part I: 35 U.S.C. § 101 Patent Eligibility and the Alice Landscape
Under 35 U.S.C. § 101, "whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title." However, there are a number of judicial exceptions to patentability--these are things that are not patentable. Abstract ideas, laws of nature, and natural phenomenon are not patentable. These are "basic tools of scientific and technological work" and the Supreme Court views monopolizing these "basic tools" as impeding rather than promoting innovation. MPEP § 2106.
The "abstract idea" judicial exception in particular has been a source of confusion and inconsistency in the USPTO and the Courts, particularly since the Supreme Court's 2014 Alice Corp. v. CLS Bank decision. That case reiterated the Court's 2012 decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. ___ (2012) setting forth a two-part test:
- Determine whether the claims at issue are directed to one of the patent-ineligible concepts (e.g. abstract idea)
- Determine, based on an examination of the elements of a claim, whether the claim contains an "inventive concept" sufficient to transform the claimed abstract idea into a patent-eligible application. Alice, at 134 S.Ct. 2347, 2355-2357.
Applying this framework, the Court held the claims at issue were directed to the abstract idea of "intermediated settlement" -- "the use of a third party to mitigate settlement risk." Alice, at 2356. The Court also found that the claims did little more than instruct a practitioner to implement that abstract idea on a generic computer, which failed to transform the abstract idea into a patent-eligible invention. Alice, at 134 S.Ct. 2347, 2357, 2359.
Since the Alice decision, in order to determine whether claims are directed to an abstract idea, the Courts have largely been comparing the claims at issue to other claims found to be directed to abstract ideas in other cases. See 2019 Guidance at 84 FR 51, citing Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1334 (2016). The Court in Alice did this as well, comparing the intermediated settlement claims to the risk hedging claims in Bilski v. Kappos, 561 U.S. 593 (2010) in which the Court found the claims were abstract ideas, namely, that risk hedging was a "fundamental economic practice." Alice, 2357-2358.
Over the years, the USPTO has been publishing guidance, examples, and other references to help USPTO examiners determine whether claims they are examining are patent eligible. These references provide examples and summarize cases finding certain claims eligible or not eligible. For example, as seen in the USPTO's July 2018 "Eligibility Quick Reference Sheet Identifying Abstract Ideas" (now superseded by the 2019 Guidance), the courts have identified many different abstract ideas. These include coordinating loans, creating a contractual relationship, managing a game of bingo, collecting, transmitting, analyzing and storing data just to name a few.
For practitioners, litigators, inventors, businesses, courts, and the USPTO, the Alice/Mayo framework has presented difficulties in arguing and determining whether subject matter meets the 35 U.S.C. § 101 requirements. The USPTO emphasized this difficulty in the 2019 Guidance:
"Since the Alice case, courts have been comparing claims at issue to those claims already found to be directed to an abstract idea in previous cases. Likewise, the USPTO has issued guidance....While that approach was effective soon after Alice was decided, it has since become impractical. The Federal Circuit has now issued numerous decisions identifying subject matter as abstract or non-abstract in the context of specific cases, and that number is continuously growing. In addition, similar subject matter has been described both as abstract and not abstract in different cases. The growing body of precedent has become increasingly more difficult for examiners to apply in a predictable manner, and concerns have been raised that different examiners within and between technology centers may reach inconsistent results."
2019 Guidance at 84 FR 52. The USPTO mentions "technology centers" here - patent applications are assigned for examination at the USPTO based on the relevant classification of technology. For example, below is the heading of an office action that was issued by the USPTO during Dropbox's prosecution of its 8,825,597 patent for "Network Folder Synchronization." The art unit is 2165 in the technology center 2100 which provides examination for patent applications including Computer Architecture Software and Information Security:
Inconsistency in technology centers themselves highlights the difficulty that can arise for patent stakeholders.
