Surviving Alice with an Appeal

By Mark Nowotarski

This third article in the “Surviving Alice” series[1] examines how the USPTO’s Patent Trial and Appeal Board has responded to the U.S. Supreme Court’s June 2014 Alice decision[2].  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:

1. “Determine whether the claims at issue are directed to a patent-ineligible concept” [3](e.g. abstract idea or fundamental economic practice); and
2. 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. "[4] (e.g. an improvement to another technology)

The business method work groups[5] 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[6].  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[7] are discussed below.   

PTAB response to Alice

Figure 1 shows how the PTAB ex parte appeals judges[8] have responded to Alice in the field of business methods.  The blue curve shows the PTAB reversals as a percent of all decisions in the business method work groups from the first quarter of 2013 (before Alice) to the second quarter of 2017.  There are typically 100 to 250 decisions in each quarter.  These are “full reversals” in the sense that all rejections by the examiner including § 101, § 102, § 103, §112, etc. were overturned by the board.  Some of these full reversals have new grounds of rejection introduced by the board[9].  The black curve shows the reversals where the board introduced a new ground of rejection under § 101.  The new grounds were typically based on the claims for failing the Alice/Mayo test.   Finally, the brown curve shows the reversals in which the PTAB did not make a new § 101 rejection, but nonetheless put in a footnote suggesting that the examiner review the claims under Alice.[10]  Alice footnotes[11] started immediately after the Alice decision and abruptly ended in the fourth quarter of 2016. 

Figure 1 also shows how examiners in the business method work groups responded to the reversals by the board.  The green curve shows the reversals that the examiners subsequently allowed.  The red curve shows the reversals that the examiners subsequently rejected with a new ground of rejection under § 101.  Examiners can reject claims again after a reversal by the board but only with the approval of their art unit director[12].  This is normally a rare event, but it became standard practice in the business method work groups after Alice. 

Figure 1

About 70% of all full reversals from the board were reopened by the examiners with a new § 101 rejection starting immediately after Alice.  Only about 30% of the full reversals were allowed.  These reopened reversals include cases where the board reversed a prior § 101 rejection.  See for example serial numbers 12/412,434 and 12/452,977.  In both cases the claims were originally rejected under § 101 for being directed to an abstract idea.  The board reversed the examiner stating that the examiner had not made a prima facie case.  When the case was returned to the examiner, the examiner reopened prosecution with a new § 101 rejection asserting yet again that the claims were directed to an abstract idea.  The standard practice of reopening 70% of the reversals by the board irrespective of whatever the board does or does not say about the statutory nature of the claims[13], has been extremely disruptive to the appeals process.  As Gene Quinn commented in the patent blog IP Watchdog, “This fundamentally frustrates the purpose of an appellate system and makes fools of applicants who believed in fairness of the PTO process.”[14] 

The rate at which examiners reopened reversals with new § 101 rejections started to drop sharply in the fourth quarter of 2016.  The PTAB reversal rate also started to drop sharply at the same time.  What could have caused both declines in the trends?  One explanation is that the board finally worked its way through a backlog of appeals of pre Alice rejections, and had finally begun deciding cases on post Alice rejections.  These post Alice rejections were largely[15] § 101 rejections based on the Alice/Mayo test.  If a reversal was of a pre Alice rejection, there was a 70% chance the examiner would reopen prosecution with a new § 101 rejection.  For reversals of a post Alice rejection, there have not been any instances in the 52 cases I’ve reviewed so far where the examiner has reopened prosecution with a new § 101 rejection.  This is true for cases that did not have a § 101 rejection as well as those that did.  Apparently if an examiner originally evaluated the claims under the Alice/Mayo test and found them statutory, the examiner does not reevaluate the claims after the board returns a decision on those claims. 

The board is now looking primarily at appeals of post Alice rejections.  Only about 20% of the post Alice § 101 rejections are being reversed. Even with a 20% reversal rate, however, applicants still have a large number of cases to use to see what the board considers to be statutory and nonstatutory subject matter.

