USPTO Responds to Public in a Subject Matter Eligibility Update

October 28, 2019 | Intellectual Property News, Legal News
On October 18, 2019, the U.S. Patent and Trademark Office provided an update to their prior guidelines released on January 7, 2019 in response to public comments. (84 FR 50, Jan. 7, 2019, “Guidance.”) The Guidance revises USPTO procedures for determining whether or not a patent claim or patent application claim is directed to one of the judicially created exceptions to 35 U.S.C. § 101: laws of nature, natural phenomena, and abstract ideas. In the October update (“Update”), the USPTO clarifies how an examiner should determine whether a claim “recites” a judicial exception in Step 2A (Prong One). Claims that either state (set forth) a judicial exception or describe a concept that falls under a judicial exception without necessarily explicitly naming it are determined to “recite” a judicial exception. Prong Two of Step 2A analyzes whether the recited judicial exception has been integrated into a practical application. A claim is “directed to” a judicial exception when it satisfies both Prong One and Prong Two of Step 2A of a patent subject matter eligibility assessment. Thus, if a claim is determined to integrate the judicial exception into a practical application, the claim is not directed to the judicial exception. The October Update explains that, in performing Prong Two of Step 2A to determine whether the recited judicial exception has been integrated into a practical application, the Examiner should take into consideration all of the claim limitations as a whole and how those limitations interact and impact each other. For example, the Manual of Patent Examination Procedure (“MPEP”) explains that examiners should evaluate any improvement in the functioning of a computer/other technology/technical field by determining whether the specification provides sufficient details regarding such improvement and, if so, whether the claim reflects the disclosed improvement. The Update notes that this determination, as described by the MPEP and the Guidance, is not an explicit test sanctioned by the courts for performing a Prong Two analysis. Also, as part of this analysis, the examiner should consider other factors that may indicate integration into a practical application such as implementing the judicial exception with a particular machine or manufacture, effecting a transformation or reduction of an article, and applying the judicial exception in some other meaningful way. Whether a claim limitation is, for example, an extra-solution activity is considered without reference to whether such extra-solution activity is well-known, conventional, or routine. The Update also includes a set of further examples and characterizations of court decisions to aid in examiner training.

USPTO Revises Patent Subject Matter Eligibility Guidance

March 7, 2019 | Intellectual Property News, Legal News
On January 7, 2019, the U.S. Patent and Trademark Office released the “2019 Revised Patent Subject Matter Eligibility Guidance” to assist USPTO personnel in evaluating subject matter eligibility. (84 FR 50, Jan. 7, 2019, “Guidance.”) The Guidance revises the procedures for determining whether or not a patent claim or patent application claim is directed to one of the judicially created exceptions to 35 U.S.C. § 101: laws of nature, natural phenomena, and abstract ideas. The new guidelines revise the procedures under what is known as the Alice/Mayo test for determining patent subject matter eligibility. Under prior examination procedure Step 2A, the examiner first determines whether a claim is “directed to” a patent-ineligible concept (laws of nature, natural phenomena, abstract idea) and if not, the inquiry ends there, as the claim is patent eligible. Otherwise, the examiner determines under Step 2B whether the balance of the claim adds “significantly more” to the judicial exception. This analysis is performed by considering the elements of the claim both individually and as an ordered combination. A portion of this analysis involves determining whether the additional elements transform the nature of the claim into a patent-eligible application, such as by reciting aspects that are not “well-understood, routine, conventional activity.” Under the revised procedure, Step 2A is divided into two separate prongs to elucidate the “directed to” inquiry. Under Prong 1, the examiner first evaluates whether the claim recites a judicial exception. For an “abstract idea,” the examiner performs this evaluation by a) identifying the specific limitation(s) in the claim that individually or in combination recites the judicial exception and b) determining whether the identified limitation(s) fall within one of the subject matter groups enumerated in the Guidance, namely mathematical concepts, certain methods of organizing human activity, and mental processes. Examples from the caselaw are cited in support of each of these groups. If the examiner concludes that the identified limitations do fall within one or these groups, then the analysis proceeds to Prong 2. If not, the claim is subject matter eligible. Under Prong 2, which applies to all three types of judicial exceptions, the examiner evaluates whether the identified judicial exception is integrated into a practical application. For example, if the claim applies, relies on, or uses the identified judicial exception in a manner that “imposes a meaningful limit on the judicial exception, such that the claim is more than a drafting effort designed to monopolize the judicial exception,” then the claim is patent subject matter eligible. Otherwise, analysis proceeds to Step 2B, which remains unchanged. With these revised guidelines, the USPTO appears to be attempting to increase the predictability and consistency of the examination process. Of particular note, USPTO personnel is no longer permitted to use the USPTO’s “Eligibility Quick Reference Sheet Identifying Abstract Ideas.” Also, the revised guidelines insist that the examiner must consider the claim as a whole when evaluating whether the judicial exception is “integrated into a practical application.” The guidelines further note that a claim that includes conventional elements may still be patent subject matter eligible by integrating a judicial exception into a practical application.

