Bilski Blog

#AliceStorm: April Update and the Impact of TC Heartland on Patent Eligibility

The Supreme Court’s recent decision on patent venue, TC Heartland LLC v. Kraft Foods Group Brands, may actually turn out to be a good thing for patentees when it comes to Section 101.  But before we get to that, let’s do the AliceStorm numbers:

The overall Alicestorm index of percentage of Section 101 ineligibility outcomes in the federal courts is up 0.6% from March, at 67.6%.   The Federal Circuit contributed the most to the increase, issuing eight separate decisions finding patent eligible subject matter, with six of these decisions being Rule 36 affirmances.  The number of motions on the pleadings index are up as well, by 1.2% from March, at 63.3%. 

Turning to the monthly numbers, after the record number (35) of Section 101 decisions in March 2017 things returned to “normal” with just 15 decisions:

The bump in March contributed to a marked increase in the three-month average of ineligible decisions, jacking it up from 62% to 73%.  But beneath that, we can also see that the raw number of ineligible decisions in April (13) is about the same as the high marks since August 2016, and that the raw number of eligible outcomes (2) is at its lowest level since October 2015.  This puts the ratio of ineligible to eligible decisions in April 2017 at 6.5, the highest it’s been since June 2015.  Whether this signals a real uptick in favor of patent defendants or just a temporary blip in the overall downward trend in ineligible outcomes remains to be seen.

Turning to the motion summary:

Heads Up: The Federal Circuit Sees Patent Eligibility in Knowing Which Way to Look

By Robert R. Sachs

The most significant Federal Circuit decision in March was Thales Visionix, Inc. v. United States, another case finding eligible subject matter.  What distinguishes this case—and demonstrates the inherently subjective I-know-it-when-I-see-it nature of the Alice test—is the extraordinary breadth of the claims.  Consider claim 22, a single-step method claim:

22. A method comprising determining an orientation of an object relative to a moving reference frame based on signals from two inertial sensors mounted respectively on the object and on the moving reference frame.

The court held that this claim was patent eligible, because it was not directed to an abstract idea in Step 1 of the Alice test: 

We hold that the ’159 patent claims at issue in this appeal are not directed to an abstract idea. The claims specify a particular configuration of inertial sensors and a particular method of using the raw data from the sensors in order to more accurately calculate the position and orientation of an object on a moving platform.  

This statement and the focus on the particularity of the claim is at odds with actual claim language and with the way the Alice test is normally applied.  The claim says nothing “particular” about the configuration other than one sensor is mounted on the object and one on the moving reference frame.  That’s it.  No limitation of how mounted, how far or near each other, or they are oriented with respect to each other, or other physical parameters.  You could have one sensor mounted on an “object” (e.g. a sensor worn on the wrist of a passenger) in the front compartment of a mile-long train (“moving reference frame”), and the other sensor mounted in the caboose.   Indeed, there’s nothing in the claim that even requires the object to be in or on the moving reference frame.  So one sensor could be mounted at the train station while the train with the passenger goes by.  And talk about abstraction: “moving reference frame.”  That’s anything that moves.  The court seems to be relying on something more about the arrangement of the sensors than is in the claims themselves, given how they quote Diehr: “This arrangement is analogous to the claims in Diehr, which required the temperature measurement “at a location closely adjacent to the mold cavity in the press during molding.”  But Diehr has specific claimed spatial relations--"closely adjacent"-- Thales has none.  This suggests that the court was implicitly performing claim construction—which generally should happen before patent eligibility, but which the court has repeatedly kicked to the curb as a predicate of the Alice test.

Nor is there any limitation on how orientation is determined, other than “based on signals.” There is no limitation on the kinds of signals, or how the determination is done.  In other words, this simply claims the result of getting an orientation when you have two sensors, one mounted on some object and one mounted on a moving reference frame. This “claiming the result” and the absence of “how” are precisely the features that the court has used in other cases to find ineligible subject matter—even with claims vastly more specific. 

Consider Vehicle Intelligence:

None of the claims at issue are limited to a particular kind of impairment, explain how to perform either screening or testing for any impairment, specify how to program the “expert system” to perform any screening or testing, or explain the nature of control to be exercised on the vehicle in response to the test results...

With a bit of obvious word substitution, this language applies directly to Thales’ claim.

Or consider Electric Power Group, which had an extremely detailed claim.  Brushing such details aside, the court stated:

The claims, defining a desirable information-based result and not limited to inventive means of achieving the result, fail under § 101.

…

The focus of the asserted claims, as illustrated by claim 12 quoted above, is on collecting information, analyzing it, and displaying certain results of the collection and analysis.

…

The advance they purport to make is a process of gathering and analyzing information of a specified content, then displaying the results, and not any particular assertedly inventive technology for performing those functions. They are therefore directed to an abstract idea.

…

Nothing in the claims, understood in light of the specification, requires anything other than off-the-shelf, conventional computer, network, and display technology for gathering, sending, and presenting the desired information...

The Electric Power court takes­ pains to point out that simply determining the results of information gathering (i.e. obtaining signals) is patent ineligible.  That’s a direct read on “determining an orientation of an object relative to a moving reference frame based on signals.”  How is it that “off-the-shelf” hardware failed to save the claim in Electric Power Group, but was apparently irrelevant in Thales, where the inertial sensors were off-the-shelf as well?

The answer is that the Thales court said that the method claim was not abstract because of the “unconventional configuration of sensors.” Wait: the unconventional arrangement analysis is considered in Step 2, not Step 1.  That’s what the court held in BASCOM:

As is the case here, an inventive concept can be found in the non-conventional and non-generic arrangement of known, conventional pieces.

And it’s not clear that this even applies to Thales’ method claim, which recites the single step of “determining.”  The arrangement of the sensors is only inferentially claimed, as part of the environment itself.  In BASCOM the method claim included limitations that actively, not inferentially, performed the filtering operations at the unconventional locations.

Putting this all together, the court just as easily could have issued this ruling, and found the claim 22 ineligible:

First, we consider whether the claim is directed to an abstract idea.  Claim 22 recites a single step of “determining the orientation of an object relative to a moving reference frame.”  Humans have been determining the orientation of objects relative to moving reference frames for time immemorial.  When we watch the faces of passengers go by in a moving train, we determine their orientation (which way they are looking).  When the cowhand on horseback watches how her cattle look at her sheepdog, she determines their orientation as well.  Indeed, one could say that the human brain is so well adapted to determining the orientation of objects, that we do not even notice that we do it all the time.  See, Peer et al, “Brain system for mental orientation in space, time, and person,” Proceedings of the National Academy of Sciences of the United States of America, vol. 112, no. 35 (Sept. 2015) (“Orientation is a fundamental mental function that processes the relations between the behaving self to space (places), time (events), and person (people).”). Thus, determining the orientation of an object relative to a moving reference frame is an abstract idea itself, and a mental step long practiced by humans.  As there is only this single step in claim 22, the claim is unmistakably “directed to” this abstract idea.

We turn then to Step 2.  The Supreme Court has held that merely limiting an abstract idea to a particular technological environment does not transform an otherwise ineligible concept into an eligible one.  Claim 22 only inferentially claims the use of the inertial sensors, at best limiting the single step of the claim to a rather generic, technological environment as opposed to a human one.  That alone cannot contribute an inventive concept.

Thales argues that the non-conventional arrangement of the inertial sensors provides the inventive concept.  That is true, however, only when the arrangement itself contributes to the specifically claimed functional operation of the claim.  In BASCOM, we held that arrangement was unconventional precisely because the functionality of the filtering was performed at the unconventional location (“The inventive concept described and claimed in the ’606 patent is the installation of a filtering tool at a specific location, remote from the end-users, with customizable filtering features specific to each end user.”)  Here, nothing happens at the location of sensors themselves: they operate exactly the same way and provide the same types of signals that they would in any conventional arrangement.  Thus, the unconventional arrangement here does not contribute an inventive functionality.

Finally, we note that claim 22 fails to specify any inventive concept in “how” the determination is made, other than to say “based on signals.”   In McRO we explained that in Step 2, "a patent may issue for the means or method of producing a certain result or effect, and not for the result or effect produced. We therefore look to whether the claims in these patents focus on a specific means or method that improves relevant technology." (emphasis added). But merely making the determining "based on" the signals does not provide a "specific means or "method" as required.  We do not read claim 22 as limited to the specific equations or mathematical framework in the specification.  Even if we did, these equations appear to be nothing more than laws of nature, and thus cannot contribute to the inventive concept.  See, Mayo, Flook. The absence of limitations to particular ways of making this determination or even particular types of signals clearly demonstrates the lack of an inventive concept beyond the merely abstract idea itself.  In other words, given inertial sensors (which themselves are conventional), how else would one determine an orientation except “based on signals”? See, Vehicle Intelligence (“But neither the claims at issue nor the specification provide any details as to how this “expert system” works or how it produces faster, more accurate and reliable results.”). In McRO we held that "The abstract idea exception has been applied to prevent patenting of claims that abstractly cover results where it matters not by what process or machinery the result is accomplished."  Here, we find that the claim 22 covers the result of determining the orientation of an object relative to a moving reference frame where it matters not by what process or machinery that result is accomplished.

This analysis further shows that Thales’ claim risks preempting the abstract idea itself, since there is no other way to make this determination of orientation. In this regard, we find the Supreme Court's decision in O'Reilly v. Morse remarkably on point in their framing of the preemption problem. The Court found that Morse's "claim is too broad, and not warranted by law" because:

It is impossible to misunderstand the extent of this claim. He claims the exclusive right to every improvement where the motive power is the electric or galvanic current [the signals are from inertial sensors mounted on an object and a moving reference frame], and the result is the marking or printing intelligible characters, signs, or letters at a distance [determining the orientation of the object based on the signals].

If this claim can be maintained, it matters not by what process or machinery the result is accomplished. For aught that we now know, some future inventor, in the onward march of science, may discover a mode of writing or printing at a distance [determining an orientation of an object] by means of the electric or galvanic current [inertial sensors], without using any part of the process or combination set forth in the plaintiff's specification. His invention may be less complicated -- less liable to get out of order -- less expensive in construction, and in its operation. But yet if it is covered by this patent, the inventor could not use it, nor the public have the benefit of it, without the permission of this patentee.

Like the Morse Court, we find claim 22 not warranted in law. 

Now, do I believe this is the correct analysis? To be clear I do not (so don’t get any funny ideas about quote mining me).  I only elaborate it to demonstrate that while patent eligibility may no longer depend on the “clever draftsman,” it can certainly depend on the clever jurist. 

I think that the court here saw what it wanted to see: a helmet-mounted display used by jet fighter pilots:

rather than actual scope of the claim (almost too simple to draw):

The context of Thales’ invention was sufficiently “technological” and distinctive from the court’s everyday experience with computers and software that collect and display information that it colored the court’s perception of the claims and the Alice analysis.

Trading Technologies Decision Stands, Federal Circuit Denies CQG Petitions for Rehearing

By Robert R. Sachs

As many of you know, the Federal Circuit’s decision in Trading Technologies was the first time a graphical user interface had been found patent eligible by the Federal Circuit.   The defendant CQG moved for both panel rehearing and enbanc rehearing.   

My client SHzoom filed a request to make the Trading Technologies decision precedential.  CQG attempted to leverage that motion as a further reason for the case to be reheard, arguing in their respose that “SHzoom’s Motion requesting that the panel’s decision in this case be made precedential should be denied. Its arguments further illustrate why CQG’s Petition for rehearing en banc should be granted.”

The Federal Circuit did not bite and today denied CQG’s petitions for rehearing.  We’ll likely see their decision on SHzoom’s motion shortly.  

Judge Mayer’s Concurrence in IV Shows the Problem with Judicially Created Exceptions

By: Stuart P. Meyer

The press is all abuzz with reactions to Judge Mayer’s concurring opinion bluntly stating that “claims directed to software implemented on a generic computer are categorically not eligible for patent.”  Intellectual Ventures I LLC v. Symantec Corp. et al., 2015-1769, -1770, -1771 (Fed. Cir. Sept. 30, 2016).

Here, I’ll just explore one aspect of this remarkable opinion—the reasons that judicially created exceptions are dangerous. As we have previously detailed on this blog, the precipitous drop-off in PTO allowances and Article III court confirmations of validity are not driven by the literal text of Section 101 or other portions of the patent statute, but instead by judicial interpretations of exceptions that the courts deem must be read into the Patent Act. Many commentators have observed that such judicially created exceptions may be an extremely convenient way to sidestep “bad” patents but are not needed, given that the provisions of sections 102, 103 and 112 would be just as effective in addressing vague or overbroad patent claims. Single-paragraph district court explanations of why particular patents claim nothing more than an abstract idea now regularly invalidate patents at the pleadings stage. Judge Mayer’s concurrence adds fuel to this fire. A few examples from his concurrence are illustrative.

Judge Mayer starts his concurrence not with the categorical condemnation of software patents, but with a First Amendment  argument, saying that “Patents, which function as government-sanctioned monopolies, invade core First Amendment rights when they are allowed to obstruct the essential channels of scientific, economic, and political discourse.” His concern is a valid one, but Congress did not agree with it in framing the patent statute and the courts have not previously seen it that way either. Indeed, many patents in traditional art areas could be said to obstruct such “essential channels,” in various ways. In one sense, excluding a community from building a patented telephone system could be seen as such obstruction. In another aspect, one could not undertake meaningful discussion of the stability of a phase-locked loop circuit under various temperature or supply voltage variations without actually making and using such a circuit. One cannot discuss the durability of a new pitman arm on a truck’s steering system without using one. So patents by their very nature can have varying impacts on discourse.

Judge Mayer’s concurrence characterizes the claims at issue as “disclosing no new technology” and “speak[ing] in vague, functional language.” Assuming he is correct, that is indeed problematic, but such concerns are directly addressed elsewhere in the statute. He concludes on this point saying that “Essential First Amendment freedoms are abridged when the Patent and Trademark Office (‘PTO’) is permitted to balkanize the Internet, granting patent owners the right to exact heavy taxes on widely-used conduits for online expression.” Changing only a couple of words, he could similarly condemn patents directed toward printing, radio and television systems.

His statement that “Section 101 creates a ‘patent-free zone’ and places within it the indispensable instruments of social, economic, and scientific endeavor” could be used to place almost any significant invention within that zone. In fact, the more significant the invention, the less likely it could avoid this “patent-free zone.” Many have previously observed that Congress drafted Section 101 using inclusive rather than exclusive language. Given that, Judge Mayer appears to be arguing that the patent statute on its face is unconstitutional. Under what authority are courts empowered to amend such a statute by inserting exceptions, even in an attempt to “save” the statute?

As a segue to his primary point, Judge Mayer opines that, “Most of the First Amendment concerns associated with patent protection could be avoided if this court were willing to acknowledge that Alice sounded the death knell for software patents.” Judge Mayer does in fact quote the most relevant portion of Alice for support, but that language says only that “mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention.” The Supreme Court cases from Bilski to Alice go out of their way to avoid the categorical condemnation of software patents, which seems appropriate given the multiple references in the patent statute that would be hard to reconcile with such condemnation (see, e.g., the Court’s discussion of Section 273 in Bilski, 561 U.S. at 607-608, and its corresponding conclusion that “the Court once again declines to impose limitations on the Patent Act that are inconsistent with the Act’s text, 561 U.S. at 612).

Nonetheless, Judge Mayer urges that “all software implemented on a standard computer should be deemed categorically outside the bounds of section 101” (emphasis added). He makes no mention of how such a position can be squared with Bilski, or how his view of what should be can be implemented judicially rather than by Congress.

He goes on to state that the “central problem with affording patent protection to generically-implemented software is that standard computers have long been ceded to the public domain.”  Such an approach could just as easily be applied to other inventions. To give an example, one could just as easily say that since items found in a hardware store “have long been ceded to the public domain” (however one wants to interpret that), one should not be able to patent a mechanical invention created just from parts available at a hardware store.

It is at the end of his opinion that we see the policy positions Judge Mayer is really advocating.  He cites four “insurmountable problems” with software claims. First, he asserts that “their scope is generally vastly disproportionate to their technological disclosure.” Again, it seems that other sections of the patent law can ably address problems with inadequate disclosure.

Second, he asserts that software patents “provide incentives at the wrong time” because “they are typically obtained at the ‘idea’ stage, before any real inventive work has been done.” The patent statute’s requirements regarding constructive reduction to practice can readily be applied to address applications that exhibit such problems. And didn’t Congress intentionally provide incentives for inventors to submit patent applications as soon as possible after such reduction to practice?  That’s why the statutory bars are there.

Third, he bluntly states that, “Yet another intractable problem with software patents is their sheer number.” The point is well taken that a patent “thicket” may make it difficult for later entrants to the market, but this is by no means an issue unique to software-implemented inventions. Many industries have established players with thousands of patents in their portfolios, and there is no policy deliberation suggested by Judge Mayer that would support singling out software-implemented inventions alone—indeed these are exactly the considerations that Congress is empowered to undertake in crafting legislation.

Finally, Judge Mayer says that “generically-implemented software invariably lacks the concrete borders the patent law demands.” He provides no explanation as to why the requirements of section 112 are ill-equipped to address this perceived concern.

One of the most common concerns about our government—voiced from all parts of the political spectrum—is that Congress gets too little done. Thus, the worry that a Congressional “fix” to our patent system is not likely anytime soon is understandable. However, problems caused by any real or perceived Congressional dysfunction may be dwarfed by allowing courts to re-write the Patent Act.  If there is ever an area where the balancing of interests calls for the legislative process to be involved, it is in our intellectual property system. One person’s view—or even one Court’s view—of a good solution, however well-intentioned, is not the right approach.

Related articles

Bilski Blog: More Lessons From McRo

Did You Mean to Claim a Function? How the USPTO Applies Section 112(f) to Software Patents

Federal Circuit Creates New (non-Alice) Hurdle for Software Patents

MAZ Encryption Technologies: The Proper Way to Decide a Rule 12(c) Motion for Ineligible Subject Matter

By: Robert R. Sachs

Given the volume of district court decisions regarding Section 101, I typically don't find ones that stand out enough to warrant discussion. But last week's decision by Judge Stark in MAZ Encryption Technologies LLC v. Blackberry Corporation is an exception. The opinion demonstrates a rigorous application of the requirements of a Rule 12(c) motion for judgment on the pleadings, as well as an integrated approach to the Mayo test. The opinion is noteworthy as well because Judge Stark is no pushover on Section 101: Before MAZ he granted six of nine Section 101 motions (including two 12(b) motions) invalidating over a dozen patents. Judge Stark also wrote the opinion invalidating the patents in the Federal Circuit's Mortgage Grader case.  

MAZ's invention solved the problem of integrating encryption into electronic document management system (EDMS). The summary of invention of MAZ's patent provides an overview:

In the encryption method, after a user issues a “close,” “save” or “save as” command for a document, the command is translated into an event, and a crypto module traps the event. The crypto module then obtains an encryption key value and encrypts the document using the encryption key value. With the document encrypted, the crypto module passes control to an electronic document management system which executes the “close,” “save” or “save as” command.

In MAZ, Judge Stark follows the methodologies set out in Enfish and McRo, focusing in step one of the Mayo test on the improvement provided by the invention. Stark correctly states that on a motion to dismiss the court cannot consider any evidence other than the pleadings and the patent (and public records such as the file history). And, for purposes of the motion, the court has to accept as true any statements made in the patent specification, not arguments by counsel.  

However, on the record properly before the Court on Defendant's Motion - which is a motion for judgment on the pleadings - the Court must take the specification's statements about the purported invention to be true. The Court is not free to accept Defendant's contrary attorney argument that claim 31 is directed to a "conventional" way of transparent encryption.

Thus, Judge Stark looks to the patent specification’s discussion of how the invention is an improvement over the prior art, in particular language identifying the problems in art, again accepting these statements as true. 

The patent's specification describes problems associated with "typical" prior art encryption systems, such as incompatibility with EDMS systems and general difficulty of use. (See '681 patent at 3:54-4:9)

This approach follows Enfish which likewise relied on the  specification’s disparagement of the prior art. Here is relevant text from the MAZ patent:

The biggest obstacle to adoption of any type of encryption system has been ease of use. Typical encryption systems are very cumbersome. They require a user to interrupt their normal work flow, save their clear text document, activate the separate encryption software, and save the cipher text document under a different name. Where the subject document is ordinary e-mail contents, the process is especially cumbersome, because the clear text must first be created in a separate application, then encrypted, then attached to the e-mail message.

A major concern in computing today is “total cost of ownership,” or TCO. TCO recognizes that while a program might be inexpensive (or even free in the case of PGP for non-commercial use), there are significant costs in using the software. This includes the cost of installation, training, lost productivity during use and from bugs, and maintenance.

Even where one of the typical encryption systems might satisfy a user's TCO needs, they may not even be an available option. For example, typical EDMSes are self-contained and are not compatible with typical encryption systems.

Judge Stark relied on these statements to find that the claims were directed to an encryption method that enabled encryption within an EDMS, without disrupting the user's workflow thus solving a technological problem. 