PTAB examples of statutory and nonstatutory subject matter

In order to get examples of what the board considers to be statutory and nonstatutory subject matter under the Alice/Mayo test, I downloaded from PAIR[16] 216 PTAB decisions for the business method work groups that had a post Alice rejection; of these, there were 39 reversals of § 101 rejections.  Table 1 below gives a summary of the reasons for the reversals.

PTAB reasons for reversal of 101 rejection under Alice/Mayo test table 1
	Board found that the claims did not meet step 1 or did meet step 2.	Board found that the Examiner has not made a prima facie case that the claims met step 1 or did not meet step 2.
Alice/Mayo step 1: Is the claim directed to a judicial exception?	23	8
Alice/Mayo step 2: Does the claim have something more than the judicial exception?	3	5

 

Most of the reversals were based on the board determining that the claims were not directed to a judicial exception and hence did not meet the requirements of step 1 of the Alice/Mayo test.  This was a surprise since there is conflicting case law on what is or is not a judicial exception, and during prosecution it is generally very difficult to convince an examiner that a claim is not directed to an abstract idea.  The board, however, stated that it reads the claims in light of the specifications to ascertain what inventive concept the claims were “directed to.”  Once it determined what the inventive concept was, it then determined if the inventive concept was a judicial exception or not.  If the inventive concept was not directed to what the board considered to be a judicial exception, it reversed the examiner.  If it was directed to a judicial exception, the board proceeded to step 2.   

In only three of the reversals that I have examined so far has the board reversed the examiner because it explicitly found that the claims met the statutory requirements of step 2.  This is unfortunate since applicants and examiners are looking for guidance from the board on what it considers to be “something more” than a judicial exception.  Further it contradicts general prosecution strategy of focusing one’s arguments on step 2, and attempting to show some technical feature or improvement in technology.  Thus, we may have to wait a while before the PTAB issues enough decisions to identify any general pattern of what it considers to be “something more.”  In the meantime, we can turn our attention to the examples we do have to determine what the board considers to be judicial exceptions and not judicial exceptions.

Table 2 below shows all of the statements made by the various panels of judges in the data set that explicitly recite the inventive concepts they considered to be statutory.  The specific statements are in bold.  The rest of the text gives context.  I’ve shown the serial numbers of the cases so that readers can look up the full decisions.  I’ve also sorted the decisions by their technical fields and their associated art units so that readers can find examples closest to their own cases.