Enfish Decision Breathes New Life Into Computer-Implemented Patents

May 13, 2016 | Intellectual Property News
In the Supreme Court’s pivotal decision in Alice Corp. Pty. Ltd. v. CLS Bank, Int’l (2014), computer-implemented inventions were considered unpatentable if they were directed to an abstract idea. Since that time, many applications have been rejected and issued patents invalidated on the grounds that they were directed to an abstract idea and therefore contained unpatentable subject matter. In Enfish, LLC v. Microsoft Corporation (2016), the Federal Circuit Court of Appeals issued a clarifying decision that should stem the tide and provides an important clarification to support the patentability of many computer-implemented inventions. In setting up a two-stage inquiry for patentability of such inventions, the Supreme Court declared: “We must first determine whether the claims at issue are directed to a patent ineligible concept.” That formulation plainly contemplates that the first step of the inquiry is a meaningful one, i.e., that a substantial class of claims are not directed to a patent-ineligible concept. The “directed to” inquiry, therefore, cannot simply ask whether the claims involve a patent-ineligible concept, because essentially every routinely patent-eligible claim involving physical products and actions involves a law of nature and/or natural phenomenon—after all, they take place in the physical world. Rather, the “directed to” inquiry applies a stage-one filter to claims, considered in light of the specification, based on whether “their character as a whole is directed to excluded subject matter.” The Federal Circuit then concluded that “We do not read Alice to broadly hold that all improvements in computer-related technology are inherently abstract.” According to the formulation of Enfish, the issue should be determined by a close evaluation of the claims. As the Court held, “Therefore, we find it relevant to ask whether the claims are directed to an improvement to computer functionality versus being directed to an abstract idea, even at the first step of the Alice analysis.” The patentability of computer-implemented inventions is still very much a case-by-case issue, but after the decision of Enfish there is once again room for pursuing such patents, particularly where the claims are written to be more particular to the specific functionality of the improvement, rather than generally to a broad or abstract idea that merely happens to be implemented on a computer.

Trial Court Claim Interpretation Given No Deference On Appeal

March 2, 2014 | Intellectual Property News
In a recent decision, the Federal Circuit Court of Appeals reconfirmed that decisions of a trial court interpreting the meaning of terms used in patent claims are not given deference on appeal. Instead, the court of appeals reviews patent claim interpretations de novo, and need not give the trial court decisions any weight. In Markman v. Westview Instruments, Inc., 517 U.S. 370 (1976), the Supreme Court held that patent claim instruction must be performed as a matter of law by judges, not as a matter of fact by juries. Since that time, trial courts have commonly conducted separate claim construction procedures to interpret any disputed terms used in patent claims in order to instruct the jury as to such meanings rather than allowing the juries to interpret the language themselves. This process has created distinct roles in which judges interpret patents while juries decide whether patents have been infringed. Because the matter of patent interpretation has been deemed a question of law, rather than fact, there is no discretion, no weighing of facts, and no reason for a trial court judge to have a better vantage point than an appellate court judge. As a result, the Federal Circuit Court of Appeals has consistently held that it must review trial court decisions that interpret patent claims as a matter of law, without giving the trial court judge any deference. In LIghting Ballast Control LLC v. Philips Electronics North America Corp., Lighting Ballast argued that the court of appeals should afford some deference to the district court’s interpretations. In particular, it argued that interpretation of documents such as patents is fundamentally factual in nature, and that merely stating that the issue is “an issue of law” does not alter the reality that there are factual aspects in every exercise of claim construction. After all, claim construction is frequently performed by evaluating expert testimony and a variety of documentary forms of evidence, and this analysis shares much in common with evaluating questions of fact. Even if it is property characterized as a question of law, there are sound reasons to give deference to the trial court. Numerous amici submitted briefs taking sides that either aligned with Lighting Ballast, argued that appeals should continue to be a matter of de novo review, or urged a hybrid approach in which underlying factual issues would be given deference but ultimate conclusions would be treated as a question of law. In a divided opinion, the majority primarily expressed a concern for stare decisis, pointing out that in the fifteen years since its holding in Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448 (Fed. Cir. 1998) (en banc), the review of claim construction on a de novo basis has created a significant body of precedent. As far as the majority could discern, there was no argument of public policy, no changed circumstance, and no problem in the ability to apply the current approach. In addition, there was no showing that the Cybor approach was inconsistent with any law or precedent, or that affording greater deference would produce any greater public or private benefit. Without any grave necessity or special justification, the majority of the en banc court could not justify departing from the current approach. A key argument in favor of greater deference to the trial court is that deference would create greater certainty and thereby also reduce the likelihood of an appeal in the first place. The majority argued that this proposition is unsupported, and that the available data seems to indicate that the percentage of cases that are appealed has been declining. Regardless of whether the standard of review affects the number of cases that are appealed, the lack of deference does make it more likely that an appellant can gain a reversal of the claim construction ruling.