Next, Judge Stark rejects the five different "abstract ideas" alleged by the defendants: "Regardless of whether Defendant's five articulations are viewed as different or the same, they each run afoul of the Federal Circuit's guidance in Enfish that courts should not "oversimplify" key inventive concepts or "downplay" an invention's benefits in conducting a step-1 analysis."  

To determine whether the claim is directed to an abstract, Judge Stark then turns to the specific claim limitations and pays particular attention to the limitations that were added to overcome the prior art. The claim before the court was claim 31, which had been amended during re-examination to add the following two limitations relative to the original claim, as shown here:

31.  A method of encrypting an electronic document which is open in an application program running in a general purpose computer, the general purpose computer including a display, a user input device, a crypto module and a processor, the method comprising:

providing plural documents having respective names providing a first table having the names of encrypted documents for each of the names of encrypted documents in the first table, key names associated with the encryption key values for the encrypted documents

(a) from within the application program running in the general purpose computer, a user issuing one of a "close," "save" or "save as" command for the document using the user input device;

(b) automatically translating the command into an event;

(d) the crypto module automatically trapping the event;

(d) the crypto module determining if the document should be encrypted using the first table, and if so then automatically obtaining an encryption key value by retrieving a key name associated with a name of the selected document from the first table and retrieving the encryption key value associated with the key name from a second table, the second table having at least one encryption key value and at least one key name respectively associated with one of the encryption key values

(e) the crypto module automatically encrypting the document using the encryption key value;

(f) the crypto module automatically passing control to an electronic document management system; and

(g) the electronic document management system executing the issued "close," "save" or "save as" command; whereby the electronic document is automatically encrypted.

Judge Stark's analysis:

Whether at step one or step two of the Alice test, in determining the patentability of a method, a court must look to the claims as an ordered combination, without ignoring the requirements of the individual steps." McRo, 2016 WL 4896481, at *7 (emphasis added). Significant "individual steps" in claim 31 were added during reexamination, including the above-described  use of tabular association of documents with "key names" and "key names" with "key values.''  (See D.I. 77 at 13-14) (summarizing exchange between applicant and examiner regarding "key name <-> document association" limitation added to overcome obviousness rejection) These limitations were added to distinguish the claimed invention from the "key­ directory association" found in the prior art and are evidence that claim 31 is "directed to a specific improvement to the way computers operate" rather than an abstract idea. Enfish, 822 F.3d at 1336. Defendant's broad articulations of abstract ideas do not capture what claim 31 is "directed to" because they do not take into account the two separate tables used to distinguish claim 31 over the prior art. (emphasis added)

Judge Stark is not holding that the claim is eligible merely because it was found non-obvious. Rather, he is holding that in deciding what the claim is directed to, it is necessary to consider the elements which distinguish the invention from the prior art because these are the elements that define the improvement when the claim is considered as a whole.  To be clear, this is not Flook's point of novelty approach:  Judge Stark is not looking for the inventive concept here, he is looking for an identifiable improvement as stated by the language of the claims.  This approach is exactly correct and should be followed by other courts and patent examiners.

Judge Stark also rejects the defendant's argument that the claim is directed to an abstract idea because that there is a human analogue for the claims, "the storage and utilization of filenames, key names, and key values recited in the patent claims is no different substantively than how an old hotel would store and keep track of the keys to its patrons' rooms."  The court's response to this argument:

Defendant's analogy is unpersuasive. It fails to capture the key inventive aspect touted in the '681 patent: handling encryption operations without requiring user input, that is, "transparently." ('681 patent at 7:58-62)8  In Defendant's analogy, the hotel clerk manually performs each operation.

and

In addition, the entire exercise of comparing the invention in claim 31 to a human- executable series of steps is relatively unhelpful in this particular case, because the specification of the '681 patent so clearly identifies the claimed invention as "improv[ing] an existing technological process ." Alice, 134 S. Ct. at 2358. Specifically, claim 31 is directed to a specific way of transparently encrypting data without the need for user input, eliminating interruption and inefficiency -as well as human action - in a technology process. Hence, claim 31 is distinguishable from claims that have been found to have human-executable analogues.

It is important to note that the technical improvement in MAZ's invention was not a better encryption algorithm that was faster or more efficient or otherwise "improved" the objective performance of the computer. Rather, the improvement that Alice acknowledges is to "improve the functioning of the computer itself" or, as phrased by the Federal Circuit in Enfish, "whether the claims are directed to an improvement to computer functionality." Functionality is broader than simply an objective performance metric such as improved speed, less memory or other factors. We see this in McRo where the invention made it easier to for animators to lip sync their characters to the dialogue. Similarly in MAZ, the improvement was in usability, making it easier for users to encrypt documents without leaving their workflow within the EDMS. Indeed, given that MAZ's method worked by intercepting requests to the EMDS close or save documents ("the crypto module automatically trapping the event"), and then encrypting them on the fly, it necessarily slowed down the computer: users had to wait well the application encrypted the document (and wait again for the document to be decrypted each time it was opened).  If you use a document management system that does on-the-fly encryption and decryption of documents, then you have experienced this issue. But the tradeoff for reduced objective performance was improved ease of use and better overall security. In short, a problem in usability of a computer is a technological problem, and solutions that improve usability are technological solutions. 

Finally, Judge Stark relies on a preemption analysis in step one, and again ties this to the specific amendments to claim 31 that overcame the prior art. Judge Stark notes the amended claims do not preempt other ways of achieving the solution.  

The specific implementation in claim 31 raises fewer preemption concerns than the broader, original claims of the '681 patent which were rejected during reexamination.

Significantly, Judge Stark treats preemption as a question of fact that requires evidence, relying on McRo:

Defendant has not produced any evidence to support any preemption concerns.  Consequently, the preemption consideration confirms the Court's conclusion at step 1 that claim 31 is not directed to an abstract idea. See [McRo]. ("There has been no showing that any rules-based lip-synchronization process must use rules with the specifically claimed characteristics .").

I think Judge Stark's approach is a model for how the district courts should handle Rule 12(c) (and by extension, Rule 12(b)(6)) motions both on a procedural and substantive level. Rather than employing empty formalisms and strained analogies, the court focuses on what is claimed, the nature of the improvement and whether the claim actually preempts the purported abstract idea. This approach should likewise be followed by examiners at the USPTO.

For patent prosecutors, MAZ, along with DDR, Enfish and McRo, suggests the value of discussing in the patent application specific problems in the prior art and linking aspects of the claimed invention to their solutions.  The general trend over the past several years has been to say less in the background and summary of invention.  That is still good advice, and these cases do not contradict that view, as the underlying patents provided very short and concise statements of the prior art problem, not lengthy expositions. Prosecutors that draft only a trivial background and little or no summary of the invention may end up removing an important basis for establishing eligibility and defeating an early dispositive motion.  If the motivation for this approach is the risk that the background and summary will narrow the scope of the claims, I would say better a slightly narrowed patent than none at all. 

More Lessons From McRo

By: Robert R. Sachs

My previous blog on McRo focused on the direct aspects of the decision, but there are other excellent points that the court makes and that can be derived from the opinion, and that should play an important role in how the courts and the USPTO handle the Mayo test.

First, the mathematical nature of the invention was not fatal; it was vital. One of the favorite buzz-saw arguments for finding ineligibility is that claims for computer-implemented inventions recite—either directly or indirectly—mathematical operations. This is about as insightful as stating that patent claims in U.S. patents are written in the English language. The invocation of the dreaded mathematical algorithm Jabberwocky and talismans of Benson and Flook often convince jurists that the claims are abstract.  The McRo court did not run scared here. Quite the contrary, the McRo court relied on the underlying mathematical nature of the rules to demonstrate non-preemption: “Defendants concede an animator’s process was driven by subjective determinations rather than specific, limited mathematical rules. . . . It is the incorporation of the claimed [mathematical] rules, not the use of the computer, that “improved [the] existing technological process” by allowing the automation of further tasks.” This holding should be heeded by the courts and the USPTO to not treat all mathematically implemented inventions as necessarily abstract.

Second, the improvement need not be in the functioning of the computer itself. McRo’s invention did not make the computer operate any faster, use less memory, or improve any other objective parameter of the device. Rather, the improvement was in subjective dimensions. First, the invention made it easier for human animators to animate 3D characters, thus improving the experience of the computer by the user, the animator. Humans have been drawing cartoons and animating images for well over 200 years, using various mechanical devices. Early film animation was done by drawing images, using pens and pencils and paint brushes as tools for this purely artistic purpose. Computer animation is simply the latest tool for this purpose, and McRo’s invention made this tool easier to use by workers in the field. Thus, McRo supports the proposition that improvements in computer tools that make them easier to use (e.g., user interface inventions) or that save users effort or time or otherwise improve their performance, all are sufficient “improvements” under Mayo.

Next, the invention specifically improved the result as experienced by the viewer by making the animated characters appear to speak more naturally, an entirely aesthetic and subjective improvement. This is consistent with the overall nature of human inventions, which is to create desirable solutions to human wants and needs, including aesthetic and artistic ones. McRo’s invention is only a means to an end, the creation of artistic works. It would have no value to animators if what animators did was of no interest to anyone. It’s because animated films are desired that animators create them, and McRo’s invention makes those end products more desirable still. In this way, McRo extends DDR. The value of the invention in DDR was entirely commercial, to improve the sales and customer retention of online merchants, as its technological contribution was trivial. The invention in DDR did not improve “how” the Internet or ecommerce sites operated in any technical way. Like McRo, DDR’s invention operated at two levels. First, it improved the design framework for creating such sites, thus an improvement in the tools used to create such sites. Second, it improved the end user experience of those sites, making users stay on the sites longer and resulting in improved customer satisfaction.

Third, the court rejected, though it did not mention, the defendant’s mental steps argument, that applying the rules to the transcript was “a simple mathematical operation that can be performed in a person’s head or using a pencil and paper.” That mathematical operations could be done mentally is —like my point above about claims being in the English language—a distraction, not a meaningful argument. By definition, every algorithm that is performed by a computer was first invented by a human who thought up the algorithm and worked it out. I discussed this issue in great detail in my articles on The Mind as Computer Metaphor. The court also rejected, without even pausing to address, the defendant’s primary (and frankly silly) argument that “there can be little question that the idea that the human mouth looks a certain way while speaking particular sounds is a pre-existing fundamental truth” that “exists in principle apart from any human action.” If you think that’s a plausible argument, see my blog on laws of nature.

Fourth, eligibility does not require tangibility. The McRo defendants argued that a “stream of output morph weight sets” is not a tangible product. The court nixed this argument: “While the result may not be tangible, there is nothing that requires a method ‘be tied to a machine or transform an article’ to be patentable.” Bilski, 561 U.S. at 603 (discussing 35 U.S.C. § 100(b)). The concern underlying the exceptions to § 101 is not tangibility, but preemption.” Examiners continue to reject claims on the grounds that the claims only produce intangible data. This basis of rejection is clearly incorrect.

Fifth, the court did not engage in a reductionist claim analysis.  In step 2 of the Mayo test, many courts and patent examiners simply look to the verbs recited in the claims—receiving, storing, generating, determining, displaying, transmitting, etc. –and state that these functions are entirely conventional and well understood, and therefore cannot be “inventive.”  This approach wipes out all software claims, since there is no way to claim the operations of a computer except by reciting steps that a computer can perform. As noted by the court in Oplus Techs. Ltd. v. Sears Holding Corp., “All software only ‘receives data,’ ‘applies algorithms,’ and ‘ends with decisions.’ That is the only thing software does. Software does nothing more.” That’s why you’ll never see a patent claim for a software process that recites slicing, dicing, shaking, and baking.  The late judge Mariana Pfaelzer recognized this in California Institute of Technology v. Hughes Communications, stating that this “simplistic” approach “would eviscerate all software patents, a result that contradicts Congress’s actions and the Supreme Court’s guidance that software may be patentable if it improves the functioning of a computer.” The reductionist approach further misses the point because it fails to consider the claim limitations as a whole and as a combination.  Had the McRo court done this, it would have been compelled to hold that there was no inventive concept since all of the claim verbs were similarly “conventional”: obtaining, generating, evaluating, and applying.  That the court did not use this approach, but instead focused on the limitations as a whole and how they worked together is instructive.  Again, the court made this plain:

Whether at step one or step two of the Alice test, in determining the patentability of a method, a court must look to the claims as an ordered combination, without ignoring the requirements of the individual steps.

The requirements of the individual steps means not just the verbs (the steps) but the specific details that limit the scope of each step to particular data and how it is structured (e.g. the details of McRo’s rules) and how it is applied (e.g. how the rules were used to evaluate the phoneme sequence).   The USPTO should instruct examiners to follow this example.

All that said, there are a couple of issues that McRo should have addressed but did not.  First, the court could have further clarified that the preemption analysis should be from the perspective of a person of ordinary skill in the art (POSITA), and not a lay court. Using POSITA makes the analysis objective, technology neutral, and adaptive to changes in technology over time. POSITA is the only objective framework in the patent law and is already employed for claim construction, enablement, written description, obviousness, and the doctrine of equivalents. My partner Dan Brownstone and I set forth this theory, what we called Objective Preemption, in our amicus brief in Alice.

Finally, McRo should have distinguished the Federal Circuit’s decision in SmartGene v. Advanced Biological Labs. There the court held that a rule-based expert system for selecting therapeutic treatments for patients with particular diseases was ineligible. The claims recited the use of “a second knowledge base comprising a plurality of expert rules for evaluating and selecting a therapeutic treatment regimen for said disease or medical condition.” The court held “the claim at issue here involves a mental process excluded from section 101: the mental steps of comparing new and stored information and using rules to identify medical options.” The court attempted to limit the reach of this holding by stating “Our ruling is limited to the circumstances presented here, in which every step is a familiar part of the conscious process that doctors can and do perform in their heads,” and designating the opinion as non-precedential. Nonetheless, district courts and more significantly the patent examiners, have read SmartGene as broadly holding that comparing old and new information and using rules to identify options—in any context at all—is an ineligible abstract idea, regardless of whether it was already done by humans in the relevant field. As I have shown, SmartGene has been cited by patent examiners more than any other Federal Circuit or Supreme Court opinions except for Mayo and Alice. (As of today, SmartGene has been cited over 13,000 times; so much for a case being limited to its facts).*

The McRo panel should have distinguished SmartGene and put to an end its overzealous application. Specifically, the panel could have simply clarified two points. First, the claims in SmartGene only stated that there were “expert rules for evaluating and selecting a therapeutic treatment regimen for said disease or medical condition,” but did not state anything about the details of the rules other than their purpose “for evaluating. . . .”   By contrast, the rules in McRo were claimed as encoding a broad, but still specific relationship, to “define output morph weight set stream as a function of phoneme sequence and time of said phoneme sequence.” Second, as discussed above, McRo’s rules were not the rules used conventionally by animators, whereas the court believed that the rules in SmartGene were the very rules normally used by doctors in their practice.  The court has frequently characterized its holdings in Ultramercial, TLI, Content Extraction, and other "ineligible" cases and it should do so with SmartGene.

---------

*In full disclosure, I was counsel of record for the patentee Advanced Biological Laboratories.  Feel free to blame some of this mess on me.

AliceStorm in the Dog Days of Summer

By: Robert R. Sachs

Over the past two months, the trends I've discussed in my previous blogs on AliceStorm have continued and become more entrenched. In particular, the Federal Circuit has been quite active, issuing nine decisions since late June. These decisions lay out a theory of patent eligibility that in my view is divorced from both scientific reality and how innovation actually occurs. I'll discuss those points below, but first let's do the numbers.   

June, July and August showed an uptick in the number Section 101 decisions from April and May, the majority of these being motions to dismiss and judgments on the pleadings.

The rates of invalidity holdings continue to be steady: 70% overall, and 66.3% in the district courts. Success on motions on the pleadings is up to 68.1%.     

We've recently started tracking ITC proceedings as well, as shown above in the last row. Three of the five holdings of invalidity recorded above involved direct competitors and counterparties, Fitbit and Jawbone. In March 2016, Fitbit invalidated Jawbone's fitness tracking patents in an ITC proceeding brought by Jawbone (ITC 337-TA-963). In July, Jawbone returned the favor and successfully invalidated Fitbit's patents (ITC 337-TA-973); the ITC judge in the latter decision even relied upon Fitbit's arguments that it made in its own motion against Jawbone.  

As I've argued, the Supreme Court did not intend AliceStorm and specifically did not intend the impact on software patents. Yet the onslaught continues. Here is the current update on the types of patents being litigated under Section 101:

Here's the updated "scorecard" for the Federal Circuit: 

I find it interesting that Judges Hughes and Taranto, neither of whom has a scientific or technological background, are leading the court in framing the boundaries of patent eligibility. Together these two judges are on 15 of the 23 written opinions. Patents describe technological advances, often based on applying scientific developments to particular problems. I believe that a correct theory of patent eligibility requires not only a deep understanding of science, but also of how technology develops—issues involving the nature of human creativity and innovation. Since the role of the patent law, as defined by the Constitution, is to promote the progress of useful arts, it is necessary for those who define the patent law to understand how such progress in fact happens.

There is an entire literature of innovation and creativity studies that explores how this process occurs, and there are many different views and theories of what constitutes creativity and how humans invent. And when it comes to questions of what constitutes abstract ideas or laws of nature, there is again a wide range of views. Yet as far as I can tell from reading Federal Circuit opinions, the court is entirely unaware of these various fields of knowledge.

Several years ago I discussed the Mayo decision with retired Chief Judge Paul Michel. I explained that the debate about laws of nature has a long tradition in philosophy of science—the term itself goes back to Roger Bacon, who first used the phrase in 1250, over 750 years ago!—and that there are well developed theoretical explanations for what constitutes a law of nature. Judge Michel candidly admitted: "We [the Federal Circuit] had no idea," speaking of the period when the court authored its opinion in Mayo. Indeed, and that's the problem. The court, in decisions like Ariosa, Rapid Litigation Management, Exergen, is setting forth patent eligibility rulings that do not cohere with modern scientific thinking. The result can only distort the development of the patent law.  

The problem is not confined the life sciences. When it comes to software, the court does not appear to understand how software works or is developed. In DDR (Chen and Wallach), for example, contrary to the court's impression that the invention did not "overcome a problem specifically arising in the realm of computer networks," the notion of "the near-instantaneous transport between these locations [is] made possible by standard Internet communication protocols, which introduces a problem that does not arise in the 'brick and mortar' context." This so-called "problem," that clicking on a link can load a remote website, is not a problem at all; the problem in DDR resided not in Internet protocols, but in the typical way that e-commerce websites were designed. The invention then was a solution in website design, not internet engineering.  The invention did not change how the Internet worked—HTTP, TCP-IP, HTML, ASP, all of the standard Internet protocols were used by the invention in their normal manner, working exactly as they were intended to. The invention did not "improve the functioning" of the computer system in any technical sense; the improvement was only an improvement in usability. What the invention changed was simply which graphical assets were combined with which product assets to create a "hybrid webpage." (To be clear, I think this is entirely eligible subject matter.) And the court's notion that there is "near instantaneous transport between locations" is a misleading metaphor. There is no more instantaneous transport when you click on links than when you change channels from watching a local broadcast station to watching the BBC. You would not say that you're "transported" to a site in England when you turn on the BBC's Downton Abbey, any more than you would say you're transported between remote locations when you change radio stations.  

In Electric Power, the panel (Taranto, Bryson, Stoll) created a distinction that does not exist in Alice: "the distinction made in Alice between, on one hand, computer-functionality improvements and, on the other, uses of existing computers as tools in aid of processes focused on 'abstract ideas'." First, Alice drew no such distinction; Alice only held that claiming the application of an identified abstract idea with generic computer elements does not provide eligibility. There is no discussion in Alice that using a computer as a tool is insufficient to be eligible.  

Second, such a reductionist view marginalizes the power and utility of computers and software, and is inconsistent with general principles of eligibility. The computer has been developed over the years precisely to be a general purpose tool that can be programmed for specific new uses, uses which themselves can be inventions. The Nobel Prize-winning scientist Herbert Simon explains in Sciences of the Artificial: 

No artifact devised by man is so convenient for this kind of functional description as a digital computer. It is truly protean, for almost the only ones of its properties that are detectable in its behavior (when it is operating properly!) are the organizational properties. The speed with which it performs its basic operations may allow us to infer a little about its physical components and their natural laws; speed data, for example, would allow us to rule out certain kinds of "slow" components. For the rest, almost no interesting statement that one can make about an operating computer bears any particular relation to the specific nature of the hardware. A computer is an organization of elementary functional components in which, to a high approximation, only the function performed by those components is relevant to the behavior of the whole system.

What makes the computer a useful tool—and computer programming a useful art—is precisely its ability to have its functional capability changed by programming, for it is the functionality, not the underlying structure, that is what is useful to solving the problem. No other tool in the history of human development is as flexible and re-purposeful as a computer. And yet this very capability is now used as evidence of ineligibility by the Federal Circuit. 