Inventive concepts considered statutory table 2
Application serial number	Technical Field and Art Units	Inventive Concepts that are Statutory Subject Matter
12/210,013	Business Cryptography 3685	Appellant argue that generating a signal indicating an attempt to access operational logic proximate to the mesh grid is not an abstract idea or a mental step (Appeal Br. Il). We agree with the Appellant that the signal is generated by electronic components in a circuit and thus is not a mental step.
13/034,093		We determine that the claims are directed to a method of validating a device over a network that is "designed to achieve an improved technological result in conventional industry practice"
10/397,778	Discounts, Incentives 3621 3622 3681 3682	Be that as it may, Appellant's claims are not directed to the "abstract idea" as defined by the Examiner, which is quite broad, but to much more limited systems and methods distributing only coupons redeemable at a third-party retailer for goods that were unpurchaseable at the issuing retailer and/or are unrelated to the goods or services offered by the issuing retailer, and then only upon the occurrence of certain conditions.
11/781,484		Although each of independent claims 1, 39-41, 43, 44, and 49 recite language about displaying advertising in an instant messaging user interface, the independent claims recite more, such as language substantially identical to "determining contextual information corresponding to advertising content previously viewed by the instant message sender." The claims are, thus, directed to more than just the fundamental economic principle of advertising.
12/820,383		Here, the character of claim 1 as a whole is directed to cooperation between two separate computer systems, namely "an aircraft inflight entertainment (IFE) system" and "at least one personal electronic device (PED) carried by an aircraft passenger."
14/018,049	Electronic Shopping 3325 3684	We find that claim 1 limits the scope of the claims to the use of specific devices, namely, a TPMS, radio wave transmission, a casing life prediction unit, a tread selection unit, and a display screen.
14/065,315	Finance 3691 3692 2693 3694 3695 3696	The record supports finding a focus of the invention - that is, when reading the claims as a whole in light of the Specification - to be on solving a problem with the way payment systems control transaction information. The problem with controlling transaction information is not itself necessarily patent-ineligible.
12/617,071		The claims are, thus, directed to interactions between at least two different types of electronic payment systems, one between financial institutions, such as banks, and billers, for recurrent billing, and the other between users of payment cards, such as consumers using credit and debit cards, the banks that issue those payment cards, and the billers with whom those cards are being used.
12/742,135		Instead, for example, claim 1 is directed to utilizing a state of a transaction communicated from both a user and a merchant during the execution of a financial transaction to determine that the transaction is between the two parties.
10/757,317		Accordingly, we find that independent claims 21 and 27 are each directed to "a revolving credit account that includes automatically initiating a direct debit" and we are unable to determine definitively whether "a revolving credit account that includes automatically initiating a direct debit," as a whole, is a fundamental economic practice.
12/106,431		We are persuaded by Appellants' argument that the "claimed methods involve applying the advertisement to a very specific apparatus during the prescription dispensing process."
12/959,017	Healthcare Management 3626 3686	Therefore, the claim, considered as a whole, is not directed merely to an abstract idea, as defined under step one of the Alice analysis, because it includes treating a patient to reduce a risk of death.
12/781,836		Claim 1 is focused on a specific asserted improvement in automatic image segmentation, i.e., the automatic generation of a graph that maps paths of vessels in a network obtained from a medical image."
12/854,426		The Appellant explains how "the claims at issue are rooted in complex MRI technology- that happens to use, inter alia, program-configured computerized control systems - to overcome a problem specifically arising in the realm of MRI data signal acquisition technology" (Reply Br. 10) and thereby rendered patent eligible. We agree with the Appellant.
13/068,301		Each of independent claims 1 and 69 recite an evaluation module "including at least one of a test strip, a lab-on-a-chip device, an assay, a lateral flow test strip, a colorimetric test strip, a lateral flow colorimetric test strip, a transdermal testing device, or a lancet."
13/736,340		The question is a simple one: does the claimed subject matter entail an unconventional technological solution to a technological problem…In that regard, the claimed combination of a card comprising a first surface and an opposite second surface with a scratch box, a web server and a product packaging for the card work together so as to satisfy a "need [for] a prepaid card for offering services related to personal health records."
13/560,232	Miscellaneous 3629 3689	We find that the claims are inextricable tied to very specific system articles of manufacture/devices recited in the claims, for example: a Java-enabled machine that is configured to communicate with multiple different systems; at least five independent, managed data channels, and, a managed, control central database module comprising (i) central application programmatic interfaces, (ii) a central server, (iii) a central database, and (iv) a redundant backup database.
12/952,502		In particular, the claims address the problem of deploying (and keeping track of) different versions of software in a runtime environment. They recite a specific implementation of the abstract idea of associating and storing version identifiers.
12/770,471		And the advance over the prior art is not simply "managing the privacy of content posted on a social network" (Ans. 8) but in an improvement in the mechanism by which social networks manage information privacy.
12/492,941	Operations Research 3623 3624 3625	Reading the claims in light of the Specification, it becomes clear that the solution to the problem the inventors have sought to overcome is rooted in technology; that is, via a task definition file comprising a number of criteria; automatically configuring the external application within the user 's computing environment to facilitate a user accomplishing a to-do task; monitoring, with a personal management device, user actions within the external application; comparing, with the personal management device, the user actions within the external application to the number of criteria in the task definition file; determining when the user actions within the external application fulfill a criteria within the task definition file; and automatically modifying the to-do list with the personal management device based on the fulfilled criteria.
12/506,921	Point of Sale, Accounting, Inventory 3627 3687	The system requires (i) a computer memory, (ii) a point of sale interface configured to communicate with a point of sale system, and (iii) a plurality of digital media devices including at least one digital menu display. We find that these devices on their face, constitute articles of manufacture. Also, when these devices are taken in the context of a system for managing digital display content as claimed, we find the recited synergy between the devices in the claim (e.g., "a translation module configured to receive the digital media data from the memory and translate the digital media data into a format readable by the point of sale system") to be that of the operation of a machine, and not the thought of a human mind.
13/855,672	Reservations, Shipping, Transportation 3628 3688	Claim 1 is directed to a computer server that receives a product selection and shopper location from a shopper's portable device within a physical establishment, and provides product location information, and directions to the product, to the shopper's portable device, along with advertising information whose download order is based on the price advertisers are willing to pay for the type, frequency, and timing of advertising placements.
13/900,660		We find instead that after considering the claims individually and as an ordered combination, the focus of the claims is to an improved computer-to-computer functionality, and is not focused on economic or other tasks for which a computer is used in its ordinary capacity....That is, the independent claims focus on a computer system to effect a claimed synergy between the system device components. The claimed operation is of a machine, and not the thought of a human mind.