The Courts too have expressed frustration with the opportunity for inconsistency and unpredictability presented by the § 101 framework. In Berkheimer v. HP Inc., Case No. 2017-1437 (Fed. Cir. May 31, 2018), Circuit Judge Lourie joined by Circuit Judge Newman concurred in the denial of rehearing en banc:
I believe the law needs clarification by higher authority, perhaps Congress, to work its way out of what so many in the innovation field consider are § 101 problems. Individual cases, whether heard by this court or the Supreme Court, are imperfect vehicles for enunciating broad principles because they are limited to the facts presented...
The concurrence also questions the necessity of having a step two in the abstract idea analysis at all: "[i]f a method is entirely abstract, is it no less abstract because it contains an inventive step? And if a claim recites 'something more,' an 'inventive physical or technological step, it is not an abstract idea, and can be examined under established patentability provisions such as § 102 and § 103." Berkheimer, Case No. 2017-1437, concurrence at 1, 4.
Prior to the 2019 Guidance, the steps the USPTO set forth for examiners to use in determining subject matter eligibility were as follows:
Step 1: Is the claim to a process, machine, manufacture or composition of matter?
Step 2A (if yes to step 1): is the claim directed to a law of nature, a natural phenomenon (product of nature) or an abstract idea? (these are the judicial exceptions we talked about above) If no, the claim is patent eligible subject matter under § 101.
Step 2B (if yes to step 2A): does the claim recite additional elements that amount to significantly more than the judicial exception? If yes, the claim is patent eligible subject matter under § 101.
See MPEP 2106(III).
The 2019 Guidance is primarily aimed at revising examining procedure with respect to the first of the Alice/Mayo test/the USPTO's step 2A.There are two main revisions to this analysis in the 2019 Guidance. First, certain enumerated groupings of subject matter are provided for identifying abstract ideas. 2019 Guidance at 84 FR 52. Second, a two-prong inquiry for whether a claim is directed to a judicial exception is provided. 2019 Guidance at at 84 FR 53-55. The first prong asks if the claim recites a judicial recognized exception e.g. abstract idea. Examiners in this step must determine whether specific limitations recite the abstract idea, and determine whether those specific limitations fall within specific enumerated groups: mathematical concepts; certain methods of organizing human activity, and mental processes. These groupings are aimed at synthesizing key concepts identified by the courts as abstract ideas, and enabling USPTO personnel to "more readily determine whether a claim recites subject matter that is an abstract idea." Id. at 84 FR 51.
In prong 2, if the claim is determined to recite a judicial exception, an examiner must evaluate whether the judicial exception is integrated into a practical application. Here, the examiners must identify any additional claim elements beyond the judicial exceptions, and evaluate whether these additional elements integrate the exception into a practical application. Examples include improving the functioning of a computer or an improvement to other technology, and application or use of a judicial exception to effect a particular treatment of prophylaxis for a disease or medical condition. Id. at 84 FR 53.
If the claim does not integrate a judicial exception into a practical application, the examiner must continue to step 2B to determine whether the claim provides an inventive concept. Id. at 84 FR 56. As an example, a claim may have additional elements that provide significantly more than the judicial exception, for example, by being unconventional in combination. Id. The 2019 Guidance further sets forth which analyses examiners should apply and in which step, and sets forth that certain determinations may need to be reevaluated at subsequent steps. See e.g. id. at 84 FR 56.
With this context in mind, Part II reviews two post-2019 Guidance PTAB decisions and two post-2019 Guidance Federal Circuit decisions.
Part II: Post-2019 Guidance PTAB and Federal Circuit Decisions
The PTAB has reversed a number of § 101 rejections using the 2019 Guidance since the new Guidance was published. In the examples below, the PTAB's analyses are fairly simple, and find at step 2A, Prong 1 that the subject claims are not directed to an abstract idea.
PTAB Post-2019 Guidance Example 1: Ex Parte Adrian Fanaru, et al.
In Ex Parte Adrian Fanaru, et al., the Appellants (Microsoft Technology Licensing, LLC, real party in interest) appealed the Examiner's § 101 rejections of claims in an application entitled "Configuring Usage Events That Affect Analytics of Usage Information."Appeal No. 2017/002898 (PTAB Jan. 22, 2019) at 1.