Supreme Court to Consider Awards to Successful Patent Defendants

October 2, 2013 | Intellectual Property News
The patent statutes allow the award of attorneys’ fees in a patent infringement lawsuit to the prevailing party—plaintiff or defendant—in exceptional cases. The Federal Circuit Court of Appeals has long held that a prevailing accused infringer must prove the plaintiff’s position was objectively unreasonable and that it was subjectively (that is, knowingly) asserted in bad faith. Some companies that have been sued for patent infringement contend that the standard should be lowered, making it easier for a successful defendant to recover its fees when defending against a weak patent infringement case. Now the Supreme Court has agreed to consider that question. On October 1, the Supreme Court agreed to hear two similar cases. A first case involves Icon Health against Octane Fitness in which Octane prevailed but its request for attorneys’ fees was denied. Octane argued that the standard for exceptionality should be lowered to require objective unreasonableness, but not proof of subjective bad faith. In most cases, the subjective element is extremely difficult or impossible to prove. The Federal Circuit declined the request to lower the standard, and the Supreme Court has agreed to consider it. The Supreme Court also agreed to review an appeal involving Highmark and Allcare Health. The issue in the Highmark appeal involves a similar issue related to the ability of the court of appeals to reconsider a decision made by the trial court. In Highmark, the trial court concluded that the case was exceptional and awarded $5 million in fees to Highmark. In part, the Federal Circuit concluded that the typically high amount of such fee awards is reason to make the standard to award them quite high. After evaluating the lower court decision, the Federal Circuit reversed the award. The issue to be considered by the Supreme Court is whether that reversal was proper, and the degree of deference that must be afforded to a trial court decision finding a case to be exceptional. The Supreme Court will likely hear arguments and issue a decision sometime in summer, 2014.

Inventor’s Purchase Order to Supplier May Place Invention On Sale

August 15, 2013 | Intellectual Property News
The patent statutes provide that an invention cannot be patented when the inventor has placed the invention on sale more than a year before the filing date of the patent application. The so-called “on-sale bar” is clearly applicable when an inventor manufactures an item and sells it directly to others, but its application is less obvious when the inventor does not make or sell the item, and instead buys a quantity of it from a supplier. In a recent decision, the court held that the invention is on sale—and the patent will be barred—in such cases. The on-sale bar applies when two conditions are satisfied before the “critical date,” which is typically one year before the patent application filing date: (1) the claimed invention must be the subject of a commercial offer for sale; and (2) the invention must be ready for patenting. An invention is on sale when there is an offer to sell that is sufficiently definite that another party could make a binding contract by simple acceptance. An invention is “ready for patenting” when prior to the critical date: (1) the invention is reduced to practice; or (2) the invention is depicted in drawings or described in writings of sufficient nature to enable a person of ordinary skill in the art to practice the invention. In Hamilton Beach Brands, Inc. v. Sunbeam Products, the Federal Circuit Court of Appeals confirmed that there is no “supplier exception” to the on-sale bar. Hamilton Beach had issued a purchase order to a supplier for a specific quantity (in this case, 2000 units) of slow cookers in a document that included price, part number, quantity, and delivery dates. Because the communication was one that could be simply accepted, it was sufficient to place the invention on sale even though it was a sale to the inventor rather than from the inventor. The court left open the possibility that a lesser quantity might not trigger the on-sale bar, particularly where the nature of the purchase is a genuine experimental use rather than a commercial transaction. Nonetheless, it would be prudent to assume that a purchase from a manufacturer will trigger the on-sale bar, and therefore to file patent applications quickly enough thereafter to avoid the bar.