Section 101 in its own terms focuses on utility as the hallmark of eligibility, and new use of a computer created by programming should be eligible by default. Indeed, Section 100(b)—"the term 'process' means process, art or method, and includes a new use of a known ..., machine,"—sanctions the use of known machines—motors as well as computers—in new processes. However, in Electric Power, the Federal Circuit has essentially abrogated Section 100(b) by holding that using "readily available" "off-the-shelf, conventional computer, network, and display technology" is “insufficient to pass the test of an inventive concept". While we may find that a patent claim that recites the use of an off-the-shelf motor to motorize a mechanical process is obvious, we would never say it is ineligible because it merely uses the motor as a "tool." And yet the Federal Circuit's rationale, if applied generally—as any principle of patent law should be—would result in exactly that outcome.

No theoretical explanation of the Federal Circuit's expansion of Alice is given, nor can there be because it is entirely contrary to the nature of both the patent law (at least Section 100(b)) and human invention. Humans invent by taking conventional, off-the-shelf, readily available components and combining them into new structures and functions. In this sense, using a computer as a tool is no different from using any other physical device as a tool for some purpose, some other function. All inventions make use of existing components and use them as "tools" in their ordinary way to achieve a desired function; sometimes the function is known, sometimes it is new, but it is (almost) always useful. Any complex machine is made of components—whether nuts and bolts, motors and relays, integrated circuits, batteries, etc., etc.—that function precisely as they are intended: if the parts did not function as intended, we could not build anything.  Similarly, we program conventional computers, using conventional languages and methods, to result in new functions—just like we create new machines by combining conventional parts using known engineering approaches.  

We would not hold that an invention made of existing off-the shelf parts, used entirely for their intended purposes, was not patent-eligible simply because the function performed by the parts was known. We would not say that the function was an abstract idea, and the application of that idea using conventional parts failed to provide an inventive contribution sufficient to be eligible. Any such analysis would clearly be seen as an obviousness analysis masquerading as eligibility. Yet, this is precisely what the Federal Circuit is guiding the lower courts, and the USPTO, to do.

Basing eligibility on the "unconventionality" of underlying physical components of software invention is precisely what Diehr said was wrong: eligibility is based on the invention as a whole, not the component parts. It is beyond dispute that every element in Diehr was conventional: the rubber molds, the temperature-sensing thermocouples, the Arrhenius equation, even the computer. The only difference over the prior art was the repetitive calculation of the Arrhenius equation—obviously using a computer precisely in the manner for which it was designed. Opening the mold based on the results of the calculation was at best "post-solution" activity. Yet, Diehr's claim was eligible, because it was a new use of an existing tool. The justification that Diehr had solved a problem in the real "technology" of rubber molding is wrong on two fronts. Eligibility is not based on the problem: it is based on the solution, that which is claimed. Second, without a definition of "technology" this answer is provides no guidance.  

I return then to the question of understanding the nature of technological innovation. I subscribe to the Holmsian Maxim: "The life of the law has not been logic; it has been experience." Without actual experience with technology, and with how technologists actually solve problems and invent, the entire process of invention itself, and thus patent eligibility, is just an abstraction to lay judges. As a result, the "rules" of patent eligibility may appear to be logical to a judge but are simply word games that bear little if any grounding in technological practice or scientific theory.  

Of course, the courts are not going to sit down and learn technology, work with inventors, and start developing the life experience to inform their decision-making. Thus, while I believe is not enough (!) to simply read the literature on creativity, innovation, software development, and so forth, to transform one's understanding of eligibility, it will have to do to. Here is a small sample of my favorites.

Technology and Creativity by Subrata Dasgupta, who sets forth a general theory of creativity, and provides a detailed application of the theory to various inventions.  

It Began with Babbage, also by Dasgupta. There’s a lot of history of the development of computers, but this one is different because it ties the historical developments to Dasgupta’s model of innovation.

Sparks of Genius: The Thirteen Thinking Tools of the World's Most Creative People, an analysis of the “tools” that are commonly found in creative individuals.  

Creativity Flow and the Psychology of Discovery and Invention, a classic in the field of creativity studies.

Metaphors We Live By, a classic in the field of language and cognition by George Lakoff. Explains the theory of conceptual metaphors. Necessary reading to learn to avoid confusing metaphors with actual reality—a common failing in patent eligibility jurisprudence.

Making Truth: Metaphor in Science: Applies Lakoff’s theory of conceptual metaphor to specific scientific discoveries, including the atomic model, protein folding, and global warming. Demonstrates how scientific innovation depends on metaphorical reasoning. Abstraction and modeling are part of creativity thinking, not evidence of ineligible concepts.  

Readings on Laws of Nature, a compilation of the most important essays on laws of nature, covering the range of different approaches in contemporary philosophy. 

How Nature Works: Physicist Per Bak’s explanation of Self-Organized Criticality. Covers the fundamental lawful relationships between sandpiles, quasars, earthquakes, evolution, and even traffic jams (with a hint why autonomous vehicles won’t eliminate traffic jams). 

Two Years After Alice: A Survey of the Impact of a "Minor Case" (Part 1)

By: Robert R. Sachs

 

Two years ago this Sunday, the Supreme Court in Alice Corp. Pty Ltd. v. CLS Bank Int'l¹ addressed a relatively narrow issue: does a claim reciting a generic computer implementation transform an abstract idea into a patent-eligible invention?  The Court considered this a "minor case" in which it did not break new ground, but instead simply followed its decisions in Bilski² and Mayo.³ The Court reiterated a two-step test set forth in Mayo determine whether the claim recites a judicial exception and if so, determine whether the claim recites an "inventive concept," something "significantly more" than the exception and "enough" to transform the claim into eligible subject matter.⁴  The Court applied this test to find that Alice’s claim simply recited a fundamental economic practice of risk intermediation through third party settlement, and then held that the presence of generic computing elements or steps was not sufficient to provide an inventive concept.⁵  To the Court, this was an easy case.

Three aspects of the decision are worth noting. First, the Court did not see the case as presenting a difficult question of defining what is an abstract idea. "In any event, we need not labor to delimit the precise contours of the "abstract ideas" category in this case….Both [Alice and Bilski’s claims] are squarely within the realm of "abstract ideas" as we have used that term.⁶  In other words, whatever an abstract idea was before Alice, it was the same afterward: there was no expansion of the scope of the term. 

Second, the Court’s decision was not addressing the patent eligibility of software in this particular case, let alone in general.  During oral argument, the Court was told by CLS—and accepted the representation that—"they [Alice] have no software…they’ve never written software."⁷  Even Alice acknowledged to the Court that it would have been trivially easy to write the software, agreeing with Justice Kennedy that:

any computer group of people sitting around a coffee shop in Silicon Valley could do this over a weekend.⁸ 

In other words, to the Court, this case was not about a software invention, but a business method that just happen to be implemented in software. 

The Court was also led to believe that its decision would not be broadly applicable. CLS told the Court:

This is not the death of software patents… This will not affect software patents.⁹ 

Likewise, the Solicitor General reassured the Court that they need not address the patent eligibility of the software to decide the matter. The Court apparently accepted this view, as indicated by Justice Sotomayor:

What's the necessity for us to announce a general rule with respect to software? There is no software being patented in this case.¹⁰ 

Indeed, the Court’s decision makes no mention of the eligibility of software as general matter; rather they only considered whether a "generic computer…transform[] a patent-ineligible abstract idea into a patent-eligible invention," whether "a the mere instruction to "implemen[t]" an abstract idea "on . . . a computer" suffices.¹¹  It is a misreading of Alice to say the Court held that software was abstract to begin with, or that the presence of a generic computer was evidence that the invention was an abstract idea.

Third, and most important, the Court was obviously aware that the lack of definition in both steps of the Mayo test created the risk of an over-expansive application of the judicial exceptions.  Thus, the Court extended a theme found in Benson¹² and Bilski,¹³  that Section 101 should not be interpreted to impede innovation, particularly in the realm of computer technology.  The Alice Court made clear that the judicial exceptions must be cautiously applied: "we tread carefully in construing this exclusionary principle lest it swallow all of patent law. At some level, "all inventions . . . embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas."¹⁴ 

However limited the Court believed or intended the Alice decision to be, the case has been broadly interpreted by both the federal courts and the USPTO, and the impact has been dramatic.¹⁵  I call this (legal) phenomenon AliceStorm. What follows is a survey of AliceStorm in the federal courts and USPTO.

The Impact of AliceStorm

Figure 1 shows the number of district court and Federal Circuit decisions addressing § 101 related motions on the merits since Alice was decided, through June 8, 2016.¹⁶  Except for an artificial spike in March 2016, in every month since Alice. the number of decisions invalidating at least one patent in suit has equaled or exceeded those upholding all of the contested patents.¹⁷ 

Here’s the first clue that the Court did not anticipate, let alone intend, AliceStorm. CLS told the Court that the issue was "a very small problem" that impacted only the "most marginal, most dubious, most skeptical patents," noting that in the four years "since Bilski, there have only been 57 district court decisions on Section 101 issues" and "only 12 Federal Circuit decisions total."¹⁸  Yet, in only two years since Alice, there have been four times as many district court decisions (247), with the Federal Circuit close behind (40)—reflecting that the patent defense bar saw the applicability of Alice quite differently from the Court.

Table 1 summarizes these decisions, along with some additional data:

The 70% overall success rate of § 101 defense motions is extremely impressive—and remarkably steady, down only slightly from the 71.7% I found last year. The success rate on § 101 motions on the pleadings has been even more constant, 67.1% this year versus 67.0% last year.  The percentage of patents invalidated has also been constant year over year, 66% vs. 65%.  Even more remarkable is the consistency of the Federal Circuit. Last year at this time they had decided only thirteen § 101 decisions, and found only one case, DDR Holdings, patent eligible.¹⁹  In the year since, they have decided more than twice that many (27) cases and still found only one case with patent-eligible claims, Enfish, LLC v. Microsoft Corp.²⁰ 

The Patent Trials and Appeals Board is likewise a good bet for patent defendants seeking to invalidate patents under Covered Business Method Review. The PTAB has granted 83.6% of the CBM petitions in which they considered a § 101 argument on the merits, and reaffirmed 96% of those decisions as Final Decisions. This trend is likely to continue, as the Federal Circuit in Versata Development Group.²¹  upheld both the USPTO's broad interpretation of "financial product or service" necessary to obtain Section 18 standing, as well as its very narrow definition of "technological invention" that would preclude it.²²  This is because to the extent that the PTAB is willing to classify a patent as non-technological financial product or service in deciding whether the patent qualifies for CBM review, it is predisposed to finding the patent directed to ineligible abstract ideas.

As explained above, the Court did not see Alice as a software patent case, but rather an example of a fundamental business method simply implemented on a computer. Even today the common perception is that the patents being invalidated after Alice are generally business method patents.  Figure 2 shows that this is not the case.

Business method patents (patents classified in U.S. Patent Class 705) account for 125 (22.4%) of the challenged patents, and similarly 26.3% of the invalidated patents.  But software patents account for 256 (45.8%) of the challenged patents and similarly 45% of the invalidated ones.  Thus, if the Court was expecting that Alice's patents were representative of a "small problem" that would not impact software patents either they were sorely misled, they failed to understand the scope of their decision, or the lower courts have failed to heed the Court’s cautionary notes. Or all three.

Figure 2 also shows the impact of Mayo and Myriad, with 53% of biotech related patents being invalidated under § 101.  In the majority of these cases, the rulings are based on the grounds that the claims are directed to "laws of nature" or "natural products." The problem here is that the Supreme Court's definition of a law of nature—as a correlation that "exists in principle apart from any human action," is scientifically incorrect.²³  As a result, courts unfortunately invalidated applications of the discoveries about nature that have historically been patent eligible.

Let’s return to the Federal Circuit. Here is how the judges of that court have voted on patent eligibility:

The forty Federal Circuit decisions are remarkable for two reasons.  First, the obvious: that thirty-eight went against the patentee, even though many, indeed most, of these cases had reasonable arguments for the eligibility of the claims.  While the Federal Circuit has said²⁴ that the line of patent eligibility is not always clear, they behave as if the line is laser straight and bright.  Less obvious is that in forty decisions there have been 120 decision opportunities by the individual judges, and yet there have been no dissents in any of the cases invalidating the patents in suit.²⁵  This lack of dissent—including none from Judge Newman, the court’s primary dissenter—is well below the court’s average rate of dissents over the same period.²⁶ 

In the district courts, the confusion over not just the boundaries of abstract ideas, but the entire approach, is apparent. Some courts conflate eligibility with novelty and uniqueness,²⁷ others focus on a lack of specificity.²⁸  Most apparent is a return to the pre-1952's nebulous standard of "inventiveness," based on Alice's requirement for an "inventive concept."²⁹  In particular, there is a persistent view that automation of existing processes is per se ineligible, as opposed to being simply obvious.³⁰ 

On Monday I'll review the impact of AlicesStorm at the USPTO.

 ________________________________________

Footnotes:

1 134 S.Ct. 2347 (2014).

2 Bilski v. Kappos, 130 S.Ct. 3218 (2010).

3 Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012).

4 134 S. Ct. at 2355.

5 Id. at 2360.

6 Id. at 2357.

7 Alice Corp.Pty. v. CLS Bank Int’l., No. 13-298 Oral Argument Transcript ("Alice Oral Argument"), (Mar. 31, 2014), p. 30. 

8 Id. at 12.

9 Id. at 42-43.

10 Id. at 46.

11 Alice, 134 S.Ct. at 2352.

12 Gottshalk v. Benson, 409 U.S. 63, 71 (1972) "It is said that the decision precludes a patent for any program servicing a computer. We do not so hold…. It is said we freeze process patents to old technologies, leaving no room for the revelations of the new, onrushing technology. Such is not our purpose.").

13 Bilksi v. Kappos, 130 S. Ct. 3218, 3226 (2010) ("This Court has "more than once cautioned that courts 'should not read into the patent laws limitations and conditions which the legislature has not expressed.")

14 Alice,  134 S.Ct. at 2354.

15  See, https://goo.gl/QymRX9.

16 It is telling indicator of AliceStorm these numbers are already out of date. There have been several district court and PTAB decisions since this data was compiled on June 12, 2016.

17 A split decision, one in which the court invalidates some patents or claims but not others, is included in both the eligibility and ineligibility counts.

18 Alice Oral Argument. at 42-43.

19 DDR Holdings, LLC v. Hotels.Com, L.P., 773 F.3d 1245 (Fed. Cir. 2014).

20 2015-1244 (Fed. Cir. May 12, 2016).

21 Versata Development Group v. SAP Am., Inc., 793 F.3d 1306 (Fed. Cir. 2015). Versata is seeking certiorari of the Federal Circuit decision, arguing, inter alia, that PTAB’s definition of "financial service" covers a salesman quoting the price of a mattress. 

22 Id., at 1325, 1326.

23 See, Robert R. Sachs, Jennifer R. Bush, "Prometheus Unbound:  The Untethering of Laws of Nature and Patent Eligibility From Scientific Reality," Bilski Blog, July 3, 2013, at http://goo.gl/KUIkvV.

24 See DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245, 1255 (Fed. Cir. 2014); Internet
Patents Corp. v. Active Network, Inc., 790 F.3d 1343, 1345 (Fed. Cir. 2015) ("Recently, the courts have focused on the patent eligibility of "abstract ideas," for precision has been elusive in defining an all-purpose boundary between the abstract and the concrete, leaving innovators and competitors uncertain as to their legal rights").

25 The low number of dissents is partly a result of the fact that half of the decisions are per curiam, in which a dissent is very rare.

26 Between Alice and April 25, 2016, there were 108 dissents in 1724 Federal Circuit cases (6.2%), with J. Newman issuing 35, more twice that of Reyna (14), the next most prolific dissent. Statistically speaking, one would have "expected" about 2 or 3 dissents thus far.

27 OpenTV, Inc. v. Apple, Inc., No. 5:15-cv-02008-EJD (N.D. Cal.1/28/2016) (“The concept of a database is not novel or unique. See Alice, 134 S. Ct. at 2360; Information exchanged between a database (as part of or remote from a computer) and the computer is not novel and adds nothing to the 101 analysis.”).

28 See, e.g, Intellectual Ventures I v. Canon Inc. (D. Del. 11/9/2015) (Noting that DDR Holdings provides “a benchmark of specificity to which other claims can be compared,” and that “even though most of the patent claims now being challenged under § 101 would have survived such challenges if mounted at the time of issuance, these claims are now in jeopardy under the heightened specificity required by the Federal Circuit post-Alice.); Clear With Computers LLC v. Altec Indus., Inc. 2015 U.S. Dist. LEXIS 28816 (E.D. Tex. 3/3/2015) (“The additional recitation of specific computer components such as a “database,” “memory,” “transceiver” and “wire-based network,” and computer functions such as “storing,” “transmitting” and “receiving,” are incapable of conferring the requisite specificity.”); Source Search Techs., LLC v. Kayak Software Corp., 111 F. Supp. 3d 603, 617 (D.N.J. 2015) (“That specificity removes the claims from the abstract realm.” (emphasis in original))

29 See, e.g., Intellectual Ventures I LLC v. Capital One Fin. Corp., 2015 U.S. Dist. LEXIS 62601 (D. Md. 6/11/2015 (“The use of generic hardware and software running an intrusion detection application is not viewed as new and inventive"); HealthTrio, LLC v. Aetna, Inc. No. 12-CV-03229-REB-MJW, 2015 WL 5675303 (D. Colo. Sept. 28, 2015) ("because Plaintiff’s insight…is not a sufficiently inventive concept, the Court concludes that the patents are drawn to an ineligible subject matter”).

30 GT Nexus, Inc. v. Inttra, Inc. U.S. Dist. LEXIS 150579 (N.D. Cal., 11/5/2015). (“Here, the Court finds that the patent claims merely automate the practice of booking and tracking shipping containers; this automation is insufficient to transform the nature of the patents.”); Hewlett-Packard Co. v. ServiceNow, Inc., 2015 U.S. Dist. LEXIS 29384 (N.D. Cal.,3/10/2015 (“the automation of IT incident resolution is an abstract idea, not patentable under § 101.”); Parus Holdings, Inc. v. Sallie Mae Bank, 2015 U.S. Dist. LEXIS 137444 (D. Del. 10/8/2015) (“Organizing business functions based on commands provided by a user is tantamount to the automation of the management of business communications usually performed by human administrative assistants (the identified purpose of the invention).”); Cogent Med., Inc. v. Elsevier Inc., 70 F. Supp. 3d 1058, 1060 (N.D. Cal. 2014) (“the ’879 Patent claims no more than a computer automation of what “can be performed in the human mind, or by a human using a pen and paper.””); Voxathon LLC v. Alpine Elecs. of Am., Inc.,Case No. 2:15-cv-562-JRG (E.D. Tex. 1/20/2016) (“Claim 1 is really nothing more than the automation of responding to the sender of a message received on a telephone.”).

The Mind as Computer Metaphor: Benson and the Mistaken Application of Mental Steps to Software (Part 5)

Go to: Part 1, Part 2, Part 3, Part 4, Part 5

(This series of posts is based on an upcoming paper for the AIPLA Spring 2016 meeting.)

 
By Robert R. Sachs

Part V. THE FICTIONAL MENTAL STEPS DOCTRINE DOES NOT APPLY TO PROGRAMMED GENERAL PURPOSE COMPUTERS

The fictional form of the mental steps doctrine is inapplicable to digital computers and computer-implemented inventions for several reasons.

First, prior to the widespread usage of the general purpose computer, many inventions were created, and many patents granted, for mechanical and electrical machines that performed mathematical calculations. For example, between 1900 and 1960, there were over 2,300 patents issued that related to mechanical computing devices. That such devices were patent-eligible subject matter seemed beyond dispute, and there are no federal cases in which claims to such devices or their methods of operation were held to be unpatentable subject matter. Calculating machines also perform simple arithmetic that a human could easily do by “head and hand”, but that does not disqualify them as patentable subject matter. This is because the mathematical operations had been mechanized into physical elements: the “locus of the operation” was in the mechanical or electrical elements of the machine.

Most calculating machines typically could only perform individual mathematical operations such as addition, subtraction, multiplication, division, logarithm, and so forth. Performing a complex series of mathematical calculations, therefore, required the human operator to control the sequence and execution of a series of calculations, as well as in many cases to store, typically on a notepad, intermediate results for later entry into the machine. In short, even though the locus of the operation was in the machine, the locus of control in those devices was always in the mind of the human operator, whether he was using a desk calculator, a slide rule, or an abacus. Accordingly, in patent cases decided prior to the widespread application of computers, the courts were correct to hold that a claim to mathematical procedures or use of formula was essentially one for mental steps, because there was then no known way to have a machine perform the entire mathematical process automatically.