Claim recited:
The Examiner's position was that the claims were directed to an abstract idea, specifically, that "the series of collecting, providing, receiving, and altering would be directed to certain methods of organizing human activities, which is an example identified by the Courts as an abstract idea." Application No. 13/287,831, February 29, 2016 Final Office Action at 5. The Examiner further found that "[t]he functions of the server computer having an interface for maintaining, receiving and selecting involve common or generic computers or computer components that do not perform any specific processing functions outside their generic known functions which are receiving, storing, and sending of data or information." Id. at 5-6.
On appeal, the PTAB referenced the 2019 Guidance, and with a brief analysis found that "[i]n light of our guidance, because collecting usage information is not a mathematical concept, an identified method of organizing human activity, or a mental process, we conclude that 'collecting usage data' is not an abstract idea" Appeal No. 2017/002898 (PTAB Jan. 22, 2019) at 8.
PTAB Post-2019 Guidance Example 2: Ex Parte Alison Page, et al.
As another example, In Ex Parte Alison Page, et at., the Appellants (Adidas AG real party in interest) appealed the Examiner's § 101 rejections of claims in an application entitled "Offering a Customized Collection of Products." Appeal No. 2017-005667 (PTAB Mar. 1, 2019) at 3.
Claim 1 recited:
The Examiner's position was that the claims were directed to the "concept of customizing a group of products" and therefore were directed to a fundamental economic practice. Application No. 13/340,919, Jan. 5, 2016 Final Office Action, at 5. The Examiner also alleged the claims described a mental process were similar to a method of organizing human activity. Id. at 5-6.
On appeal, the PTAB referenced the 2019 Guidance, and found that under Alice step 1/2019 Guidance Step 2A, Prong 1, the claims were "directed to customizing products." Appeal No. 2017-005667 (PTAB Mar. 1, 2019) at 6. The Board's determination was in part on the specification of the application that described "[t]he platform allows the organization to create customized merchandise by designing products for its members to purchase or by defining parameters that enable its members or other individuals to customize certain aspects of selected base merchandise." Id. at 7.
The Board held that "[i]n light of the [2019 Guidance] Memorandum, because customizing products is not a mathematical concept, an identified method of organizing human activity, or a mental process, we conclude the claims are not directed to an abstract idea." Reversing the Examiner's rejection, the Board specified why "customizing products" does not fall into any of the 2019 Guidance enumerated groups:
Mathematical Concept: "customizing products is not a mathematical concept, because it is not a mathematical relationship, mathematical formula or equation, or mathematical calculation."
Identified Method of Organizing Human Activity: "customizing products [] is not (i) a fundamental economic principle or practice (including hedging, insurance, mitigating risk), (ii) a commercial or legal interaction (including agreements in the form of contracts; legal obligations; advertising, marketing or sales activities or behaviors; business relations), or (iii) managing personal behavior or relationships or interactions between people (including social activities, teaching, and following rules or instructions)."
Mental Process: "customizing products is not a mental process, as it is not a concept performed in the human mind (including observation, evaluation, judgment, opinion)."
See id. at 7. This application was issued a Notice of Allowance on April 11 as seen on the Public Patent Application Information Retrieval (PAIR) portal.
Next we review two post-2019 Guidance Federal Circuit decisions.
Federal Circuit Post-2019 Guidance Example 1: ChargePoint v. SemaConnect
On March 28, 2019 the Federal Circuit affirmed the U.S. District Court for the District of Maryland's grant of a motion to dismiss a patent infringement suit based on the asserted patent claims being ineligible for patenting under § 101. ChargePoint v. SemaConnect, Inc. Case No. 2018-1739 (Fed. Cir. 2019) at 4. ChargePoint had asserted four of its patents against SemaConnect. The patents described network-connected electric vehicle charging stations. Id. Some of the claims incorporated the principle of demand response--when power supply in the grid is low, supply to certain customers/organizations is reduced, and when the demand is low, the cost of electricity may be reduced to boost demand. In the context of charging electric vehicles, electric vehicles can pull electricity from the grid as well as supply electricity to the grid ("V2G": vehicle-to-grid transfer) in times of high demand. See id. at 3.