Court of Appeals to Address Standard of Review for Claim Interpretation

March 18, 2013 | Intellectual Property News
For nearly twenty years, the federal courts have addressed the interpretation of the claims in a patent as a question of law, rather than a question of fact. This standard has meant that the court of appeals owed no deference to the findings of the trial courts on matters of claim interpretation, and the lack of deference is widely believed to contribute to an inordinately high reversal rate on appeal. Now the Federal Circuit has decided to take a closer look at whether it should give deference to the lower court rulings. In Lightning Ballast v. Philips Electronics, the Federal Circuit has asked the parties to submit briefing specifically directed to the question of whether the court should abandon the prior practice of affording no deference to claim construction rulings. It further invites input regarding the particular aspects, if any, of a lower court ruling that should be given deference. The court has also decided to consider the matter en banc, rather than in a panel. Additional briefing from nonparties are likely to be submitted, and the court expressly invited an amicus brief from the USPTO.

First to File, Other Patent Rules Effective March 16

February 28, 2013 | Intellectual Property News
The fist-inventor-to-file provision of the America Invents Act takes effect on March 16, 2013. After a long history of granting patents to the first applicant to invent an invention, the new law will now award a patent to the first applicant to file an application for the invention. Under the old system, an applicant faced with a rejection based on prior art could submit proof in the form of contemporaneous notes or the like to establish a date of invention earlier than that of the prior art reference. Because the system was focused on the first to invent, retaining good notes, prototypes, or other proof of the invention date was important. Under the new system, the invention date will no longer matter for priority purposes. Instead, the importance of the filing date makes it crucial to file an application at the earliest stage possible. There are many additional changes that accompany the migration to the first-to-file system, and surely too many to address fully in this account. As such, this report will highlight some of the more notable provisions of the new law. The new law also brings changes to the definitions of prior art and activities that will prevent an applicant from getting a patent. Under the old law, an applicant was barred from a patent if the invention was on sale more than a year before the patent application date. Judicial interpretations of the prior law concluded that almost any sale was a barring event, even if it was under a nondisclosure agreement and even if the buyer could not decipher the inventive subject matter. As one example, the use of a trade secret method to produce a product that is sold would place the method on sale even if the method was actually completely unknown to the public. The Patent Office’s current interpretation of the new law is that such private processes are not commercial uses available to the public. Consequently, it appears permissible to seek patent applications for such processes even if they have been used for many years—assuming, of course, that there is no other prior art lurking, and no other applicants who file applications first. Note that this interpretation is somewhat preliminary; although the Patent Office has adopted it for the purpose of evaluating patentability, the courts may disagree. Accordingly, there is risk in assuming that a privately conducted method, or a sale under an NDA, will not be a commercial event triggering the on-sale bar to patentability. Another change relates to the treatment of public disclosures that might bar patentability. Under the first-to-invent system, an applicant could defeat a publication showing that a third party had developed the same invention by submitting proof that the patent applicant invented the invention before the third party. Under the new first-to-file rule this is no longer allowable: if the same invention is available to the public, through a published document or otherwise, before the date of the application then the applicant will not be entitled to a patent. The key exception to this rule relates to public disclosures made by the applicant or derived from the applicant, which are not prior art against the applicant so long as the application is filed within one year of the disclosure. The Patent Office seems to intend to treat this exception very narrowly, and under its current examination guidelines the disclosure may still qualify as prior art unless it is essentially a verbatim copy of the patent applicant’s own work. If the public disclosure is a variation of the applicant’s work then it may be treated as prior art, thereby barring the patent from issuing. Given the risks involved in such publications, the best course is to file an application before any public disclosures. The first-to-file rules do not apply retroactively, and therefore do not apply to any applications filed prior to March 16, 2013. Likewise, the old rules related to prior art, commercialization, and public disclosures will still apply to such applications. Because the old rules may be preferable, most applicants will be better off if they file applications prior to March 16. For applications filed on or after that date, the applicability of either the new or old rules depends on the nature of the application. A request for continued examination for an application filed before March 16, 2013, as well as the filing of a national stage application for a pre-March 16, 2013 PCT application, will not subject the application to the new first-to-file rules even if the RCE or national stage application is filed after March 16. For applications filed on or after March 16, 2013, the application will be treated under the new first-to-file rules if the application contains even a single claim that has an effective filing date of March 16 or later. Thus, all new applications with no priority claims to prior-filed applications will be treated under the new rules. Likewise, any continuation in part application that includes one or more claims that rely on subject matter submitted after March 16, 2013 will also be treated under the new rules. Once such a claim is submitted in an application it is processed under the new rules for all time, even if the triggering claim is later canceled. The Patent Office is also raising its fees, effective March 19, 2013. While the Patent Office routinely raises its fees at least annually, in this case the increases are hefty. For example, a utility patent application previously required a small entity filing fee of $533 under the old rules, but will cost $730 under the new rules. For large entities, these basic filing fees increase from $1260 to $1600. A further change creates a new “micro entity” for filing purposes, with a micro entity being small entities with four or fewer prior patent applications, a gross income that does not exceed three times the national median household income, and has not granted rights in the invention to an entity with an income greater than three times the national median. For a micro entity, the basic filing fee is $400.