However, von Neumann’s architecture of the stored program computer represented a fundamental change in where control of the operations is held.  Prior to the von Neumann architecture, a human had to enter a program one step at a time into the computer’s memory—this was essentially the same as the human controlling the adding machine by pressing keys and pulling handles. In the stored program computer, the locus of control resides in the machine itself: the computer program controls the operation of the computer by sequentially changing the signals stored and manipulated by the computer, without any human intervention other than high level inputs. These low level signals are not representative of the mental states of the human but rather are signals that electronically represent the machine language “instructions” that the computer can execute. At a minimum, just as the mechanical or electrical implementation of calculating machines would not be ignored in deciding patent eligibility, the implementation of a digital computer should not be ignored either.

The only reason to ignore the presence of digital computer elements, such as the shift register in Benson, or even a general-purpose computer itself, is if one assumes that computers perform mental steps in the same way that a human does. Once this assumption is removed, there is no principled reason to distinguish between the mechanical nature of a calculating machine and the computer technology in digital computers. Both likewise contribute to patent eligibility. And as shown above, the assumptions of functional and procedural equivalence was without support in Benson in 1972 and remains even less likely today.

The fictional form of the mental steps doctrine represents a significant and unwise departure from the factual form.  The fictional form is untethered from the conceptual and technological attributes of computer design, the nature of human cognition, and the practical reality and value in computer-implemented inventions.  The courts should return to the doctrine’s factual form, and avoid a further descent into the fact-free analysis that now characterizes patent eligibility.

The Mind as Computer Metaphor: Benson and the Mistaken Application of Mental Steps to Software (Part 4)

Go to: Part 1, Part 2, Part 3, Part 4, Part 5

(This series of posts is based on an upcoming paper for the AIPLA Spring 2016 meeting.)

 
By Robert R. Sachs

Part IV. THE CONTINUED APPLICATION OF MENTAL STEPS TO SOFTWARE INVENTIONS

Unfortunately, the Supreme Court’s misstatement of the relationship between computers and minds continues to this day to be cited as authority and a statement of fact about how computers operate. The Court’s conversion of the mental steps doctrine from its factual form to its fictional form in essence turned the performance of mental steps from being a necessary condition for ineligibility to a sufficient condition. And since the Alice decision refused to offer a definition or even a methodology for identifying abstract ideas, the fictional form of mental steps has been taken up as a model tool. As a result, it has substantively impacted both the case law and the outcome of many patent cases.

Though the Federal Circuit decided dozens eligibility cases after Benson, it was not until some forty years later that Federal Circuit adopted the fictional form of mental steps. First, in Cybersource, that court stated that “in finding that the process in Benson was not patent-eligible, the Supreme Court appeared to endorse the view that methods which can be performed mentally, or which are the equivalent of human mental work, are unpatentable abstract ideas--the "basic tools of scientific and technological work" that are open to all.”¹ Then in Bancorp, the court stated

As the Supreme Court has explained, “[a] digital computer . . . operates on data expressed in digits, solving a problem by doing arithmetic as a person would do it by head and hand.” Benson, 409 U.S. at 65. Indeed, prior to the information age, a “computer” was not a machine at all; rather, it was a job title: “a person employed to make calculations.” Oxford English Dictionary, supra. Those meanings conveniently illustrate the interchangeability of certain mental processes and basic digital computation, and help explain why the use of a computer in an otherwise patent-ineligible process for no more than its most basic function—making calculations or computations—fails to circumvent the prohibition against patenting abstract ideas and mental processes.²

Here too, the statements from UDC have been taken out of context and used in a manner at odds with their intended purpose and meaning. However, as should be clear, the digital operations of a computer are not “interchangeable” with the mental processes of a human. That both can be described in a common way does not make them the same in fact. If the programmed operations of a computer are interchangeable with the mental processes of a human, then so too are the mechanical operations of an adding machine, since these operations can likewise be described as the “same procedures” performed by a human. Clearly, this result would not be correct, and thus it implies that the “interchangeability” premise is false.

After Alice, reliance on Benson’s “mental steps” and the pencil-and-paper test increased significantly, even where the claims were directed to processes that were disclosed as fully performed by a computer.  These types of claims that would have been eligible under the pre-Benson factual mental steps approach of Judge Rich and the Court of Customs and Patent Appeals.  What follows is a short survey of several exemplary cases:

In Planet Bingo, LLC v. VKGS LLC, the Federal Circuit stated that “The district court correctly concluded that managing the game of bingo “consists solely of mental steps which can be carried out by a human using pen and paper,” and expressly relied on Benson: “Like the claims at issue in Benson, not only can these steps be “carried out in existing computers long in use,” but they also can be “done mentally.””³  

In Broadband iTV, Inc. v. Oceanic Time Warner Cable, LLC, the claims included steps of “enabling the online uploading of videos” and “converting the uploaded videos standard TV digital format.” ⁴ The court nonetheless held “Even though the ‘336 Patent anticipates that its steps will be performed through computer operation, it describes a process that a person could perform “[u]sing a pen, paper, and her own brain.”⁵ The court did not explain how a human with pencil and paper could themselves enable uploading of videos or convert the videos into a specific digital format.

In Concaten, Inc. v. Ameritrak Fleet Solutions, LLC, one of the claims dealt with generating maps of the locations of snow plows, and presenting graphical users interfaces based on such maps, along with automated instructions to the snow plow operator.  The claim included steps of “processing, by the server, the received collected information to (i) provide a map associated with a physical location of a selected snow maintenance vehicle” and providing, over the wireless cellular network, the map and an operator instruction to the selected snow maintenance vehicle of the plurality of snow maintenance vehicles, wherein the map is visually displayed, by a touch screen monitor”.⁶  The court held that these steps were “nothing more than taking steps routinely performed by humans.”⁷

In Evolutionary Intelligence, LLC v. Sprint Nextel Corp., the claims were directed computer search methods using a data structure described as a “container” formed of “registers” with specific types of relationships ("the container registers having defined therein data comprising historical data associated with interactions of the identified containers with other containers from the plurality of containers, wherein searching the first container registers comprises searching the historical data;” etc.). ⁸  The court held that the claims cover “no more than a computer automation of what “can be performed in the human mind, or by a human using a pen and paper.””⁹

In Kinglite Holdings Inc. v. Micro-Star Int'l Co. Ltd., the claims were directed to encrypting the BIOS of a computer:¹⁰ “A method to securely invoke Basic Input and Output System (BIOS) services, comprising: creating a service request to invoke BIOS services; signing the service request with a service request signature generated using a private key in a cryptographic key pair; and verifying the service request signature using a public key in the cryptographic key pair to ensure the integrity of the service request.”¹¹ The court held that the steps of “generating a signature using a “private key” and verifying that signature with a “public key” can be performed by a human who is capable of reading such keys.”¹²  The court did not explain exactly how a human would mentally create a service request for a BIOS service, since such an operation take place within the operating system, not at any user-accessible level of the computer. 

Finally, perhaps the strangest application of the mental steps doctrine is Stanacard v. Rubard, LLC.¹³  The invention involved combining caller ID and call forwarding to route and connect a call to a unique recipient.  The customer of a telephone service has their own phone number, as is normal. The telephone service also provides a local ten-digit telephone number that the customer can assign to a second phone number (including long distance international numbers) of another person. When the customer, calling from their own phone, calls the local number, the telephone service determines the caller’s number using caller ID, and then looks up the second number that the caller assigned to the local number.  The service then connects the caller to that second number.¹⁴  Claim 1 recited:

1. A method comprising

detecting an identity of a caller;

receiving an assigned incoming telephone number;

identifying a recipient associated with the assigned incoming telephone number and the identity;

connecting the caller and the recipient;

wherein said caller has a plurality of assigned incoming telephone numbers to choose from, at least one of said plurality of assigned incoming telephone numbers being associated with said recipient,

wherein each assigned incoming telephone number is associated with multiple recipient telephone numbers, a particular telephone number of a recipient being determined solely by a particular assigned incoming telephone number used by a particular identified caller and without input of further data by said caller, whereby said caller is not required to be within a particular network for making calls.

The court went so far as to refer to the “genius of the '156 patent (and it is indeed clever and creative),”¹⁵ as an “elegant solution to the problem of the calling card PIN was apparently overlooked by a lot of smart people for a very long time.”¹⁶  Nonetheless, the court found the claims directed to a mental process, relying on Cybersource and the pencil-and-paper analysis.  The court’s implementation of the pencil-and-paper test, however, borders on the bizarre:

When I was a child I watched Lassie on television. Whenever June Lockhart, playing Ruth Martin, wanted to reach someone by telephone, she rang Jenny at Central and got herself connected to whomever she wished just by saying "Can you get the doctor?" or "I need to speak to Timmy's teacher, Miss Jones." Ruth didn't have to dial any numbers at all. Jenny, the intermediary, recognized Ruth as the caller from the line that rang at Central, and she knew which receptacle to plug Ruth's line into so that Ruth's call to Central would be forwarded to its intended recipient. Nothing different happens here, except that switching machinery and computers (none of which is claimed) recognize who the incoming caller is and to whom she wishes her call forwarded. As defendant points out, a room full of telephone operators with sheets of paper containing the look-up tables could accomplish the same result- expensively, true, but the same result, using the same process.¹⁷ 

It’s a fair bet that in the history of patent litigation no court has invalidated a patent based on its childhood memories of television shows.  

These cases illustrate the types of patents that have been invalidated under the fictional form of the mental steps doctrine and pencil-and-paper test.  Not all courts presented claims for software inventions adopt the mental steps approach.  The most cogent judicial critique of the mental steps test is by Judge Pfaelzer in California Inst. of Tech. v. Hughes Commc'ns Inc.¹⁸  The claim before the court dealt with the generation of parity bits for communication packets, “Claim 1 of the ’032 patent recites generating a parity bit by accumulating two values: (i) the value of the previous parity bit and (ii) the sum of a number of randomly chosen irregular repeats of message bits.”  Even accepting this simplification of the claim, the court rejected Hughes’s argument that the steps could be performed mentally:

One of Hughes’ arguments deserves special attention. Hughes argues that calculating parity bit values involve “mental steps [that] can be performed by a person with pencil and paper.” Therefore, Hughes, argues the claim is not patentable. Defs.’ Mem. in Supp. of Invalidity at 14, Dkt. No. 126. The Court finds this mode of analysis unhelpful for computer inventions. Many inventions could be theorized with pencil and paper, but pencil and paper can rarely produce the actual effect of the invention. Likewise, with regard to software, a human could spend months or years writing on paper the 1s and 0s comprising a computer program and applying the same algorithms as the program. At the end of the effort, he would be left with a lot of paper that obviously would not produce the same result as the software.¹⁹

The court offers two further insightful observations.  First, “Pencil-and-paper analysis can mislead courts into ignoring a key fact: although a computer performs the same math as a human, a human cannot always achieve the same results as a computer.”²⁰  This is an important point, one regularly overlooked by the courts, as the examples in Kinglite and Broadband iTV above show: while a human may be able to calculate manually a cryptographic key (Kinglite) or perhaps even manually encode a video (Broadband iTV) that would not achieve the same results as claimed. This is consistent with Judge Rich’s observation in In re Benson that speed of computation is “essential in the practical utilization” of the process.²¹ Today, the courts have distanced themselves entirely from appreciating the significance of practical considerations—patent eligibility is performed in an intellectual vacuum.

The court’s second observation was that “it is clear that Caltech’s error correction codes were not conventional activity that humans engaged in before computers, and the codes do not become conventional simply because humans can do math.”²²  This point is likewise routinely ignored: once a court decides a human can perform the claimed steps, it typically reduces the subsequent analysis of whether there is an inventive step to these simplistic terms. This is how the Stanacard undertook the inventive step analysis: “The claimed invention is literally no more sophisticated than what Jenny the Operator did on Lassie, those many years ago; as defendant argues, any telephone operator given a copy of the lookup table (which is not part of the claimed invention) can route and connect the call.”²³

 

1 Cybersource, 654 F.3d at 1371.

2 Bancorp Servs., L.L.C. v. Sun Life Assur. Co. of Canada, 687 F.3d 1266, 1277 (Fed. Cir. 2012) (holding patent claims to a computer-implemented system non-statutory as mental steps).

3 576 F. App’x 1005, 1008 (Fed. Cir. 2014), quoting Benson, 409 U.S. at 67.

4 Civ. No. 15-00131-ACK-RLP, 2015 U.S. Dist. LEXIS 131726, at *16 (D. Haw. Sep. 29, 2015).

5 Id. at *23.

6 Civ. No. 14-cv-00790-PAB-NYW, 2015 U.S. Dist. LEXIS 127679, at *2 (D.Colo. Sep. 23, 2015).

7 Id. at *12.

8 Civ. No. 13-04513, 2015 U.S. Dist. LEXIS 136458, at *6 (N.D. Cal. Oct. 6, 2015).

9 Id. at *15, quoting Cybersource, 654 F.3d at 1372.

10 Civ. No. CV-14-03009 JVS (PJWx), 2015 U.S. Dist. LEXIS 145121 (C.D. Cal. Oct. 16,2015).

11 Id. at *12

12 Id. at 14.

13 12 Civ. 5176 (CM (MHD), 2015 U.S. Dist. LEXIS 157345 (S.D.N.Y. Nov. 18, 2015).

14 Id. at *2.

15 Id. at *10. 

16 Id. 11.

17 Id. at 9

18 59 F. Supp. 3d 974 (C.D. Cal. 2014).

19 Id. at 982.

20 Id.

21 In re Benson, 441 F.2d. at 688 (emphasis added).

22 Id.

23 Stanacard, 2015 U.S. Dist. LEXIS 157345, at *10.

Update on Section 101 Rejections at the USPTO

By: Robert R. Sachs

In my June post, The One Year Anniversary: The Aftermath of #AliceStorm, I surveyed the frequency of Section 101 rejections at the USPTO. My analysis was based on approximately 300,000 office action and notices of allowance received from Patent Advisor.  
As a reminder, the Section 101 rejection rates from the June post at the level of the USPTO Technology Center (TC) are shown below.  The numbers here are the percentage of all events in the cohort (TC and time period) that had a Section 101 rejection.  An event is either an allowance or a rejection; other events such as restriction requirements, advisory actions, and so forth are not counted.  

Since June, I've received a significant amount of new data from Patent Advisor.  The trends we saw before are continuing, with some interesting new developments.   

 

 
First, TC 3600, which includes the E-commerce work groups (3620, 3680,  3690) continues to have the highest rates of § 101 rejections.   

Second, all of the TCs showed a significant increase in § 101 rejections in June. Tech Center 1700, which covers chemical and materials engineering saw an unexpected three-fold increase!  Rates dropped back down in July and August. 

As explained before, TC 3600 covers both E-commerce and non-Ecommerce work groups and it is the former that contribute to the high rejection rates.  Similarly, the rejection rates in TC 1600 appear generally low, but this obscures higher than average rejection rates in biotechnology work groups.  If we filter for those work groups we find the following:

 

We can then drill down into the specific technologies in these respective work groups for their § 101 rejection rates:

  

To assess how these rejection rates impact prosecution outcomes in the E-commerce groups in particular, I reviewed the status of all applications in these work groups that had a significant prosecution event in the last seven months (March 17 to October 17).  Here is a complete breakdown of the status of these applications:

Of interest are the 3,633 applications abandoned for failure to respond to an office action.   Also interesting is the filing of the 506 appeals during this period.  This is a harbinger of things to come.  

I also aggregated the status by work group technology:

The average number of office actions before abandonment here was 3.13, as compared to 3.27 office actions to allowance and patenting, not a significant difference.  Here is a view of the distribution of the number of office actions to abandonment, allowance 

 

This shows that almost 25% of abandonments occurred after the first office action, whereas most of the allowances occurred by the fourth.  Cumulatively (not shown here) the behavior was the same: 80% of abandonments and allowances occurred after the fourth office action.  Some applicants (or some examiners, depending on your perspective) fought to the bitter end, with 18 cases having ten or more actions before abandonment.  

The average abandonment rate at 16.5% is about twice the abandonment rate for the rest of the Office.  The allowance rate at 1.9% is strikingly low.  These two statistics are disturbing when you  consider the  following. In this time period, the vast majority of applications have been amended in view of previous § 101 rejections and the Office's own Interim Guidance, and arguments have been presented that the claims are not abstract ideas or fundamental business concepts, that they do not preempt all practical applications, that they offer improvements in some technology, and that they contain claim limitations reciting significantly more than the mere judicial exception. And yet more than 98% of the time, these arguments are rejected.

In the July 2015 Update to the Interim Guidance, the USPTO states that when it comes to economic concepts, the "term 'fundamental' is used in the sense of being foundational or basic". Is it truly likely that most, let alone all, of the 3,633 abandoned patent applications claim nothing more than foundational  or basic economic practices?  That the applicants in these cases did nothing more than implement some foundational economic practice on a computer, without doing anything more?  That the thousands of patent counsel prosecuting these cases couldn't draft a single eligible claim? 

From a business perspective, abandonments are more harmful to small companies with a small number of patent filings than to larger companies.  If you are a large company with hundreds of applications, abandoning 20% of them because of Section 101 rejections still leaves you with plenty of applications.  But if you are a small company, you tend to file on the core, crown jewel technology. If you have to abandon even one or two applications, the impact can be dramatic:  a loss of a competitive advantage, the withdrawal or delay in funding by investors, the loss of potential customers.   In this light consider the following:

This chart shows that over 1,000 companies have abandoned 100% of their applications in the last six months, accounting for 1119 applications, fully 30% of all abandoned applications.  Overall, companies with greater than 50% abandonment rates had 6 or fewer applications.  As the final total shows, these companies accounted for 43% of all abandonments in the last six months. 

Now, not all news is bad news.  As the charts show, there are 452 allowed applications that will issue within the next several months.  These applications are likely the best evidence of the kinds of amendments and arguments that are getting over 101 rejections. I've included a partial list of 244 of these applications at end of the posting.  The list is sorted by art unit and then by examiner, so you can easily find applications in an art unit of interest.  By identifying an examiner on one of your cases, you can review the kinds of amendments and arguments that the examiner has accepted and plan your strategy accordingly.

Abandonments and rejections aside, there are E-commerce examiners who are allowing cases, and they deserve recognition and support.  Here is a list of the top examiners, those who have an allowance rate (allowed+patented / total cases) over the past six months of 15% or more, which puts them well ahead of the rest of the E-commerce group.  

 

 In future posts I'll explore the biotechnology groups in a similar manner.