Two of the claims the Court considered from patent no. 8,138,715 recited:
In its Alice Step 1 analysis, the Court found "[i]t is clear from the language of claim 1 that the claim involves an abstract idea--namely, the abstract idea of communicating requests to a remote server and receiving communications from that server, i.e. communication over a network" and emphasized that the Court must determine whether the claim as a whole is directed to that abstract idea. Id. at 9. Like the Board did in Ex Parte Alison Page, et al. above, the Federal Circuit looked to the ChargePoint specification to assist it in determining whether the claim was directed to the abstract idea it had identified. Id. at 9. The Court concluded the claim was directed to the abstract idea based on statements in the specification, including:
- that the problem faced by the patentee was the lack of communication network that would allow drivers, businesses, and utility companies to interact with the electric vehicle charging stations
- that there is a need for an efficient communication network for managing peak load leveling using Demand Response and V2G
--as well as things the specification did not state. The Court emphasized that the specification did not state the charging station itself was improved from a technical perspective, or that it would operate differently than it otherwise could, or that the invention overcame a technical difficulty in adding networking capability to the charging stations. Id. at 12. "[T]he specification suggests that the invention of the patent is nothing more than the abstract idea of communication over a network for interacting with a device, applied to the context of electric vehicle charging stations." Id. at 12.
Then, looking at the claim language itself, the Court found "[t]he breadth with which the claim is written indicates that the claim is directed to the abstract idea of communication over a network for device interaction," and that the language of claim 1 "would preempt the use of any networked charging stations." Id. at 13. The Court hearkened to the 1853 case O'Reilly v. Morse, in which the Supreme Court invalidated one of Samuel Morse's claims for the use of "electromagnetism, however developed for marking or printing intelligible characters, signs, or letters, at any distances" because the claim would preempt any application of printing at a distance via magnetism whether those applications used the invention in the patent. Id. at 14.
The Court also considered the following claim from another of ChargePoint's patents:
The Court's analysis was similar. ChargePoint argued that this claim taught "a charging station with improved technical features that enable it to adjust the amount o electricity delivered to cars based on demand-response communications with utilities." Id. at 17. The Court did was not persuaded: "the fact that the electricity flow is modified based on demand response principles does nothing to make this claim directed to something other than the abstract idea. Demand response is itself an abstract concept--a familiar business choice to alter terms of dealing to help match supply and demand." Id. at 17. The Court applied similar analyses to the method and system claims at issue, finding each directed to an abstract idea. Id. at 19-21.
In its Alice step two analysis, the Court searched for an inventive concept. ChargePoint argued that its patents contained an inventive concept because they represent an unconventional solution to technological problems in the field. Id. at 22. Again, the Court was not persuaded.
In essence, the alleged "inventive concept" that solves problems identified in the field is that the charging stations are network controlled. But network control is the abstract idea itself, and a claimed invention's use of the ineligible concept to which it is directed cannot supply the inventive concept that renders the invention "significantly more" than that ineligible concept.
Id. at 23.
Taking into consideration the 2019 Guidance in the context of the ChargePoint patent claims, it seems possible that the Board, given its analysis in Ex Parte Alison Page and Ex Parte Adrian Fanaru, would find that claim 1 of the 8,138,715 patent ("an apparatus comprising a control device to turn electric supply on and off to enable and disable charge transfer for electric vehicles...") does not recite one of the 2019 Guidance enumerated abstract ideas: mathematical concepts, methods of organizing human activity, and mental processes.
The Federal Circuit in ChargePoint made no mention of the 2019 Guidance in its decision, though the Court has recently noted that it is not bound by USPTO guidance:
While we greatly respect the PTO's expertise on all matters relating to patentability, including patent eligibility, we are not bound by its guidance.
Cleveland Clinic Foundation, Cleveland Heartlab, Inc. v. True Health Diagnostics LLC, Case No. 2018-1218 (Fed. Cir. Apr. 1, 2019) at 13.