 

Two themes of statutory subject matter are apparent in the above examples.  They are:

1. Claims that are directed to a technology (e.g. “lab-on-a-chip device”) are not a judicial exception; and
2. Claims that are directed to interactions between components of a network (e.g. “interactions between at least two different types of electronic payment systems”) may also not be a judicial exception.

There are only a few instances where the inventive concepts of the claims were business methods per se and the board considered them to not be judicial exceptions.  For example, according to the board, the inventive concept for application 10/757,317 is “a revolving credit account that includes automatically initiating a direct debit”.  This is in the field of finance and hence a business method.  This example, however, is an exception and not the rule. 

Table 3 shows a sample of applications where the board affirmed the examiner and found that the claims were directed to a judicial exception.  This table also shows the serial numbers of the cases and the technical field/art units where the applications were assigned. 

Concepts considered to be judicial exceptions table 3
Application serial number	Technical Field Art Units	Concepts that are Judicial Exceptions
11/959,082	Business Cryptography 3685	In our view, claim 26 is directed to software licensing.
12/941,989		The Examiner finds here that claims 1-11 are directed to the abstract idea of a "platform release of content".
12/650,113	Discounts, Incentives 3621 3622 3681 3682	We find that the concept of entering into a contract (based on previously gathered information) is a fundamental business practice.
13/178,857		Claim 1 recites three steps: (a) selecting, (b) obtaining, and (c) generating. All three steps involve information, albeit three different types of information. Two types of information are gathered, and then a third type of information is generated that is associated with the other two. This is the essence of information generation - to take information and generate from that new information. Claim 1 as a whole is directed to that, the concept of information generation.
12/969,044	Finance 3691 3692 2693 3694 3695 3696	In this case, it is clear that the Appellants' invention serves only to more quickly calculate the optimal probability.
12/237,941		The claim is directed to the concept of a trading exchange that receives and matches orders and substitutes financial instruments.
14/173,410		The Examiner found claim 1 is "directed to the abstract idea of business principles" (Final Act. 2) as well as a combination of "gathering data with respect to network capacities associated with first and second wireless networks and outputting said data" (Ans. 4) and "managing an auction (bidding) process" (id.).
10/838,842		The independent claims are each directed to analyzing a value of a complex financial instrument through a series of determinations and calculations.
11/848,285		The bulk of claim 1 recites software modules used by "a system," communicating data, and "facilitating" presenting and receiving a selection from a menu, which are all attributes of a general purpose computer.
13/403,577		We find that this claim recites steps that involve obtaining account information on a loan account, estimating the chances of default, calculating the financial impacts of default or lack of default going forward, classifying accounts by risk and financial impact, and taking action on certain classes of accounts.
14/212,998		We agree with the Examiner's finding that the claims are directed to the fundamental economic practice of funding an activity via a contract using a mathematical relationship or formula and that therefore the claims are directed to an abstract idea.
10/091,606		Claim 1 is directed to a system "for processing account payments"
13/417,268	Healthcare Management 3626 3686	Claim 1 recites six steps: (a) receiving; (b) determining; (c) generating; (d) classifying; (e) displaying; and (f) indicating. Each of these steps involves information. A first type of information is received and a second type of information is determined. A third type of information is generated and information is classified. Finally, information is displayed. This is the essence of information gathering. Claim 1 as a whole is directed to that: the concept of information gathering.
10/209,531	Miscellaneous 3629 3689	These are the core steps of the claims and all involve acts that could be performed by a human, i.e., either mentally, or manually using pen and paper, without the use of a computer or any other machine, i.e., determining qualifying items based on a set of criteria.