*********************************

Partial Listing of Allowed Applications

Publication No.	Serial No.	Examiner	Art Unit	Assignee	Title (See, Note below)
20120035990	13106051	COPPOLA, JACOB C	3621	TAPJOY	Rewarding Application Installs
20150278524	14739519	COPPOLA, JACOB C	3621	BANK OF NEW YORK MELLON TRUST	Secure Information Handling System Flash Memory Access
20040078334	10416095	COPPOLA, JACOB C	3621	ORCHESTRIA	Information Management System
20090151008	12315113	COPPOLA, JACOB C	3621	INVENTION SCIENCE FUND I	Media Markup System For Content Alteration In Derivative Works
20120005080	13168812	COPPOLA, JACOB C	3621	C SAM	Transactional Services
20120274480	13547194	COPPOLA, JACOB C	3621		Usage Metering Based Upon Hardware Aging
20110321127	13167645	COPPOLA, JACOB C	3621	C SAM	Transactional Services
20120109672	13292836	COPPOLA, JACOB C	3621	C SAM	Transactional Services
20130030910	13193464	COPPOLA, JACOB C	3621	III HOLDINGS	Generating Using A Digital Pass
20120005087	13168858	COPPOLA, JACOB C	3621	C SAM	Transactional Services
20080228733	12048072	REAGAN, JAMES A	3621	DIGIMARC	Determining Content Treatment
20070265854	11306671	REAGAN, JAMES A	3621	IBM	Digital Rights Management For Publishing Scanned Documents On The Internet
20100106649	12604019	REAGAN, JAMES A	3621	IMS HEALTH	Authorizing Transactions Via Mobile Devices
20110313850	13152070	REAGAN, JAMES A	3621	ADSAFE MEDIA	Reviewing Content Traffic
20080313938	12096708	BEKERMAN, MICHAEL	3622		Shopping Trolley With Display Or Advertising Surface
20120296782	13437416	MOSLEY, KYLE T	3622	PROJECT J	System For Managing Product Inventory Counts
20130117096	13289857	MOSLEY, KYLE T	3622	AT&T	Internet Protocol Multi-Media System Value Voucher Distribution With Network Storage Redemption
20140111323	14143132	SCHMUCKER, MICHAEL W	3622		Display Device Mountable On An Automotive Vehicle Method
20110131080	12627071	BROCKINGTON III, WILLIAM S	3623	IBM	Performance-Aware Enterprise Components
20080077463	11516953	DELICH, STEPHANIE ZAGARELLA	3623	IBM	Optimizing The Selection Verification Deployment Of Expert Resources In A Time Of Chaos
20130007744	13611570	GILLS, KURTIS	3623		Optimizing On DemAllocation Of Virtual Machines Using A Stateless Preallocation Pool
20110107330	12834690	GILLS, KURTIS	3623	AVAYA	Generation Of Open Virtualization Framework Package For Solution Installations Upgrades
20110029970	12782743	GILLS, KURTIS	3623	IBM	Optimizing On DemAllocation Of Virtual Machines Using A Stateless Preallocation Pool
20140122141	13666834	JARRETT, SCOTT L	3623	FLOUR TECHNOLOGIES	Improving Cost Effectiveness Of Coking System
20130246124	13715792	KASSIM, HAFIZ A	3623	AMERICAN EXPRESS	An Analysis Cycle To Determine Interest Merchants
20130317877	13900404	MANSFIELD, THOMAS L	3623	INFOSYS	Information Technology Energy Wastage Management System
20120239453	13416275	MANSFIELD, THOMAS L	3623	IBM	Resource Cost Optimization Program
20130186333	13797229	MANSFIELD, THOMAS L	3623	CERTUSVIEW TECHNOLOGIES	Overlaying Electronic Marking Information On Facilities Map Information And/Or Other Image Information Displayed On A Marking Device
20100088164	12571356	MANSFIELD, THOMAS L	3623	CERTUSVIEW TECHNOLOGIES	Analyzing Locate Marking Operations With Respect To Facilities Maps
20110202929	12832044	MANSFIELD, THOMAS L	3623	ORACLE	Parallelizing Database Requests
20100305991	12475035	MANSFIELD, THOMAS L	3623	IBM	Complexity Reduction Of User Tasks
20050149372	10885191	MANSFIELD, THOMAS L	3623	AT&T	Planning Resources Based On Primary Alternate Location Relief Strategies
20130312003	13947629	MILLER, ALAN S	3623	SAMSUNG; USC	Dynamically Parallelizing Application Program
20080306803	12133332	MILLER, ALAN S	3623	SCHLUMBERGER	Performing Oilfield Production Operations
20130238376	13780202	SINGH, GURKANWALJIT	3623	TOSHIBA	Job Supporting Apparatus Portable Terminal Job Supporting Method
20120136689	12956162	SINGH, GURKANWALJIT	3623	MICROSOFT TECHNOLOGY LICENSING	Event Planning Within Social Networks
20140358627	14463594	STERRETT, JONATHAN G	3623	GREENLINE SYSTEMS	Risk Detection Reporting Infrastructure
20140006073	13538902	BYRD, UCHE SOWANDE	3624	YAHOO	Framework For Marketplace Analysis
20100088028	12441284	COUPE, ANITA YVONNE	3624	NEC	Electronic Apparatus Power Supply Control Program For Position Measuring
20100166273	12160528	COUPE, ANITA YVONNE	3624		Representing Multichannel Image Data
20110228997	12725811	COUPE, ANITA YVONNE	3624	MICROSOFT TECHNOLOGY LICENSING	Medical Image Rendering
20140019186	13545704	DIXON, THOMAS A	3624	SAP	Capacity Planning Management
20140012614	13543617	DIXON, THOMAS A	3624	NASDAQ OMX GROUP	Due Diligence System Method
20100318402	12833121	GOLDBERG, IVAN R	3624	CERTUSVIEW TECHNOLOGIES	Managing Locate And/Or Marking Operations
20110055835	12841288	GOLDBERG, IVAN R	3624	IBM	Aiding Resolution Of A Transaction
20100088134	12572202	GOLDBERG, IVAN R	3624	CERTUSVIEW TECHNOLOGIES	Analyzing Locate Marking Operations With Respect To Historical Information
20080313004	11761663	GOLDBERG, IVAN R	3624	IBM	Providing A Bi-Directional Feedback Loop Between Project Management Personal Calendar System
20140297351	13853916	KONERU, SUJAY	3624	IBM	Computing System Predictive Build
20130262165	13850820	KONERU, SUJAY	3624	ALIBABA GROUP HOLDING	Sending Recommendation Information Associated With A Business Object
20130166351	13543631	KONERU, SUJAY	3624	MU SIGMA BUSINESS SOLUTIONS PVT	Generating A Marketing-Mix Solution
20130204663	13762041	KONERU, SUJAY	3624	6 SENSE INSIGHTS	Sales Prediction System Method
20140222488	13761639	KONERU, SUJAY	3624	IBM	Quantifying The Quality Of Trend Lines
20070038490	11203324	KONERU, SUJAY	3624	IBM	Analyzing Business Architecture
20110307141	12814859	ROTARU, OCTAVIAN	3624	ON BOARD COMMUNICATIONS	Determining Equipment Utilization
20130022956	13189193	ROTARU, OCTAVIAN	3624	SYSMEX	Analyzer Method For Performing A Measurement On A Sample
20080201708	11692309	ROTARU, OCTAVIAN	3624	NOVELL	Virtualized Workflow Processing
20130074110	13669589	AIRAPETIAN, MILA	3625	LINKEDIN	Parallel Fact Checking
20130051887	13486686	AIRAPETIAN, MILA	3625	ADVANTAGE TECHNOLOGY & INNOVATIONS	Identifying Stacking Splitting Of Stenographic Keystrokes
20130198196	13763856	AIRAPETIAN, MILA	3625	LINKEDIN	Selective Fact Checking Method System
20130268392	13442501	DESAI, RESHA	3625	SEARS BRANDS	Presenting Product Recommendations
20120265585	13528592	DESAI, RESHA	3625	QUICKPAY	Location Based System For Entry Exit
20130124354	13671327	GARG, YOGESH C	3625	EXBIBLIO	Automatic Modification Of Web Pages
n/a	12776961	GARG, YOGESH C	3625
20130254075	13747396	HAQ, NAEEM U	3625	SCIQUEST	Taxonomy Data Structure For An Electronic Procurement System
20120191575	13358494	HAQ, NAEEM U	3625	CITRIX SYSTEMS	Enabling Communication Of Identity Information During Online Transaction
20120310791	13150568	HAQ, NAEEM U	3625	AT&T	Clothing Visualization
20050216304	11137076	MISIASZEK, MICHAEL	3625	W.W. GRAINGER	Electronically Creating A Customized Catalog
20130144766	13817089	MISIASZEK, MICHAEL	3625	RAKUTEN	Comment Submission Support System Comment Submission Support Device Comment Submission Support Device Control Method Program Information Storage Medium
20130173397	13339154	MISIASZEK, MICHAEL	3625	TARGET BRANDS	Recently Viewed Items Display Area
20120265631	13303983	MISIASZEK, MICHAEL	3625	SHIFT4	Enabling Merchants To Share Tokens
20130198034	13709358	MISIASZEK, MICHAEL	3625	MUSIC CHOICE	Cross Channel Delivery System Method
20110238533	12731025	MISIASZEK, MICHAEL	3625	INVISIBLEHAND SOFTWARE	Data Processing
20150294338	14750081	PALAVECINO, KATHLEEN GAGE	3625		Network-Based Marketplace Service For Facilitating Purchases Of Bundled Services Products
20130179303	13346549	PALAVECINO, KATHLEEN GAGE	3625	GOOGLE	Enabling Real-Time Product Vendor Identification
20130254069	13896996	PALAVECINO, KATHLEEN GAGE	3625	DO IT BEST	Generating An Order For Purchase
20120173354	12982393	PALAVECINO, KATHLEEN GAGE	3625	VERIZON	Providing A Unified Messaging Modeling Infrastructure
20110016021	12821554	PALAVECINO, KATHLEEN GAGE	3625	JWL IP HOLDINGS	Scripted Content Delivery
20100153228	12549277	PALAVECINO, KATHLEEN GAGE	3625	QUALCOMM	Bundling Application Services With Inbuilt Connectivity Management
20090164897	11961599	PALAVECINO, KATHLEEN GAGE	3625	YAHOO	Recommendation System Using Social Behavior Analysis Vocabulary Taxonomies
20130198035	13800774	ROSEN, NICHOLAS D	3625	BOOM PAYMENTS	Confirming Local Marketplace Transaction Consummation For Online Payment Consummation
20120021774	13248991	ROSEN, NICHOLAS D	3625	GOOGLE	Context-Influenced Application Recommendations
20130091071	13562012	ROSEN, NICHOLAS D	3625	GOOGLE	Product Catalog Dynamically Tailored To User-Selected Media Content
20130185176	13352893	ROSEN, NICHOLAS D	3625	CELLCO PARTNERSHIP D B A VERIZON WIRELESS	Cross Channel Real Time Awareness Framework
20150277681	14230864	SEIBERT, CHRISTOPHER B	3625	MONTICELLO ENTERPRISES	Providing A Single Input Field Having Multiple Processing Possibilities
20130238468	13412994	WOLCOTT, ALEX E	3625	XEROX	Managing Distribution Of Digital Rights Revenue For Integrated System
20090281724	12119316	BURGESS, JOSEPH D	3626	APPLE	Map Service With Network-Based Query For Search
20100274483	12430492	CHNG, JOY P	3626	GOOGLE TECHNOLOGY HOLDINGS	Ergonomic User Interface For A Portable Navigation Device
20130054478	13199545	GILLIGAN, CHRISTOPHER L	3626	ELWHA	Reporting Ingestible Product Preparation System Method
20130159019	13768765	GILLIGAN, CHRISTOPHER L	3626	DR SYSTEMS	Providing Dynamic Customizable Medical Examination Forms
20130060579	13560934	GILLIGAN, CHRISTOPHER L	3626	ONEMEDNET	Devices For Managing Medical Images Records
20110123079	12625898	GILLIGAN, CHRISTOPHER L	3626	PENRAD TECHNOLOGIES	Mammography Information System
20110125526	12625926	GILLIGAN, CHRISTOPHER L	3626	PENRAD TECHNOLOGIES	Multiple Modality Mammography Image Gallery Clipping System
20110085715	12578826	LULTSCHIK, WILLIAM G	3626	CARESTREAM HEALTH	Method For Locating An Interproximal Tooth Region
20060241975	11473960	PAULS, JOHN A	3626	HEALTH HERO NETWORK	Multi-User Remote Health Monitoring System With Biometrics Support
20140129259	14073812	RAPILLO, KRISTINE K	3626	2020 VISION CENTER	Enabling Customers To Obtain Vision Eye Health Examinations
20130343630	14011947	REYES, REGINALD R	3626		Automatic Interpretation Of Computer Tomography Scan Data
20140003699	14011906	REYES, REGINALD R	3626		Automatic Interpretation Of Computer Tomography Scan Data
20090304242	12092528	REYES, REGINALD R	3626	HITACHI	Image Analyzing System Method
20140095187	13710167	SOREY, ROBERT A	3626		Tracking Goods
20100042323	12440754	SOREY, ROBERT A	3626	TOYOTA	Collision Prediction Device
20120284041	13460824	TOMASZEWSKI, MICHAEL	3626	JVM	Integrated Drug Management Of Providing Prescription Drugs By Using The Same
20140201095	14155205	TOMASZEWSKI, MICHAEL	3626	CERNER INNOVATION	Healthcare Assurance System
20130246088	13793848	TOMASZEWSKI, MICHAEL	3626	HILL ROM SERVICES	Algorithm For Predicting Mitigating Adverse Events
20110251850	13085298	TOMASZEWSKI, MICHAEL	3626	PROVIDER MEDS	On Site Prescription Management Health Care Facilities
20110231202	12728721	WINSTON III, EDWARD B	3626	AI CURE TECHNOLOGIES	Collection Of Protocol Adherence Data
20100198496	12365151	WINSTON III, EDWARD B	3626	TELENAV	Navigation System With Path Prediction Method Of Operation Thereof
20100164791	12347371	WINSTON III, EDWARD B	3626	AT&T	Providing Mapping Data
20100217676	12392192	AMSDELL, DANA	3627		Automatically Adding Gratuity To Amount Charged In Electronic Transaction
20110112918	12915550	AMSDELL, DANA	3627	MASTERCARD INTERNATIONAL	Risk Management In Payment-Enabled Mobile Device
20110218871	12893834	AMSDELL, DANA	3627	VISA INTERNATIONAL SERVICE ASSOCIATION	Portable Account Number For Consumer Payment Account
20100286872	12838529	AMSDELL, DANA	3627	TOYOTA	Parking Assisting Apparatus
20110071711	12727976	AMSDELL, DANA	3627	PENNY & GILES CONTROLS	Controller Control Method For A Motorised Vehicle
20080281520	12117925	AMSDELL, DANA	3627	TOPCON	Positioning System Receiving Terminal Used Therein
20090043502	11837331	AMSDELL, DANA	3627	CISCO	Navigating Using Multiple Modalities
20080059344	11516823	AMSDELL, DANA	3627	SAP	Analyzing Stock Differences In A Supply Chain
20140067568	13601786	BUCHANAN, CHRISTOPHER R	3627	WAL MART STORES	Locating Organizing Digital Receipt Data For Use In In-Store Audits
20080265022	12140212	BUCHANAN, CHRISTOPHER R	3627	TOSHIBA GLOBAL COMMERCE SOLUTIONS HOLDINGS	Customer Checkout Accelerator
20100185391	12689231	BUCHANAN, CHRISTOPHER R	3627	HTC	Recording Medium For Selecting Location
20080243655	11778250	BUCHANAN, CHRISTOPHER R	3627	LUCENT	Implementing Rating Timer Control In A Pre-Biller To Support Online Offline Charging
20140114825	13659754	CHAMPAGNE, LUNA	3627	MASTERCARD INTERNATIONAL	Routing E-Invoices
20120030073	12845420	CHAMPAGNE, LUNA	3627	IBM	Creation Use Of Constraint Templates
20140258007	13785970	CHEIN, ALLEN C	3627	BANK OF AMERICA	Mobile Device As Point Of Transaction For In-Store Purchases
20130080274	13636418	CHEIN, ALLEN C	3627	MASTERCARD INTERNATIONAL	Delivery Of Information Services To Personal Devices
20110137759	12962528	CHEIN, ALLEN C	3627	AETHON	Providing Information Regarding A Status Of An Item
20150178677	14139172	DANNEMAN, PAUL	3627	EBAY	Kiosk For Receiving Delivering Packages
20140052625	14048874	DANNEMAN, PAUL	3627	METABANK	Transfer Account System Computer Program Products Associated Computer-Implemented Method
20140006196	14013819	DANNEMAN, PAUL	3627	PAYPAL	Dynamic Funding
20130345941	13974159	DANNEMAN, PAUL	3627	EATON	Shift Rail Transmission Position Sensing
20140372261	13920856	DANNEMAN, PAUL	3627	MASTERCARD INTERNATIONAL	System And/Or Method For Determining Needs Ability Assessment
20140337150	13889242	DANNEMAN, PAUL	3627		Automatic Receipt Logging Notifications For Transactions
20130132219	13680824	DANNEMAN, PAUL	3627	MOZIDO	Using A Mobile Wallet Infrastructure To Support Multiple Mobile Wallet Providers
20150039481	13959490	DANNEMAN, PAUL	3627	CALIX	Service Utilization Browser Plug-In
20130117163	13668822	DANNEMAN, PAUL	3627		An Inventory Aggregator
20100036758	12248127	HAIDER, FAWAAD	3627	VISA	Processing Fees For A Card
20110225073	13047302	OBAID, FATEH M	3627	SAMSUNG	Apparatus Method For Performing Wireless Charging
20100235234	12788830	OBAID, FATEH M	3627	HOSHIKO	Transacting With Network Traffic
20140365345	14362990	OBAID, FATEH M	3627	PANASONIC	Information-Providing Method Information-Providing System
20140324652	14331078	OBAID, FATEH M	3627	AT&T	Passive Rfid Postage Stamps Method Of Using The Same
20130132214	13684062	OBAID, FATEH M	3627	STARBUCKS	Cooking Management
20130088615	13629198	OBAID, FATEH M	3627	BARBARO TECHNOLOGIES	Conducting A Transaction In A Virtual Environment
20120173347	12981616	OBAID, FATEH M	3627	SAMSUNG	Automatic Tracking Decoding Barcode By Means Of Portable Devices Having Digital Cameras
20070062851	10553292	OBAID, FATEH M	3627	RED PARCEL POST	Distributing Packages Other Similar Dispatched Articles
20120030043	12846576	OBAID, FATEH M	3627	BANK OF AMERICA	Wearable Financial Indicator
20040254883	10687534	OBAID, FATEH M	3627	APPLE	Submitting Media For Network-Based Purchase Distribution
20100324771	12866555	ORTIZ ROMAN, DENISSE Y	3627	TOYOTA	Autonomous Moving Body Its Control Method Control System
20110153442	12802546	ORTIZ ROMAN, DENISSE Y	3627		Establishing Credit On A Cash Register Or Printer
20150278773	13554586	ORTIZ ROMAN, DENISSE Y	3627	GOFIGURE PAYMENTS	Mobile Payment System Method
20120047037	13214368	ORTIZ ROMAN, DENISSE Y	3627	TOSHIBA	Store System Sales Registration Method
20110060494	12860948	ORTIZ ROMAN, DENISSE Y	3627	YAMAHA	Saddle Riding Type Vehicle
20130073403	13234056	ORTIZ ROMAN, DENISSE Y	3627	TELETECH HOLDINGS	Activating Services Associated With A Product Via A Service Center Supporting A Variety Of Products
20100076879	12594238	ORTIZ ROMAN, DENISSE Y	3627	ZTE	Providing Services Via Peer-To-Peer-Based Next Generation Network
20090204514	12028918	ORTIZ ROMAN, DENISSE Y	3627	IBM	Media For Managing Shared Inventory In A Virtual Universe
20080040502	11456734	ORTIZ ROMAN, DENISSE Y	3627	WEST VIRGINIA UNIVERSITY	Automated Tracking Of Class Attendance
20110209210	13100387	RACIC, MILENA	3627	JPMORGAN CHASE BANK	Single Sign-On Session Management Without Central Server
20110131117	12989752	RACIC, MILENA	3627	WINCOR NIXDORF INTERNATIONAL	Administration System For Monitoring Of Disposal Processes For Money
20130030965	13191166	ROJAS, HAJIME S	3627	PAYPAL	Location-Based Payer Charging System
20100312421	12773965	ROJAS, HAJIME S	3627	EUROCOPTER	Assisting In Piloting A Hybrid Helicopter A Hybrid Helicopter Provided With Such A Device A Method Implemented By Said Device
20100250053	12680719	ROJAS, HAJIME S	3627	CONTINENTAL	Tachograph Toll Onboard Unit Display Instrument System
20120214521	13463037	ROJAS, HAJIME S	3627	ENVISIONIT	Verifying Message Delivery Integrity In A Wireless Mobile Message Broadcasting System
20120214405	13463033	ROJAS, HAJIME S	3627	ENVISIONIT	Message Receipt Verification In A Wireless Mobile Message Broadcasting System
20100272347	12810777	ROJAS, HAJIME S	3627	LAM RESEARCH	Dynamic Alignment Beam Calibration
20130166423	12365138	ROJAS, HAJIME S	3627	ADOBE	Providing Content On Connected Devices
20080301009	11756160	ROJAS, HAJIME S	3627	AMAZON TECHNOLOGIES	Providing Fulfillment Services
20130230205	13774992	SHEIKH, ASFAND M	3627	RICOH	Expense Report System With Receipt Image Processing
20130080645	13683397	SHEIKH, ASFAND M	3627	INFOSYS TECHNOLOGIES	Providing Real-Time Communications Services
20130084830	13683355	SHEIKH, ASFAND M	3627	INFOSYS TECHNOLOGIES	Providing Real-Time Communication Services
20090094145	12282880	SHEIKH, ASFAND M	3627	NAVER	Automatically Completed General Recommended Word Advertisement Recommended Word
20090319429	12183844	SHEIKH, ASFAND M	3627	BANK OF AMERICA	Cash Positioning Reporting
20140006186	13562614	WILDER, ANDREW H	3627	BANK OF AMERICA	Readable Indicia For Fuel Purchase
20130138518	13308180	WILDER, ANDREW H	3627	AT&T	Wireless Transactions For Enhancing Customer Experience
20100293023	12464448	WILDER, ANDREW H	3627	INFOSYS TECHNOLOGIES	Framework For Developing Enterprise Service Architecture
20120221444	13035734	WILDER, ANDREW H	3627	RED HAT	Message Queue Based Product Asset Management Auditing System
20090150266	12323134	WILDER, ANDREW H	3627	U.S. BANK	Buyer Routing Arrangements Method For Disparate Network System
20150262188	14702722	YU, ARIEL J	3627		Customer Service Management System
20120150673	13324970	YU, ARIEL J	3627	MAGTEK	Conducting Financial Transactions Using Non-Standard Magstripe Payment Cards
20110276442	12773550	YU, ARIEL J	3627	BRIDGEWATER SYSTEMS	User-Centric Mobile Device-Based Data Communications Cost Monitoring Control
20120072256	13212961	YU, ARIEL J	3627		Vehicle Impound Auctioning Management System
20080294488	12125734	YU, ARIEL J	3627	HUSSMANN	Supply Chain Management System
20090281851	12437418	YU, ARIEL J	3627	SALESFORCE.COM	Determining On-Line Influence In Social Media
20100292913	12308478	YU, ARIEL J	3627	ROBERT BOSCH	Map Data Method For Generating Maps Navigation Device
20130339071	13970410	ALLEN, AKIBA KANELLE	3628	LIVE NATION ENTERTAINMENT	Queuing Access To Network Resources
20110029147	12830019	ALLEN, AKIBA KANELLE	3628	ALSTOM	Multi-Interval Dispatch Method For Enabling Dispatchers In Power Grid Control Centers To Manage Changes
20100191549	12359228	ALLEN, AKIBA KANELLE	3628	MICROSOFT	Icafe Pre-Ordering
20140205859	13694943	CAMPBELL, SHANNON S	3628		Electroless Silvering Ink
20150149382	14614875	CHEN, GEORGE YUNG CHIEH	3628	BROADRIDGE INVESTOR COMMUNICATION SOLUTIONS	Automated On-Demand Customizable Assembling High Throughput Printing Of Documents
20140089015	13624873	CHEN, GEORGE YUNG CHIEH	3628	PALO ALTO RESEARCH CENTER	Providing Just-In-Time Loading Zone Parking
20120239588	13349557	CHEN, GEORGE YUNG CHIEH	3628	CUMMINS INTELLECTUAL PROPERTY	Determining Freight/Load Distribution For Multiple Vehicles
20150154558	14614919	CHEN, GEORGE YUNG CHIEH	3628	BROADRIDGE INVESTOR COMMUNICATION SOLUTIONS	Automated On-Demand Customizable Assembling High Throughput Printing Of Documents
20110131286	12972610	CHEN, GEORGE YUNG CHIEH	3628	BOOKIT	Booking Method System
20130046663	13211482	HARRINGTON, MICHAEL P	3628	ANALOG DEVICES	Measuring Active/Reactive Powers
20140089021	14094669	JUNG, ALLEN J	3628	PALO ALTO RESEARCH CENTER; XEROX	Providing Multi-Locational Curbside Valet Parking Services
20060004675	11154866	JUNG, ALLEN J	3628	UNITED PARCEL SERVICE OF AMERICA	Offline Processing A Carrier Management System
20130144665	13746646	VETTER, DANIEL	3628	TICKETMASTER	Computer Aided Event Venue Setup Modeling Interactive Maps
20130106569	13719583	ABRAHAMSON, AMANDA C.	3629	SENTRILOCK	Vehicle Activity Module
20140279615	14202218	CASLER, TRACI	3629	LIVE NATION ENTERTAINMENT	Centralized Device-Aware Ticket-Transfer System Method
20080154623	11951988	FLEISCHER, MARK A	3629	LIVE NATION ENTERTAINMENT	Access Control Using A Networked Turnstile
20140162235	14025704	FLEISCHER, MARK A	3629	GOOGLE	Determining Individuals For Online Groups
20110099118	12912644	FLEISCHER, MARK A	3629	AOL	Electronic Distribution Of Job Listings
20110218924	12718569	FLEISCHER, MARK A	3629	ORACLE	Distributed Order Orchestration System For Adjusting Long Running Order Management Fulfillment Processes With Delta Attributes
20120259793	13082710	LINDSEY III, JOHNATHAN J	3629	COMPUTER ASSOCIATES THINK	Transaction Model With Structural Behavioral Description Of Complex Transactions
20110137667	12959876	LINDSEY III, JOHNATHAN J	3629	SIEMENS	Sales Estimating Tool For Building Control System
20110004499	12496881	LINDSEY III, JOHNATHAN J	3629	IBM	Traceability Management For Aligning Solution Artifacts With Business Goals In A Service Oriented Architecture Environment
20100223097	12396467	OFORI-AWUAH, MAAME	3629	GROUPON	Providing Information To Contacts Without Being Given Contact Data
20080001704	11818321	OUELLETTE, JONATHAN P	3629		Childcare Tracking System Method
20130006883	13595831	OUELLETTE, JONATHAN P	3629	WORKSCAPE	Performance Drive Compensation For Enterprise-Level Human Capital Management
20130046706	13497494	OUELLETTE, JONATHAN P	3629	EMPIRE TECHNOLOGY DEVELOPMENT	Analyzing Communications To Determine Business Entity Popularity
20100280964	12770336	OUELLETTE, JONATHAN P	3629		Issuance Conveyance Management Of Endorsements
20140136417	14157423	ALI, HATEM M	3691	GONOW TECHNOLOGIES	Portable E-Wallet Universal Card
20130200999	13836864	ALI, HATEM M	3691	DIGITAL LIFE TECHNOLOGIES	Portable E-Wallet Universal Card
20130024372	13630248	ALI, HATEM M	3691	DIGITAL LIFE TECHNOLOGIES	Portable E-Wallet Universal Card
20120123937	13359352	ALI, HATEM M	3691	DIGITAL LIFE TECHNOLOGIES	Portable E-Wallet Universal Card
20130134216	13717363	ALI, HATEM M	3691	DIGITAL LIFE TECHNOLOGIES	Portable E-Wallet Universal Card
20130232033	13870144	HAMILTON, LALITA M	3691	BROADCOM	Billing Support In A Media Exchange Network
20150186852	14644917	HAMILTON, LALITA M	3691	BANK OF AMERICA	Incident Management For Automated Teller Machines
20120179494	13354915	HAMILTON, LALITA M	3691	HSBC TECHNOLOGIES	Account Opening Flow Configuration Computer System Process For Implementing Same
20140222652	14254030	KAZIMI, HANI M	3691	EPIT	User Interface For An Electronic Trading System
20110320339	13229676	KAZIMI, HANI M	3691	TRADING TECHNOLOGIES INTERNATIONAL	Interface For Historical Display Of Market Information
20130132137	13746044	KAZIMI, HANI M	3691	IBM	Online Registration Block Tracking For Travel Wholesalers Agencies Hotels
20120310807	13316952	POINVIL, FRANTZY	3691	HARTFORD FIRE INSURANCE	Graphically Enabled Retirement Planning
20120330826	13599285	POINVIL, FRANTZY	3691		Virtual Accounts Linked To Financial Accounts
20150220923	14171189	POINVIL, FRANTZY	3691	FMR	Real-Time Spend Management With Savings Goals
20120173421	13496413	POINVIL, FRANTZY	3691	NTT	Electronic Settlement Server Program Thereof
20150112730	14057419	BAIRD, EDWARD J	3692	STATE FARM MUTUAL AUTOMOBILE INSURANCE	Assessing Risk Using Vehicle Environment Information
20130054320	13561244	JOHNSON, GREGORY L	3692		Fast Mobile Payment
20100088228	12572321	LIU, I JUNG	3692	IBM	Dual Layer Authentication For Electronic Payment Request In Online Transactions
20110179042	13079690	WONG, ERIC TAK WAI	3692		Object Modeling For Exploring Large Data Sets
20110251955	13133369	AMELUNXEN, BARBARA J	3693	NXP	Enhanced Smart Card Usage
20130159157	13328961	BORLINGHAUS, JASON M	3693	PALO ALTO RESEARCH CENTER	Energy-Disutility Modeling For Agile Demand Response
20140257874	14203356	MAGUIRE, LINDSAY M	3693	STATE FARM MUTUAL AUTOMOBILE INSURANCE	Determining Monitoring Auto Insurance Incentives
20140304156	13856217	ANDERSON, MIKE W.	3694	GELLER NAKIA	Gold Precious Metal Buying Machine Method
20140180939	13909482	APPLE, KIRSTEN SACHWITZ	3694	APPLICATIONS IN INTERNET TIME	Integrated Change Management Unit
20090198522	12002376	ZIEGLE, STEPHANIE M	3694	HARTFORD FIRE INSURANCE	Equity/Interest Rate Hybrid Hedging System Method
20090319355	12141720	OYEBISI, OJO O	3695	MICROSOFT TECHNOLOGY LICENSING	Presenting Advertisements Based On Web-Page Interaction
20140244494	13792764	PRINSLOW, GARRISON T	3695	DIGIMARC	Smartphone Payments
20100161343	12342908	ROBINSON, KITO R	3695	NCR	Obtaining Diagnostic Data From A Device At A Remote Location
20140074720	13609197	TIBLJAS, SHACOLE C	3695	KING FAHD UNIVERSITY OF PETROLEUM & MINERALS	Virtual Account Token-Based Digital Cash Protocols
20140164233	14100876	CHANG, EDWARD	3696		Data Extraction Method
20130332354	13915173	CHANG, EDWARD	3696	SAMSUNG	Mobile Device and Control Method Thereof
20150227927	14175786	KING JR., JOSEPH W	3696	BANK OF AMERICA	Revocation Of Application Access Based On Non-Co-Located
20150161582	14623418	NGUYEN, LIZ P	3696	QUISK	Self-Authenticating Peer To Peer Transaction
20130238368	13864687	NIQUETTE, ROBERT R	3696	PROGRESSIVE CASUALTY INSURANCE	Customizable Insurance System
20140279447	14272367	PATEL, JAGDISH	3696	SQUARE	Transferring Money Using Email
20140040124	13945533	PATEL, JAGDISH	3696	SONY	Physical-Quantity Receiving Device Physical-Quantity Supplying Device Physical-Quantity Receiving Method Physical-Quantity Supplying Method Storage Medium Having Physical-Quantity Receiving Program Storage Medium Having Physical-Quantity Supplying Program