Court of Appeals Urges Professionalism in Persuasion

January 25, 2013 | Intellectual Property News
In a recent decision, the Federal Circuit Court of Appeals criticized the parties involved for the use of excessive hyperbole in their written submissions to the court, urging instead that counsel should offer a straightforward recital of the facts without the use of such shrill language. Clients sometimes believe that their attorneys should be “aggressive” to win, but this recent decision proves yet again that sound legal skills coupled with professional behavior trumps aggressive tactics and harsh language every time. The particular case is Nissim Corp. v. Clearplay, which in itself is a fairly routine patent infringement case related to the use of an invention that can skip over or filter out unwanted content when playing DVD movies. In the course of addressing an appeal involving questions of infringement, the court addressed the behavior of the litigants and the role it played in the case, stating: “The excessive hyperbole in the briefs makes them difficult to take seriously and unpleasant to read, and strips both parties of their credibility. Nissim characterizes ClearPlay’s arguments as ‘moan[ing],’ ‘excuse[s],’ and ‘absurd’; it describes one of ClearPlay’s communications with the special master as ‘bias-inducing screed.’ ClearPlay’s briefs are no better; disparaging Nissim’s suit as ‘unnecessarily time-consuming and expensive,’ ‘ill-conceived,’ ‘wast[ing] the time and resources of ClearPlay and the [c]ourt,’ and a ‘massive waste of judicial time and resources,’ and referring to Nissim’s arguments as ‘inexplicable,’ ‘strange,’ and ‘baffling.’ The record reveals the parties’ behavior in the district court proceedings to be even worse. The parties would be well-advised to take the advice of Justice Scalia and Bryan Garner: ‘Cultivate a tone of civility, showing that you are not blinded by passion. . . . A straightforward recital of the facts will arouse whatever animosity the appellate court is capable of entertaining, without detracting from the appearance of calm and equanimity that you want to project.’ Antonin Scalia & Bryan A. Garner, Making Your Case: The Art of Persuading Judges 34-35 (2008). The parties’ poor judgment extends beyond their choice of words. For example, Nissim stated that ‘the district court stuck Nissim with ClearPlay’s trivial gesture’ and that the court’s decision ‘mock[ed] justice.’ These statements were at best unprofessional. See ABA Model Rules of Professional Conduct Rules 3.5, 8.4(d). ClearPlay’s statements throughout its brief that Nissim had requested only prospective relief were obvious misrepresentations that cannot easily be explained away as mistakes. See id. Rule 3.3(a).” There is surely room for attorneys to convey a sense of importance when advancing their clients’ positions, but the art of persuasion stops short of hyperbole and belittling the opposing party. In this insightful decision, judges make it quite clear that such aggressive tactics are not only unprofessional, but ineffective and counterproductive as well.

Federal Circuit Invalidates Soverain eCommerce Patents

January 24, 2013 | Intellectual Property News
In a decision this week, the Federal Circuit Court of Appeals invalidated a group of patents held by Soverain Software LLC and asserted against many companies for practicing electronic commerce, including use of a shopping cart model for sales transactions. Soverain Software sued many online retailers for infringement of several patents that include claims for use of an online shopping cart sales system and related electronic commerce methods. Most of the defendants settled the litigation by purchasing a license under the patents, but Newegg declined and elected to defend itself in court instead. A key part of Newegg’s defense was that the patents were invalid in view of earlier electronic buying systems such as the CompuServe Mall. At trial, the district court decided that Newegg had not presented enough evidence to show that the patents were invalid. In fact, the district court concluded that Newegg’s case was so lacking that it did not allow the jury to even consider the question. On appeal, the Federal Circuit disagreed. After a thorough review of the evidence, the Court of Appeals ruled that the Soverain patents were invalid because they were obvious in view of the prior art, including the CompuServe Mall references. In most cases, when a court of appeals reverses a district court decision it will remand the case to the trial court to reconsider the matter in view of the errors found on appeal. In this case, however, the court noted that because the district court ruled on obviousness as a question of law, the court of appeals could also reach its own ruling as a matter of law, without remanding it to the district court for further review. The decision is available at Soverain