13/343,775		Independent claim 26 is directed to a method that receives data, performs several "determining" steps involving received and previously stored data, then generates output that is communicated.  All of the claimed steps can be performed by mental thought, with a pen and paper for communicating information, by a human.
13/370,610		Claim 1 is concerned with matching data, from pre-existing forms, with the type and format of data expected for use in a new practice area.
11/820,701		We would refine the Examiner's finding, by indicating the claims are directed to comparing information about an issue to determine whether the issue is consistent with a role of a user that defined the issue, selecting other issues related to the role, selecting business transactions from an account associated with the user, assigning priority levels to the issues, and generating a report about the issues and priorities.
13/936,885		Claims 1, 5, and 6 are directed to the abstract idea of preparing patent applications.
11/741,429		Independent method claim 1, as well as independent method claims 37 and 63, merely recite steps to organize human activity in the realm of securing and enforcing patent rights.
12/911,288		Here, claim 1 involves nothing more than calculating and evaluating data to create, maintain, and evaluate policies, without any particular inventive technology.
13/170,499	Operations Research 3623 3624 3625	In our view, independent method claim 1, based on its express limitations, is directed to recommending a queue, to provide service to customers, based on the most efficient utilization of scheduled customer service resources.
12/490,511		The steps recited in independent claim 1 involve receiving information, "deriving a ... model" comprising task and organizational dependencies, applying "business processes defining the plurality of tasks that implement the organizational restructuring," determining when a reorganization is complete, and displaying before, after, and change information about the reorganization.
11/083,576		Further, while the claimed orders may represent physical products, the claimed invention is merely a computer implemented method of manipulating hypothetical orders in the abstract.
13/674,231		Independent claim 1 recites a process that is essentially a business meeting, or interpersonal collaboration, undertaken in a particular order using a generic computer: a first person selects something of importance to a business, such as a parameter from an agenda, and presents a proposed way to measure that parameter, which is communicated to a group; a second person provides feedback, and the first person revises the proposal.
13/797,303	Point of Sale, Accounting, Inventory 3627 3687	The Examiner determined thereby that "[t]he claim [claim 1] as a whole, does not amount to significantly more than the abstract idea ["management of assets," Ans. 3] itself."
12/363,402	Reservations, Shipping, Transportation 3628 3688	Independent claim 1 is directed to a method for organizing how notes about a presentation are taken and kept.
11/535,353		In this regard, sending a coupon code to a recipient based on the recipient's assent to terms and conditions is a method of organizing human activity and/or fundamental economic practice.

 

One theme in these affirmances is that the processing of information alone, no matter how unique or inventive, does not save a claim from being considered a judicial exception.  An example is 13/417,268 where the panel deciding the case held that a claim was directed to six steps: “(a) receiving; (b) determining; (c) generating; (d) classifying; (e) displaying; and (f) indicating.”  The panel considered this to be directed to no more than “the concept of information gathering” even though the § 103 obviousness rejection brought against these claims was not sustained.  Hence even though the claims cover a new and not obvious method of processing information, the board held that they are nonetheless not statutory simply for being in the field of information processing.  If this view spreads to the other computer implemented art units (e.g. databases, search engines, etc.), it could cause a serious decline in the allowances of all software based inventions since all software based inventions involve information processing.

We are at the very early stages of PTAB rulings on post Alice 101 rejections of business methods.  As of the end of May 2017, we had about 215 decisions.  We are adding to that corpus, however, at a rate of about 250 decisions per quarter.  Even if the reversal rate stays at only 20%, we are still getting 50 new reversal decisions per quarter to use as guides for our own appeals. 