Note: Many of the titles have been shortened by removing the stock "Methods, Systems, etc." from the beginning; any typographical errors are my own.   

Massachusetts Court Upholds Software Method Patent

By: Stuart P. Meyer

On September 4, a Massachusetts district court issued an interesting ruling that calls into question many of the recent preliminary stage Alice-based invalidations we’ve seen over the past year.  The decision, the latest round in ongoing litigation between DataTern and numerous defendants, is notable for the following reasons:

• It expressly recognizes that the presumption of validity applies to subject matter eligibility, saying that notwithstanding some suggestions in the Federal Circuit to the contrary (see Judge Mayer in Ultramercial III, 772 F.3d at 720-721), the Supreme Court’s unanimous statement in Microsoft Corp. v. i4i Ltd. Partnership, 131 S. Ct. 2238 (2011) was, without qualification, that 35 U.S.C. § 282 requires an invalidity defense to be proved by clear and convincing evidence.  The DataTern court refused to read the Supreme Court’s silence on the issue in its more recent § 101 decisions as creating any sort of exception to that rule.

• The patent at issue (6,101,502) is remarkable in how little hardware it describes in the specification, and the claims are directed, for example, to, “A method of interfacing an object oriented software application with a relational database, comprising the steps of selecting an object model; generating a map …; employing the map …; and utilizing a runtime engine … to access data from the relational database.”  Thus, these are pretty software-centric claims, which have had a dismal track record in recent § 101 challenges.

• After summarizing the post-Alice case law, the court found that “the ‘502 patent is directed at solving a problem that specifically arises in the realm of computing” so computer limitations in the claims are neither just post-solution limitations nor mere specific applications of an abstract idea.

Based on such reasoning, the court denied the motion for summary judgment of invalidity.  If this decision is appealed, it will be interesting to see the Federal Circuit’s reactions to the presumption of validity issue, the minimal recitation of hardware, and the “realm of computing” analysis.  Given the paucity of other cases upholding such software-related claims, we should expect to see this decision cited in numerous other pending cases in the coming months.

Versata: What's "Technological" and the Federal Circuit's New Rule Against Improvements

By: Robert R. Sachs

Part II:  See Part I #AliceStorm: July is Hot, Hot, Hot…and Versata is Not, Not, Not

What Is a "technological invention"?

The other part of the CBM definition at issue in Versata is the exclusion of a technological invention from the scope of CBM review. Correctly, the Court noted that the USPTO's circular definition of technological invention as "essentially one having a “technological” feature that solves a “technical” problem using a “technical” solution," "does not offer much help."  But instead of defining what was technological, the Court looked to what PTAB said was not technological, that is "certain characteristics which, if present, did not help support a finding" that an invention was technological.  Here are PTAB's exclusionary factors:

1) mere “recitation of known technologies”;

2) “reciting the use of known prior art technology”; and

3) “combining prior art structures to achieve the normal, expected, or predictable result of that combination.”

As a general rule you do not define a word by what it is not: the definition of mammal is not creatures that do not have scales, cold blood, and lay eggs.  Similarly, the use of exclusions does not effectively differentiate between technological inventions and non-technological inventions. 

Assume I invent a machine to crack nuts:

 

I apply mechanical engineering principles and equations to ensure that the machine will do exactly what it's supposed to do ("the normal, expected, or predictable result of that combination").  I claim the combination of a motors and gears and so forth ("known technologies").  If we apply the PTAB's exclusionary rules, then my nut cracker is not a technological invention. And if I happen to mention in my patent application that my nutcracker reduces the costs of cracking nuts and thus makes the sale of bulk nuts more profitable, then suddenly I have invented a financial product.  

The problem with this approach is that every invention is made with some existing technologies, which are used precisely for their known purpose, and operate according to the laws of physics and engineering to produce a predictable result.  This is certainly true of every invention in mechanical engineering, electrical engineering, chemical engineering, as well as software, telecommunications, networking, and so forth.  The reality of how inventions are made by humans--using prior technologies in new combinations--can be said to the second law of patent-dynamics.  And just as a scientific theory that violates the second law of thermodynamics is wrong, if a definition of technology violates that rule, then it's wrong as well. (The first law of patent-dynamics is Diehr.)

This exclusionary approach improperly imports novelty and non-obviousness into the definition of technology.  The problem is that In other words, something is technological only if it inventive. That my nut cracker uses known technologies and operates according to known principles to provide predictable results may make my machine obvious, but it is still a machine--it's still technology. 

The Court then turns to Alice to justify the PTAB's definition of technological:

As the PTAB correctly noted, even if the invention required the use of a computer, the claim did not constitute a technological invention. As we are now instructed, the presence of a general purpose computer to facilitate operations through uninventive steps does not change the fundamental character of an invention. See Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014).

Using Alice in this way is reasoning backward.  Alice decided that merely using a general purpose computer did not provide for eligibility.  But that does not mean using a general purpose computer to implement any invention is not technological—unless you solely equate eligible inventions with technological inventions.  However, in Bilski, the Supreme Court refused to impose a technological arts test in Section 101, as requested by the government.  Further, by the Federal Circuit's reasoning, no software-based invention that makes use of a standard computer would be a technological invention.  That's an absurd result—and certainly not what Congress intended when it created CBM reviews.

Everything Is a Financial Product

Let's accept then the USPTO's definition of financial product and the Federal Circuit's endorsement of that definition.  According to the USPTO, financial means "pertaining or relating to money matters."  The Court held that this definition "readily embraces the ’350 patent which expressly claims a “method for determining a price of a product” in Versata's claim 17.  Since a product includes a machine, the following are financial products since they are used determine prices:

 

On the left, we have a state of the art bar code scanning system as you find in many grocery stores and retail outlets.  In the middle, we also have what was the state of the art in 1853, a cash register that totaled prices.  But these are nothing compared to the technology on the right.  These wax tablets were the state of the art 800 years before the time of Christ, and they were reliable enough to be used for another 2,600 years!  "Wax tablets were used for high-volume business records of transient importance until the 19th century. For instance, the salt mining authority at  Schwabisch Hall employed wax records until 1812." If the unknown Roman inventor of the wax tablet mentioned in his patent application that the tablets could be used to determined prices, then according to PTAB and the Federal Circuit, they are financial products as well.  

For your consideration, here are some more financial products:

   and   

These products definitely relate to "money matters," particularly the administration of money.

 

Similarly, the change machine is a certainly an "apparatus" for "management" of "money matters."

 

This price computing scale automatically determines the price of a bulk item based on its weight and price per pound.  Pure financial product.  

And finally, arguably the financial product that forever altered the landscape of the modern gas station, and eliminated the first job that many teenage males held:

This apparatus is a financial product in spades.  Not only does it determine the price in real time as you pump the gas, it also conducts the financial transaction with your financial card.  Further, these machines are linked to back-end systems that calculate the remaining inventories of gasoline. And if you are unlucky enough to use one of the fancy new pumps with a display monitor, those devices selectively present advertisements based on your location.  

Moreover, once it's determined that these are financial products eligible for CBM review, it takes only a few steps to find such inventions patent ineligible.  As for the price determination and the payment?  A gas station attendant used to do that by mental steps (back in the day, teenage males could do math in their heads, since they had to). Inventory management was done by accountants with pencils.  And the customized advertisements based on location--that's just like putting ad inserts into newspapers (see the Federal Circuit's recent Intellectual Ventures decision).  All of this is abstract, implemented with conventional computers, and thus utterly ineligible subject matter. 

I do not believe that Congress really intended all these machines and systems, and the methods they implement, to be considered financial products and services. Nor do I think the USPTO, in its expertise, considered these technologies when it crafted the CBM definitions.  The USPTO's commitment to such broad definitions, along with the Federal Circuit's endorsement, will certainly result in patents being invalidated that were never part of the problem Congress was trying to solve.

Patent Claims vs. The Invention's Benefits

On the merits, the Federal Circuit decided that Versata's patent claim was an abstract idea (method of determining a price) and did not claim substantially more than the concept itself (conventional to do all of the claimed steps in a computer; where else?).  The analysis was itself conventional—the Court again relied on the mental steps doctrine that a person could do the calculations by pencil and paper.  At this point I think the Court is willfully ignoring the trenchant analysis of Judge Pfaelzer of the Central District of California who has shown that the "pencil-and-paper analysis can mislead courts into ignoring a key fact: although a computer performs the same math as a human, a human cannot always achieve the same results as a computer."  California Inst. of Tech. v. Hughes Comm'ns Inc.

What's really striking though is the Court's brusque treatment of Versata's argument that its invention improved the performance of the computer system.  Versata presented evidence that its method reduced the number of database tables and run-time queries, leading to improvements in computer performance and ease of maintenance.  The Federal Circuit finessed this evidence:

Versata argues that its claims recite “a specific approach to determining the price of a product on a computer, using hierarchies so as to enable the desired benefit for the computing environment: fewer software tables and searches, leading to improvements in computer performance and ease of maintenance.” Appellant’s Br. at 43– 44. However, all of the parties—including Versata— recognize that these supposed benefits are not recited in the claims at issue.  Versata contends that the benefits are relevant under Genetics Inst., LLC v. Novartis Vaccines & Diagnostics, Inc., 655 F.3d 1291 (Fed. Cir. 2011), but this case is inapposite since it does not concern section 101.

Examination of the claims—as a whole and in terms of each claim’s limitations—reveals that the claims are not directed to improving computer performance and do not recite any such benefit. The claims are directed to price determination and merely use a computer to improve the performance of that determination—not the performance of a computer.

As a general rule, patent claims do not recite benefits; they recite the structure and function that provide the benefits. To be sure, there are circumstances in the biological, therapeutic, and related arts, where claiming a benefit is an acceptable practice, but in the mechanical, electrical, and software arts, claims are focused on the invention's direct features, not the benefits of the invention—those are described, if at all, in the specification. 

A claimed benefit becomes an express limitation, and thus anyone who does not provide the claimed benefit avoids infringement, even if they otherwise copy the structure or method.  If my inventive nutcracker cracks nuts ten times faster than the prior art, I don't claim "…wherein said nutcracking machine cracks nuts at least ten times faster than the cited references," or other hortatory statement.  Similarly, I would not claim this functionally, such as "wherein said nutcracking machine cracks at least 100 nuts per minute."  Either way, I did claim this benefit, then someone can copy the structure, but just adjust the machine so it operates a bit more slowly.  

Benefits are typically not claimed because in most cases the patent examiner will not give them any patentable weight in distinguishing over the prior art--they are excess baggage.  This is because an apparatus claim must distinguish over the structure of the prior art.  "A claim containing a “recitation with respect to the manner in which a claimed apparatus is intended to be employed does not differentiate the claimed apparatus from a prior art apparatus” if the prior art apparatus teaches all the structural limitations of the claim." MPEP 2114 Thus, when every word in a patent claim can and will be used against the patentee in a court of law, claiming benefits is likely to do more harm than good.  When it come to methods (like Versata), claiming a benefit often does little to distinguish over the art.

The Federal Circuit should know this.  Indeed, its rulings suggest prosecutors should avoid reciting objects of the invention and lauding features as superior, lest such objects or features limit the claim construction.  Dismissing Versata's argument without any consideration at all because it did not claim the benefits punishes it for adhering to long-standing practices of claim drafting—practices which the Court itself has molded in precisely this way over the years. 

Further, nothing in Alice, Bilski, Benson, Diehr, or Flook suggests, let alone imposes, a rule that only benefits that are claimed can satisfy the safe harbors of improving the functioning of the computer or improving another technology.  At least the Supreme Court got that right.

In properly dismissing Versata's argument that Section 101 cannot be raised in a CBM, the Court notes:

It would require a hyper-technical adherence to form rather than an understanding of substance to arrive at a conclusion that § 101 is not a ground available to test patents under either the PGR or § 18 processes.

But a hyper-technical adherence to the form of the claim, rather than an understanding of the substance of the invention, is precisely what the Court is doing with its rule requiring benefits to be claimed.  