Another recent Federal Circuit decision, Trading Technologies International, Inc. v. IBG LLC, Interactive Brokers, LLC, was an appeal of the PTAB's 2017 decision that claims 1-35 of patent no. 7,212,999 were patent-ineligible under § 101. The Federal Circuit affirmed. Case No. 2017-2257 (Fed. Cir. Apr. 18, 2019) at 20.
Claim 1 recited a method for facilitating transactional information to a user regarding the buying and selling of items, and including displaying a plurality of bid and offer indicators along a scaled axis of prices, receiving market information, and displaying market information along the axis, and displaying information pertaining to user's order. Id. at 14. The Court noted "[w]e have treated collecting information, including when limited to particular content (which does not change its character as information), as within the realm of abstract ideas." Id. at 14 (citing Electric Power Grp., LLC v. Alstom S.A., 830 F.3d 1350, 1353 (Fed. Cir. 2016).
Contrast the Board's simple analysis in Ex Parte Adrian Fanaru:"[i]n light of our guidance, because collecting usage information is not a mathematical concept, an identified method of organizing human activity, or a mental process, we conclude that 'collecting usage data' is not an abstract idea" Appeal No. 2017/002898 (PTAB Jan. 22, 2019) at 8. The claims at issue in Ex Parte Adrian Fanaru likewise recited numerous receiving, transmitting, and storing claims.
The Federal Circuit found that "[t]he claims of the '999 patent do not improve the functioning of the computer, make it operate more efficiently, or solve any technological problem. Instead, they recite a purportedly new arrangement of generic information that assists traders in processing information more quickly." Trading Technologies, at 15. Trading Technologies argued patent eligibility by--as many courts have done in their eligibility decisions--comparing its claims to claims of other patents that the Federal Circuit found patent eligible, in this case, Trading Technologies own patents that had been found eligible. The Court responded, "[w]e are not bound by non-precedential decisions at all, much less ones to different patents, different specifications, or different claims. Each panel must evaluate the claims presented to it. Eligibility depends on what is claimed, not all that is disclosed in the specification." Id. at 19. The Court affirmed, agreeing with the Board that the claims did not contain any inventive concept. Id. at 16, 20.
Of note, not only are the USPTO and Courts grappling with how to achieve consistency. As suggested by Circuit Judges Lourie and Newman, this year Congress is floating principles for revising § 101 analyses statutorily. The day before the Trading Technologies decision, Senators Chris Coons (D-Del.) and Thom Tillis (R-N.C.), and Representatives. Doug Collins (R-Ga.), Hank Johnson (D-Ga.), and Steve Stivers (R-Ohio) released a § 101 Patent Reform Framework. See Senate, House Lawmakers Unveil Plan to Revamp Patent Eligibility, Bloomberg Law (Apr. 17, 2018).
The Framework echos principles in the 2019 Guidance, and sentiments of the Courts, including:
- defining a "closed list" of "exclusive categories of statutory subject matter which alone should not be eligible for patent protection"
- create a "practical application" test to "ensure statutorily ineligible subject matter is construed narrowly"
- "statutorily abrogate judicially created exceptions to patent eligible subject matter in favor of exclusive statutory categories of ineligible subject matter"
- "[m]ake clear that eligibility is determined by considering each and every element of the claim as a whole and without regard to considerations properly addressed by 102, 103, and 112"
The last point invokes Circuit Judges Lourie and Newman's questioning of whether determining whether a claim recites an inventive step is necessary at all in a § 101 analysis, since novelty and obviousness are addressed under §§ 102 and 103.
Unsurprisingly, the 2019 Guidance has not yet achieved consistency and predictability in the difficult § 101 landscape that has developed over the last 4-plus years, though it highlights areas of inconsistency which will continue to inform strategies of inventors, practitioners, litigators, and other patent stakeholders.
You can read more about § 101 in my other articles:
Netflix, Amazon, and Hulu Prevail Over Abstract Idea
Using Berkheimer (discussing the February 8, 2018 Berkheimer decision of the Federal Circuit on § 101)