Appeals are often a last resort when an applicant cannot reach agreement with an examiner.  In our next article, “Surviving Alice with Classification,” we will look at how applicants can avoid appeals in the first place by drafting their applications so that they have a better chance of being assigned to a more conventional computer technology art unit instead of business methods.  The prospects of facing an unresolvable § 101 rejection will then be greatly reduced.

 

[1] Nowotarski, Mark “Surviving Alice in the Finance Arts,” Bilskiblog, 30 January 2017 and Nowotarski, Mark “Surviving Alice in the e-Commerce Arts,” Bilskiblog, 17 May 2017.

[2] Alice Corp. Pty. Ltd. v. CLS Bank International, 134 S. Ct. 2347 (2014)

[3] Alice, 134 S. Ct. at 2355.

[4] Alice, 134 S. Ct. at 2355 (quoting Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289, 1294 (2012)).

[5] The business method work groups are 3620, 3680 (both e-Commerce) and 3690 (Finance).  Each work group is divided into individual art units and each art unit is assigned patent applications in a given field of business method technology.  Business Cryptography, for example, is assigned to art unit 3685. 

[6] Sachs, Robert “Alice Storm Update for Q1 2017,” Bilksiblog, 6 April 2017.

[7] We are only looking at ex parte appeals of examiner rejections.  We are not looking at inter partes post grant proceedings.

[8] There are about 25 appeals judges that sit on business method appeals panels.  Each appeal is heard by a panel of three judges.  One judge authors the opinion.

[9] The board may enter a new ground of rejection when it feels that one or more claims are not allowable despite their overturning of the examiner’s rejection.  This new ground of rejection must be overcome by the applicant before the case will be allowed.

[10] The PTAB will occasionally put footnotes in decisions where there is an issue related to patentability that it feels the examiner should consider, but presumably they do not have enough information before them to enter a new grounds of rejection.

[11] Example of Alice footnote from ex parte Arash Bateni, application serial number 12/649,072, decided 27 October 2015: 

“Should there be further prosecution of this application (including any review for allowance); the Examiner may wish to review the claims for compliance under 35 U.S.C. § 101 in light of the recent guidance on patent eligible subject matter. See 2014 Interim Guidance on Patent Subject Matter Eligibility, 79 Fed. Reg. 74618 (Dec. 16,2014); "Preliminary Examination Instructions in view of the Supreme Court Decision in Alice Corporation Pty. Ltd. v. CLS Bank International, et al.," Memorandum to the Examining Corps, June 25, 2014; see also July 2015 Update on Subject Matter Eligibility, 80 Fed. Reg. 45429 (July 30,2015).”

[12] 37 CFR 1.198   Reopening after a final decision of the Patent Trial and Appeal Board.

“When a decision by the Patent Trial and Appeal Board on appeal has become final for judicial review, prosecution of the proceeding before the primary examiner will not be reopened or reconsidered by the primary examiner except under the provisions of §1.114 or §41.50 of this title without the written authority of the Director, and then only for the consideration of matters not already adjudicated, sufficient cause being shown.”

[13] I have not seen any reversals of pre Alice 101 rejections in the business method work groups where the board applied the Alice/Mayo test to reverse the examiner.  The board simply stated that the examiner had failed to make a prima facie case or the examiner used the wrong test (e.g. Machine or Transformation test).  Outside of the business method work groups, however, I have found PTAB reversals of pre Alice 101 rejections where the board did apply the Alice/Mayo test to reverse an examiner. See 12/695145 and 11/820364 for examples.

[14] Quinn, Gene “The Impotence of the Patent Trial and Appeal Board,” IPWatchdog, 17 July 2016.

[15] About 70% of appealed post Alice rejections have a § 101 rejection under the Alice/Mayo test.

[16] Patent Application Information Retrieval System https://www.uspto.gov/patents-application-process/checking-application-status/check-filing-status-your-patent-application