The Federal Circuit has created a very damaging rule, because it lets the courts disregard any evidence of improvements in technology if the benefits are not claimed--which will be the case 99% of the time (at least in the mechanical, electrical, and software arts). Thus, what the Supreme Court gave with one hand, the Federal Circuit has taken away with a formalist meat cleaver.  

Conclusion

The USPTO has adopted definitions of a covered business method patent that conflict with the underlying context of the patent statute, the rules of English grammar, and the basic logic of how inventions are made.  The Federal Circuit has approved these definitions, without consideration of how they play out in real life.

The CBM definitions should instead be based on the widely accepted definitions of financial products and services.  That would comport with the background of the CBM legislation and a correct reading of the statute.  

When it comes to defining what is technology, that may not be easy, but the USPTO's "way of negation" is simply the wrong approach.   Even starting with a dictionary definition would have been better:

1. the branch of knowledge that deals with the creation and use of technical means and their interrelation with life, society, and the environment, drawing upon such subjects as industrial arts, engineering, applied science, and pure science. 
2. the application of this knowledge for practical ends.
3. the terminology of an art, science, etc.; technical nomenclature.
4. a scientific or industrial process, invention, method, or the like.
5. the sum of the ways in which social groups provide themselves with the material objects of their civilization.

If the standard dictionary was the correct resource for the meaning of financial, why did PTAB and the Federal Circuit ignore it when defining technological?  

 

But I would not stop at the dictionary.  There is an entire literature on technology that can and should be considered.  If nothing else, the USPTO and the Federal Circuit can start with Wikipedia--at least there they will find a history of technology, and explanation and analysis that is missing from the dictionary.  Better yet, they can dive into the philosophy of technology.  Or if philosophy is too messy, they can use the more commercial approach of the United Nations Conference on Trade and Development, which defines technology as the "systematic knowledge for the manufacture of a product, for the application of a process or for the rendering of a service."  (UNCTAD, Transfer of Technology, 2001). This knowledge includes 1) the  technical knowledge on which the end product is based, 2) the organizational capacity to convert the relevant productive inputs into the finished item or service, 3) knowledge or methods that are necessary to carry on or to improve the existing production and distribution of goods and services, 4)  the ability develop entire new products or processes as needed, and 5) entrepreneurial expertise and professional know-how.   

 

If the USPTO and the judges have time to read only one book on technology and the nature of invention, then this is it:  Subrata Dasgupta, Technology and Creativity, (New York: Oxford University Press, 1996).  This is by far the best I've read on the subject.  Dasgupta provides a deeply reasoned analysis of how technology is developed and lays out a theory that explains creative developments--essentially how to identify whether something is a technologically inventive concept.  

#AliceStorm: July is Smoking Hot, Hot, Hot…and Versata is Not, Not, Not

By: Robert R. Sachs

NOTE (July 14, 2015): When I wrote this piece on Sunday, there were only 7 decisions announced through July 10. When I came to work on Monday, there were three more, so I revised and published yesterday with the count at ten.  Now today, two more decision from July 10!

All of the tables have been updated accordingly.

Perhaps I should just wait until tomorrow?

Part I: #AliceStorm and Versata

July invokes images of hot days, cool nights, and fireworks.  When it comes to #Alicestorm, the fireworks are happening in the courts, with the Federal Circuit lighting up the sky.

In just the first ten days of July, there have been ten twelve decisions on patent eligibility—more decisions in first ten days of any month since Alice was decided last year the dawn of time.  At this pace, we could see some twenty to thirty decisions this month.   #AliceStorm is accelerating. 

Here are the numbers by motion type:

Here are the numbers for all the courts, by tribunal:

Finally, here's a summary of the number of Section 101 decisions by the various judges on the Federal Circuit since Alice:

I leave the interpretation of this graph as an exercise for the reader.

Versata: The Federal Circuit is Large and In Charge

While the indices are steady, the recent decisions are very interesting.  Most importantly, there have been two Federal Circuit decisions in July, Versata Development Group v. SAP Am., Inc. and Intellectual Ventures I LLC v. Capital One Bank (USA), both of which found the patents in suit ineligible.  Today, I'll focus on Versata.

Versata was a closely watched appeal since it was the first appeal to the Federal Circuit of a Covered Business Methods review.  The Court covered a lot of ground including 1) whether it could review PTAB's determination that Versata's patent was eligible for CBM review, 2)what is the meaning of "covered business method patent," including whether USPTO's definitions of a "financial product or service" and "technological invention" were correct, 3) what is the appropriate standard for claim construction, broadest reasonable interpretation or one correct construction, and 4) an evaluation of the merits. Briefly, the court decided:

• The Court can review PTAB final decisions, even when they touch upon the same legal issues that lead to the institution decision (which the Federal Circuit does not have authority to review), including whether a patent qualifies as a covered business method patent;
• The USPTO's definitions of covered business method patent (which simply copies the statutory language without any definition at all) are just fine.
• PTAB can use broadest reasonable construction; and
• Versata's patent is for a financial service, not a technological invention and is an ineligible abstract idea.

I'm not going to do an extensive analysis of the Federal Circuit's handling of all these issues.  Essentially, the Federal Circuit is saying: PTAB, keep up the good work of invalidating patents, but just remember, we're still in charge. Instead, I'm going just to highlight some of the issues in the Court's reasoning regarding the definitions of a covered business method patent.

As background, Versata's patent is a way of determining prices where you have a very complex collection of products types and business groups, all overlapping and intersecting. Consider a company like General Motors with dozens of divisions and subsidiaries, hundreds of cars, and millions of parts.  The problem is that conventional systems use multiple database tables to track and compute prices, requiring significant storage and reducing run-time performance.  In a nutshell, Versata used hierarchical data structures representing product and business organizational hierarchies to store and compute product prices.  By using hierarchical data structures, Versata's invention saved memory and resulted in faster run-time performance than existing approaches. 

What Is a Financial Product or Service?

Section 18(d)(1) of the statute that authorizes the CBM review states that a covered business method patent is:

a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions

The question is what is a financial product or service.  The Court adopted the USPTO's parsing of the phrase into financial and product or service.   In doing so, the Court adopted PTAB's incorrect grammatical parsing of the statute, which looked at the definition of financial apart from products and services.  According to PTAB, “The term financial is an adjective that simply means relating to monetary matters."

Running with this analysis the court concludes:

We agree with the USPTO that, as a matter of statutory construction, the definition of “covered business method patent” is not limited to products and services of only the financial industry, or to patents owned by or directly affecting the activities of financial institutions such as banks and brokerage houses. The plain text of the statutory definition contained in § 18(d)(1)— “performing . . . operations used in the practice, administration, or management of a financial product or service”— on its face covers a wide range of finance-related activities. The statutory definition makes no reference to financial institutions as such, and does not limit itself only to those institutions.

To limit the definition as Versata argues would require reading limitations into the statute that are not there.

This analysis is incorrect. The phrase financial product or service is not just the adjective financial modifying the nouns products and services—it's not like sweet pastries and pies or funny songs and videos or complex issues and problems.  Rather, financial product and financial service are open compound nouns, like high school, cell phone, and half sister.  The meaning of these nouns is not determined by looking at the meaning of the individual words; the entire noun has its own meaning. When you attended high school, you did not go to a school that was "of great vertical extent"; when you speak on your cell phone you're not talking on a telephone made of "the smallest structural and functional unit of an organism."  And when you offer to introduce me to your half sister, I don't ask "Left or right?"

The term financial product means something specific and different from the simple combination of financial and product.  It's important to remember that the Covered Business Method program was pushed by three of the largest financial lobbying groups: the Financial Services Roundtable, the Independent Community of Banks of America, and the Securities Industry and Financial Markets Association. In the financial industry, financial products and services has a specific meaning.  

Consider the following definitions of financial product:

a product that is connected with the way in which you manage and use your money, such as a bank account, a credit card, insurance, etc.
Cambridge Dictionary of Business English

Financial products refer to instruments that help you save, invest, get insurance or get a mortgage. These are issued by various banks, financial institutions, stock brokerages, insurance providers, credit card agencies and government sponsored entities. Financial products are categorised in terms of their type or underlying asset class, volatility, risk and return.
EconomyWatch

Better yet, look at the Australian Treasury's definition:

The overarching definition of financial product will focus on the key attributes of, and functions performed by, financial products. A financial product will be defined as: 

A facility or arrangement through which a person does one or more of the following: 

— Makes a financial investment; 
— Manages a financial risk; 
— Obtains credit; or 
— Obtains or receives a means of payment.

The facility or arrangement may be provided by means of a contract or agreement or a number of contracts or agreements.

The term financial services is equally specific:

Financial services are the economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit card companies, insurance companies, accountancy companies, consumer finance companies, stock brokerages, investment funds, real estate funds and some government sponsored enterprises.
Wikipedia, "Financial services"

Financial Services is a term used to refer to the services provided by the finance market. Financial Services is also the term used to describe organizations that deal with the management of money. Examples are the Banks, investment banks, insurance companies, credit card companies and stock brokerages.
Streetdictionary.com, "What exactly does financial services mean?"

The USPTO and the Federal Circuit ignored these definitions of financial products and services as used by the very industries that sought protection from abusive business methods patents.  The Court even notes that "It is often said, whether accurate or not, that Congress is presumed to know the background against which it is legislating." Indeed, it did here, but the Court simply chooses to discount both that background and correct English language usage.  

The Court further argues that the statutory definition makes no reference to financial institutions as such, implying that Congress did not intend to limit financial products and services to the financial services industries.  To riff off the logical fallacy---evidence of an absence is not the absence of evidence.  There was no need to mention explicitly the financial industry in the statute because the industry context is built into the terms themselves. Contrary to the Court's final statement, the limitations are already in "the plain text of the statute."  

In short, looking up the Random House definition of the adjective financial apart from financial products and services is like extracting greasy from spoon and concluding that a greasy spoon is an oily small, shallow oval or round bowl on a long handle. 

Whether you are talking business or busing tables, you must interpret words according to the relevant context, the relevant grammar, and the relevant dictionary.  

Deference to the USPTO's Expertise: Only Sometimes

In concluding its analysis of the meaning of a covered business method patent, the Court relies on a deference argument.  In its final paragraph regarding the propriety of USPTO's definition of financial product and services, the Court says:

Furthermore, the expertise of the USPTO entitles the agency to substantial deference in how it defines its mission.  

The overall mission of the USPTO is to issue patents for inventions.  The Ninth Circuit made a similar observation about the Copyright Office. In Garcia v. Google, the Copyright Office refused to register Garcia's five-second appearance in a film. The Ninth Circuit noted "We credit this expert opinion of the Copyright Office—the office charged with administration and enforcement of the copyright laws and registration."  And thus the Ninth Circuit found it appropriate to defer to the office's expertise in deciding copyrightable subject matter.  The parallel could not be more perfect: the USPTO is the office charged with the administration and enforcement of the patent laws and registration.   Likewise, the courts should defer to its expertise as well.

Here, when the USPTO comes up with a definition of technology in its interpretation of Section 18(d)(1) of the patent statute--a very small part of its mission--the Federal Circuit says that the Office is due substantial deference. Yet, when the Office comes up with a definition of Section 101--the section of the statute most fundamental to its mission--and when an examiner implements that definition and determines that a particular claim satisfies Section 101, that definition and that decision is given no deference at all.  

Thus, I find it rather inconsistent of the Court to be deferential the USPTO's definition of technology in a very narrow context, but entirely dismissive of the USPTO's historical expertise in identifying patent eligible subject matter.  When it comes to patents, the USPTO is like Rodney Dangerfield: it gets no respect.

See Part II Versata:  What's Technological and The New Rule Against Improvements

 

Did You Mean to Claim a Function? How the USPTO Applies Section 112(f) to Software Patents

By: Robert R. Sachs

Patent eligibility is not the only area in which the Federal Circuit's rulings have impacted software patents.  The Court has also altered course in handing means-plus function claims in several recent cases including Eon v. ATT and Williamson v. Citrix. To learn how these rulings will effect software patents, your company's IP portfolio and your overall business, please join me next week in a webinar hosted by the Intellectual Property Owners Association on Algorithms and Software Patents: USPTO and Litigation Perspectives, on Tuesday, July 14, at 2:00pm ET.   Carolyn Kosowski of the USPTO’s Patent Legal Administration at the USPTO will present the Office’s current framework for examining means-plus function claims, after which I and Douglas Luftman, Vice President of Innovation Services and Chief IP Counsel for NetApp, will offer the perspective of patent prosecutors and in house counsel.

 

Click here to register.

 

Federal Circuit Creates New (non-Alice) Hurdle for Software Patents

By: Stuart P. Meyer

In the wake of last year’s Supreme Court decision in Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014), dozens of courts have declared scores of patents to be invalid as not satisfying the requirements of §101 of the patent statute. The Federal Circuit recently issued a decision that provides the same result but does not rely on the Alice standard and may have a significant and lasting impact on patents for software-related inventions. Allvoice Devs. US, LLC v. Microsoft Corp., No. 2014-1258, 2015 U.S. App. LEXIS 8476 (Fed. Cir. May 22, 2015). In Allvoice, the Federal Circuit declared a patent’s claims to be invalid because it simply found them not to be directed to one of the four statutory categories of inventions identified in §101.

The Alice case and its progeny have all relied on certain judicially created exceptions to §101, stating that inventions are not of a patentable type if, for instance, they encompass an abstract idea. Various tests evolved over the past few years, culminating in Alice, to determine whether the claims of a patent fall into one of these judicially created exceptions. In Allvoice, the Federal Circuit took a very different approach.

Judge O’Malley, writing an opinion for a unanimous panel including Judges Prost and Dyk, took a strictly literal reading of §101 and said that if a patent claim does not recite an invention that matches one of the four categories recited therein (i.e., a “process, machine, manufacture, or composition of matter”), it is invalid.

For context, the patent at issue is U.S. Patent No. 5,799,273, which carries the somewhat awkward title, “Automated proofreading using interface linking recognized words to their audio data while text is being changed.” The patent has 78 claims. Independent claims 1, 52, 69, and 75 are directed to “data processing apparatus.” Independent claims 15 and 54 are directed to “a data processing arrangement.” Independent claims 28, 56, 71, and 77 are styled as “a data processing method,” while independent claims 40 and 58 begin, “a method of processing data.” Independent claims 51 and 73 are directed to “a computer usable medium having computer readable instructions.” Independent claims 60 and 64 recite “a universal speech-recognition interface.”

It is the last of these that the Federal Circuit considered to be outside the ambit of §101. The court began its analysis by stating that, “except for process claims, the eligible subject matter must exist in some physical or tangible form.” (quoting Digitech Image Techs., LLC v. Elecs. for Imaging, Inc., 758 F.3d 1344, 1348 (Fed. Cir. 2014)). Diving deeper, the court quoted other passages from Digitech, with citations back to the mid-1800s, for the notion that manufactures and compositions of matter must be tangible.

In contrast, the Allvoice court held that claims 60 and 64 (and their dependents) “do not recite a process or tangible or physical object and, thus, do not fall within any of the categories of eligible subject matter.” The court noted that Allvoice had, at the district court level, argued that the claims were limited to software, but before the Federal Circuit, argued that the claimed interfaces are software instructions. The Federal Circuit held that unless a process is claimed, “the subject matter must exist in tangible form. Here, the disputed claims merely claim software instructions without any hardware limitations.”

Closer review of the claims calls this conclusion into question. The claims recite interfaces that comprise three elements: “input means for receiving speech-recognition data,” “output means for outputting the recognized words,” and “means… for determining positions of the recognised words.” The Federal Circuit relegated to a footnote any recognition that this claim form might benefit from the functional claim provisions of §112(6) of the patent statute and essentially ignored that issue based on an assertion that, “the means-plus-function limitations, as construed by Allvoice, do not correspond to tangible structure.”

Thus, the court appears to have simply looked to what it saw as a flawed argument by Allvoice, rather than independently reviewing the specification to determine proper means-plus-function determination of these claim elements. Such an approach seems particularly harsh, placing undue emphasis on lawyering skills as opposed to the court’s independent review of the patent. In this instance, figure 2 of the patent “illustrates a schematic overview of the internal architecture of the computer” and shows the speech recognition interface as being part of a processor of that computer. See ’273 patent at column 5, lines 37 – 44. More generally, the patent includes several system block diagrams and corresponding flow charts describing at several levels the tangible structures that correspond to the elements of the claimed interface. For reasons that are not explained in the opinion, though one might surmise conservation of judicial resources, the Federal Circuit chose not to independently undertake analysis of the patent but instead to allow these claims to fail due to the way that the patent owner’s counsel characterized them in litigation.

Notably, the Allvoice opinion is marked “NOTE: This disposition is nonprecedential.” Under old Federal Circuit rules, nonprecedential opinions could not be cited by parties to later cases in briefs and the like, but this has not been the case since 2007. Current Federal Circuit Rule 32.1 says that a panel of the court can designate an opinion as nonprecedential, but that no longer prevents parties from citing to it or prevents the court from looking to it “for guidance or persuasive reasoning.” In addition, not just parties but “any person” is afforded 60 days after issuance of a nonprecedential opinion or order to request that it be reissued as precedential.

What is particularly concerning in this instance is that other courts may adopt the approach in Allvoice as a convenient proxy for invalidating patents — one that may be even easier to apply than the Alice test. It would be incorrect to look at a claim that begins “an interface comprising” and invalidate such a claim merely because an interface is not necessarily a process, machine, manufacture, or composition of matter.

Practitioners would be wise to take note of this decision in framing claims as well. Constructs that have been commonplace for years may now be suspect if the Allvoice approach begins to be used by courts in other cases. Particularly in the case of software-implemented inventions, but also in other circumstances, patent lawyers may want to clarify both the nature of the interfaces, engines, systems and the like in their claims both to clearly show the tangible aspect of these and to tie them as directly as possible to the specific statutory categories.

One important aspect of §101 that the Allvoice court did not appear to consider is that §101 is not, by its own terms, limited to the four categories recited above. The actual text of the statute reads, “process, machine, manufacture or composition of matter, or any new and useful improvement thereof.” It does not follow that an improvement to a machine must itself be a machine, for instance. For example, a machine can be improved by adjusting it in a particular way. More specifically, a computing machine may be improved by programming it in a particular way. That Congress intended §101 to be broadly rather than narrowly interpreted is settled law, so ignoring or strictly limiting the “improvement” language in §101 would be difficult to square with dozens of Federal Circuit and Supreme Court decisions.

It may be that courts and the Patent and Trademark Office itself are enjoying the convenience of invalidating patents and rejecting patent applications based on simplistic analysis of what qualifies as patentable subject matter. It may be that such approaches provide a quick and inexpensive way to dispose of poorly written claims and overly aggressive patent plaintiffs. However, there is great danger in such an approach as well, since such shortcuts can lead to invalidation of patent claims that do not deserve such a fate. Patent law is not easy, and we must be careful not to jump to anything that seems like too simple a solution. As always, we will see how the situation develops and report further.

 

The One Year Anniversary: The Aftermath of #AliceStorm

By: Robert R. Sachs

It's been one year since the Supreme Court's decision in Alice Corp. v. CLS Bank. On its face the opinion was relatively conservative, cautioning courts to "tread carefully" before invalidating patents, and emphasizing that the primary concern was to avoid preemption of "fundamental building blocks" of human ingenuity.  The Court specifically avoided any suggestion that software or business methods were presumptively invalid.  But those concerns seem to have gone unheeded.  The Court's attempt to sidestep the tricky problem of defining the boundary of an exception to patent eligibility—"we need not labor to delimit the precise contours of the "abstract ideas category in this case""—has turned into the very mechanism that is quickly "swallow[ing] all of patent law.” The federal courts, the Patent Trial and Appeal Board, and the USPTO are using the very lack of a definition to liberally expand the contours of abstract ideas to cover everything from computer animation to database architecture to digital photograph management and even to safety systems for automobiles.

Let's look at the numbers to present an accurate picture of the implications of the Supreme Court’s decision. My analysis is a data-driven attempt to assess the implications of Alice one year out. It is with an understanding of how the Supreme Court’s decision is actually playing out in the theater of innovation that we can better project and position ourselves for what the future holds.

Alice at Court

As of June 19, 2015 there have been 106 Federal Circuit and district court decisions on § 101 grounds, with 76 decisions invalidating the patents at issue in whole or in part.  In terms of patents and claims, 65% of challenged patents have been found invalid, along with 76.2% of the challenged claims. 

The success rate of motions on the pleadings (including motions to dismiss and judgments on the pleadings) is extremely impressive:  67% of defense motions granted, invalidating 54% of asserted patents.  There has never been a Supreme Court ruling that the presumption of validity does not apply to § 101—only the Court's use of the originally metaphorical notion that eligibility is a "threshold" condition.  Given that, and the general rule that to survive a motion to dismiss the patentee (historically) need only show that there was a plausible basis that the complaint states a cause of action— there is a plausible basis that the patent claim is not directed to an abstract idea, law of nature, or natural phenomena.  One would be forgiven for thinking, as did former Chief Judge Rader in Ultramercial, LLC v. Hulu, LLC that a “Rule 12(b)(6) dismissal for lack of eligible subject matter will be the exception, not the rule.”  Apparently the rules change in the middle of the game.

Turning specifically to the Federal Circuit, the numbers are stark:

Of the 13 decisions, 11 are in software or e-commerce and only two are in biotech.  The one case where the court held in favor of the patentee, DDR Holdings, LLC v. Hotels.com, L.P. appeared to offer a narrow avenue for patentees to avoid invalidation.  However, only nine district court opinions have relied upon DDR to find patent eligibility, with over 30 court opinions distinguishing DDR as inapplicable.  Even more interesting is the fact that in DDR the Federal Circuit essentially held that creating a website that copies the look and feel of another website is patent eligible.  In the Silicon Valley, that's called phishing, and it's not a technology in which most reputable companies invest.

Alice at the Office

The impact of Alice is similarly impacting practitioners before the USPTO.  In December, 2014 the Office issued its Interim Guidance on Patent Subject Matter Eligibility, providing guidance to patent examiners as to how to apply the Alice, Mayo, and Myriad decisions along with various Federal Circuit decisions, to claims during prosecution.  Importantly, the Guidance noted that "the Supreme Court did not create a per se excluded category of subject matter, such as software or business methods, nor did it impose any special requirements for eligibility of software or business methods,” and it reminded examiners that "Courts tread carefully in scrutinizing such claims because at some level all inventions embody, use, reflect, rest upon, or apply a law of nature, natural phenomenon, or abstract idea."  Alas, most patent examiners are acting as if the patent applications before them are the exceptions to these cautionary instructions. 

With the assistance of Patent Advisor, I compiled a dataset of almost 300,000 office actions and notice of allowances sampled in two week periods during 2013, 2013, 2014 and early 2015, and all actions during March, April and May 2015, across all technology centers: 

About 100,000 actions were notices of allowances, leaving about 200,000 office actions.  Each office action was coded as to whether it included rejections under §§ 101, 102 and 103.  For each office action the art unit and examiner was identified as well, and the status of the application (abandoned, pending or patented) as of the date that the data was obtained.  I then analyzed the data for office actions rejections based on § 101, allowance rates, and examiner rejection rates.  Here's what I found. 

 Percent of all Actions with § 101 Rejections

Here, we have the percentage of all actions in each period that received a § 101 rejection, considering both rejections issued and notices of allowances.  The black line separates pre-Alice from post-Alice data.  For example, in TC 1600, the biotech area, in January, 2012 6.81% of all actions issued (counting both office actions and notices of allowances) were office actions with § 101 rejections; by May 2015 that percentage almost doubled to 11.86% of actions.   

Overall, data shows that in 2012 subject matter rejections were mainly in the computer related Tech Centers (2100, 2400) and began declining thereafter, while escalating in biotechnology (1600) and so-called "business methods" Tech Center, TC 3600, following Mayo and Alice.   Other technology centers such as semiconductors and mechanical engineering had essentially low and constant rejection rates.  But that's not because there are no software patents in these technology centers: you find plenty of software patents in these groups. Rather, my view is that it is because examiners in these groups treat software patents as they do any other technology.  

The rejection rates in Tech Center 3600 in the 30-40% range are higher than any other group, but they also mask what's really going on, since TC 3600 covers more than business methods.  Tech Center 3600 has nine work groups:

Percent of all Actions with § 101 Rejections in TC 3600 Work Groups

In TC 3600 most of the work groups handle good old-fashioned machines and processes, such as transportation (3610), structures like chairs and ladders (3630), airplanes, agriculture, and weapons (3640), wells and earth moving equipment (3670), etc.  Three work groups handle e-commerce applications: specifically, 3620, 3680 and 3690.  Here we see that these groups have significantly higher § 101 rejections than the rest of TC 3600.  But let's drill down further. 

Each of work groups 3620, 3680 and 3690 have between five and 10 individual art units that handle specific types of e-commerce technologies, but they are not all under the same work group. For example business related cryptography is handed by both art units 3621 and 3685; healthcare and insurance is handled by art units 3626 and 3686; operations research is handled in 3623, 3624, 3682 and 3684. If we consolidate the data according to technology type and then look at rates of § 101 rejections we get the following: 

Percent of all Actions with § 101 Rejections in E-Commerce Art Units by Technology Type

What's going on?  After Bilski in 2010, the § 101 rejections were running between 17% and 50%. Not great but tolerable since these were mostly formal and were overcome with amendments adding hardware elements ("processor," "memory") to method claims or inserting "non-transitory" into Beauregard claims. 

But after Alice, everything changed and § 101 rejections started issuing like paper money in a hyperinflation economy.  If your perception as a patent prosecutor was that the every application was getting rejected under § 101, this explains your pain.  Here's another view of this data, in terms of actual number of § 101 rejections per sample period:

Number of Office Actions with § 101 Rejections in E-Commerce Art Units by Technology Type

Notice here that the number of office actions in March, 2015 fell dramatically, and then in April the flood gates opened and hundreds of actions issued with § 101 rejections.  This is consistent with the Office's statements in January 2015 that it was training examiners in view of the 2014 Interim Guidance, so office actions were being held until the training was completed.  Apparently, the training skipped the part about no per se exclusions of business methods. 

 Now let's consider notice of allowance rates. First with respect to all Tech Centers. 

Percent of Actions that Are Notices of Allowance

This data reflects, of all the actions that were issued in a given period, the percentage that were notices of allowances. (Note here that contrary to the preceding tables, red cells are low percentage, and green cells are high since notices of allowance are good things, not bad things).  The numbers look good, with a general increasing trend over time.

Now consider what's happening in TC 3600's business methods art units. 

Percent of Actions that Are Notices of Allowance in Business Methods

Now the picture is quite different.  The rate of NOAs drops dramatically after Alice, especially in finance and banking and operations research.  If it seemed that you were no longer getting a NOAs, this is why.  The zero percent rate in March, 2015 is a result of the Office holding up actions and NOAs in view of the Interim Guidance training, as mentioned above.

Patents issued in the business methods art units typically are classified in Class 705 for "Data Processing."  I identified all patents with a primary classification in Class 705 since January, 2011, on a month by month basis, to identify year over year trends. Again the black line separates pre-Alice from post-Alice data.

This table shows a precipitous decline in the number of business method patents issued following Alice, especially year over year.  The lag between the June, 2014 Alice decision and the drop off in October 2014 is an artifact of the delay between allowance and issuance, as well as the USPTO's unprecedented decision to withdraw an unknown number of applications for which the issue fee had already been paid, and issue § 101 rejections.  It's an interesting artifact, as well, that the number of Class 705 patents issued peaked in the month after Alice: you have to remember that these patents were allowed at least three months, and as much as a year, before the Alice decision; it just took a long time to actually get printed as a patent.

Next, we'll consider abandonment rates, on a comparative basis, looking at the percentages of applications that were ultimately abandoned in relationship to whether or not they received a § 101 rejection.  We'll compare the data from January 2012 to July 2014. Again, consider the entire patent corps: 

Percent of Abandoned Applications with Prior § 101 Rejection

Here we see that of the applications that were abandoned during the respective sample periods, the vast majority did not have a prior § 101 rejection.  Only in TC 3600 did the majority shift after Alice with 51.83% applications that received § 101 rejections in July 2014 being subsequently abandoned by May 31, 2015.  Again, let's drill down into the business method art units in TC 3600:

 Percent of Abandoned Applications with Prior § 101 Rejection

First, prior to Alice, abandonments in the business method units appeared to result more frequently from other than § 101 rejections, typically prior art rejections.  This is shown by the fact that the Jan. 2012 "No" column (no prior 101 rejection) is greater than the Jan. 2012 "Yes" column.  Then after Alice, there is a huge shift with the vast majority of applications that were abandoned having § 101 rejections, as shown by the July, 2014 "Yes" column.  The vast majority of abandonments, upwards of 90%, followed a 101 rejection.   That's applicants essentially giving up over what only a few years ago was a relatively minor hurdle.  That's what happens when you change the rules in the middle of the game. Second, there is also significant differential behavior in the business method areas as compared to the rest of the technology centers after Alice. 

Here's my personal favorite.   

Rates of Examiner § 101 Rejections in TC 3600

This table shows the numbers of examiners in the business method art units with respect to the percentage of applications in which they issued § 101 rejections after Alice.  The first row shows that during the sampled periods since Alice, 58 business methods examiners issued § 101 rejections in 100% of their applications, for a total of 443 applications.  Twenty examiners issued § 101 rejections for between 90% and 99% of their cases, covering 370 applications.  In short, 199 examiners issued § 101 rejections more than 70% of the time, covering 3,304 applications or about 70.6% of all applications.  This is not "treading carefully."

We find similar, though less dramatic, trends and variations in TC 1600 which handles biotechnology, pharma, and chemistry.

Percent of all Actions with § 101 Rejections in TC 1600 Work Groups

The red line separate pre-Mayo/Myriad data from post-Mayo/Myriad, and the increase in the post-period is significant.  Here too, the various work groups mask the more significant rejection rates in specific technology areas, with the rejection rate in microbiology first jumping up to 34.6% post-Mayo and steadily climbing to the current 53.2%.   

Percent of all Actions with § 101 Rejections in TC 1600 by Technology

This table breaks down the work groups into technology types, and then these are sorting average rejection rate over the past four months.  Following Alice, we see a significant increase in eligibility rejections in bioinformatics related applications--inventions that rely on analysis and identification of biological and genetic information, and which are frequently used in diagnostics and drug discovery.  This is especially disconcerting because bioinformatics is critical to the development of new diagnostics, therapies and drugs.  

Note as well the enormous spike in rejections for plant related applications from 0% between July 2015 and April 2015, to 50% in May 2015. This is likely a result again of the USPTO's Interim Guidance which essentially instructed examiners to reject any claim that included any form of a natural product.  

At least pesticides and herbicides are safe from Alice, since we definitely need more of those.  The irony is that the more pesticides and herbicides that come to market, the more we need bioinformatics inventions to identify and treat conditions potentially resulting from these products.  

Alice at the Board

The Patent Trial and Appeal Board has been even more hostile to software and business methods patents under the Covered Business Method review program:

	Total Petitions	Petitions Granted	Percent Invalid
PTAB CBM Institution on § 101	72	64	89%
PTAB Final Decisions on § 101	27	27	100%

Covered Business Method review is available for patents that claim "a method, apparatus, or operation used in the practice, administration, or management of a financial product or service."  The Board takes a very broad view of what constitutes a financial product or service: if the patent specification happens to mention that the invention may be used in a financial context such as banking, finance, shopping or the like, then that's sufficient.  The Board has found CBM standing in 91% of petitions, and instituted trial in 89% of petitions asserting § 101 invalidity.   Once a CBM trial has been instituted, the odds are heavily in the petitioner's favor: of the 27 final CBM decisions addressing § 101, the Board has found for the petitioner 100% of the time. 

 Finally, we look at the Board's activity in handling ex parte appeals from § 101 rejections for the period of March 1, 2015 to May 30, 2015: 

• 32 Ex Parte Decisions on § 101, with 15 in TC 3600.
• 28 Affirmances overall, 13 in TC 3600
• Two Reversals on § 101, both in TC 3600
• Four New Grounds of Rejection for § 101

Following suit with how the Board is handling CBMs, they are also heavily supporting examiners in affirming § 101 rejections.  More disconcerting is the trend of new grounds of rejection under § 101.  While only four were issued in this period, there have been several dozen since Alice. In this situation, the applicant has appealed, for example, a § 103 rejection.  The Board can reverse the examiner on that rejection, but then sua sponte reject all of the claims under § 101.  What are the odds that the examiner will ever allow the case?  Close to zero. What are the odds that an appeal back to the Board on the examiner's next § 101 rejection will be reversed?  If the Board's 100% rate of affirming its CBM institution decisions on § 101 is any indication, then you know the answer. 

Conclusions

Looking at the overall context of the Alice decision, it's my view that Supreme Court did not intend this landslide effect.  While they were certainly aware of the concerns over patent trolls and bad patents, they framed their decision not as a broadside against these perceived evils, but as simple extension of Bilski and the question of whether computer implementation of an abstract idea imparts eligibility.  At oral argument, the members of the Court specifically asked if they needed to rule on the eligibility of software and they were told by CLS and the Solicitor General that they did not.  To the extent that there is broad language in that opinion, it is the cautionary instructions to the courts to avoid disemboweling the patent law from the inside, and the emphasis on preemption of fundamental ideas—not just any ideas—as the core concern of the exclusionary rule.  The evidence above shows that these guideposts have been rushed past quite quickly on the way to some goal other than the preservation of intellectual property rights.

 If the present trends hold, and I see no reason to suggest that they will not, we will continue to see the zone of patent eligibility curtailed in software (not to mention bio-technology after Mayo and Myriad).  Indeed, the more advanced the software technology—the more it takes over the cognitive work once done exclusively by humans, the more seamless it becomes in the fabric of our daily lives—the less patent eligible it is deemed to be by the courts and the USPTO.  What technologies will not be funded, what discoveries will not be made, what products will never come to market we do not know.  What we do know is this: there is only one law that governs human affairs and that is the law of unintended consequences. 

  

Tracking #AliceStorm: Spring Showers Continue to Rain Patent Destruction

By: Robert R. Sachs

It's been six weeks since my last AliceStorm update, and we've had plenty of action: twelve §101 decisions, and fourteen patents invalidated in just that period. That said, the success rate of motions on the pleadings is dropping, now down to a mere 69.6%. At PTAB, ten new institution decisions, all of which were granted on ineligibility grounds. And PTAB continues with its 100% kill rate, with seven (!) final decisions invalidating patents.

Here's the data.

	Total	Total Invalid	% Invalid	+/-
Fed. Cir and  Dist. Ct. Decisions	90	63	70.0%	-3.9%
Patents	215	131	60.9%	-10.4%
Claims	4,497	3,282	73.0%	-7.3%
Motions on Pleading	46	32	69.6%	-7.6%
PTAB CBM Institution Decisions on 101	51	44	88.5%	1.52%
PTAB CBM Final Decisions on 101	27	27	100%	0%

May 28, 2015:  

First, an update from the AIPLA Spring Meeting. Drew Hirshfeld, Deputy Commissioner of Patent Examination Policy made some interesting announcements. First, the Office is preparing to release additional examples of eligible and ineligible patent claims for both life sciences and software; he would not give a firm date, but suggested that it would by the end of June. Second, in response to a direct question from a member of the audience as to whether there was a "101 panel" that reviewed all 101 rejections, Hirshfeld specifically stated that there was no such panel, and that each primary and SPE had authority to sign off on a 101 rejection (or withdraw a §101 rejection).  There are numerous SPE and others who are considered experts on §101, but they do not dictate 101 rejections or allowances.  My read of this is that when an examiner tells you she has to talk to the 101 panel, it's a classic appeal to authority negotiating tactic.

Finally, we recently heard from a primary in the Patent Technology Center (TC) 3600 that there has been another round of examiner training in that TC, whereby examiners were instructed to not reject claims unless the claims were similar to those that have been invalidated by the Federal Circuit.  The examiner went so far as to say that some of the examiner's prior rejections would likely not stand under the new training.  Let's hope this is an accurate statement of a shift in Office practice, particularly in TC 3600, which has a current §101 rejection rate of over 50%.  

Federal Circuit:  Two decisions at the Federal Circuit.  First, a per curiam (Newman, Reyna, Taranto) affirmance of the invalidity of U.S. 6,192,347 in Freddie Mae v. Graff/Ross.  Not a surprise, as the claims were a heavy computer-window dressing on a method generating a purchase price for a "component" of a "fixed income asset."  Interesting irony: the invalidated claim was claim number 101!  Here is the claim marked up to strike out the window dressing:

101. A method for making financial analysis output having a system-determined purchase price for at least one component from property in consummating a sale, the financial analysis output being made by steps including:

converting input data, representing at least one component from property, wherein the property is a fixed-income asset, into input digital electrical signals representing the input data;

providing a digital electrical computer system controlled by a processor electrically connected to receive said input digital electrical signals and electrically connected to an output means;

controlling a digital electrical computer processor to manipulate electrical signals to compute a system-determined purchase price for the at least one component from property in consummating a sale and corresponding purchase of the component; and

generating the financial analysis output at said output means.

Yes, this was filed back in 1992, and the sentiment at that time was this would work. But even so, there really should have been more real meat to the invention, other than simply computing a price of an asset on a computer.  It is claims like this that give real software inventions a bad name.

What is really disturbing however is the decision in Allvoice Developments v. Microsoft.  Here, the Court (Prost, Dyke, O'Malley) invalidated on a very unusual ground:  the claims did not recite something in the four statutory categories of machine, process, manufacture or composition of matter. The claims recited an application programming interface for a speech recognition engine: 

 "A universal speech-recognition interface that enables operative coupling of a speech-recognition engine to at least any one of a plurality of different computer-related applications, the universal speech-recognition interface comprising...."

 "A speech-recognition interface that enables operative coupling of a speech-recognition engine to computer-related application, the interface comprising...."

According to the Court:

Software may be patent eligible, but when a claim is not directed towards a process, the subject matter must exist in tangible form. Here, the disputed claims merely claim software instructions without any hardware limitations.

And software is not tangible because it does not meet the Supreme Court's definition of either a machine or an article of manufacture. And where did these definitions come from you ask?  The definition of "machine" comes from the 152 year-old decision in Burr v. Duryee (1863): "the claimed invention must be a ‘concrete thing, consisting of parts, or of certain devices and combination of devices.’”   Upshot: the Federal Circuit has just fixed patent-eligible "machines" in the framework of the Industrial Revolution.  If your invention would not be recognized as a "machine" of parts and pieces by a person who could not even conceive of a digital computer, to whom something as mundane to us as a microwave oven would appear to be magical---"What sorcery is it that makes the food heat without fire?!"----then you are out of luck, it's not eligible subject matter.   This approach ignores the fact that the definition of "machine" as evolved over time: a machine no longer must have moving parts, for example.  Similarly, according to the Federal Circuit, an article of manufacture requires "two or more substances," and obviously software is not a substance.  

Then the Court created a brilliant Catch-22: it rejected Allvoice's argument that "software must necessarily be in a machine readable, physical state in order to exist, and absent a tangible medium, software or data is not a manufacture, and it would not imply the existence of a tangible medium into the claims where none was recited.  Wait for it:  had the claim recited a tangible medium, the Court would have then said that's irrelevant, because the claims are really directed to nothing more than the information itself, and that is an abstract idea ala DigiTech v. Electronics for Imaging and thus ineligible.  Gotcha! 

Here's a riddle: Is it a patent eligible machine if it is made of a single atom?  How "tangible" is that?  Certainly not tangible in the sense expressed by the Supreme Court in 1863.  If a single atom is "tangible" then software, which is stored in some fashion using arrangements of atoms must also be tangible.  So if you are going to play the reductionist card of tangibility, software qualifies.

Second, the Federal Circuit's approach is simply at odds with how inventors in software think of their inventions.  An application programming interface, a database architecture, a communications protocol, a programming framework are just as much real "things" as any hammer or nail.  Like all machines, they "do work," they have specific function and/or structure that can be manipulated.  That's what matters about machines, not their specific material instantiation.   And that's what matters to inventors.   If a theory of human behavior does not actually explain how humans behave then we discard it, just like we discard other theories that don't fit the facts.  The patent law embodies a theory of human behavior of what it means to invent.  Section §101 as it stands now is radically at odds with how we go about inventing.  

District Courts

First, two entirely opposing decisions: Kenexa Brassring v. Hireability and Wireless Media Innovations v. Maher Terminals.  Both are motions on the pleadings.  In Kenexa, the court makes clear that motions to dismiss are disfavored for §101, that they should be the "exception, not the rule," because "every issued patent is presumed to have been issued properly, absent clear and convincing evidence to the contrary."  The court then finds that the defendants did not meet their burden for such evidence:  that there are factual issues as to whether the defendant's  proposed analogies "accurately reflect “routine” business practices," and further that "the Court cannot assume that the claims detailed above would pre-empt" the identified business practices in fact.  "Accordingly, defendants have not put forth “clear and convincing evidence” that the patents-in-suit contain no limitations that are “sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself." Motion denied.

The court in Wireless Media went the other way, and granted the motion to dismiss.  First, there is no presumption of validity: "the Court adopts Judge Mayer’s approach and will not afford Plaintiff’s Patents presumption of subject matter eligibility." Not only that, but requiring "clear and convincing evidence" from the defendants would "effectively create a near impossible threshold for a defendant to clear when assessing a patent’s subject matter under the test articulated by Alice."  Apparently, the court was not aware that the Federal Circuit stated in its plurality opinion in Alice that the " presumption [of validity] applies when § 101 is raised as a basis for invalidity in district court proceedings."  For this reason alone, the court committed reversal error.

Second, the court held claim construction is not necessary, so there are no factual issues to be considered--even though the claims recite means-plus function elements and other complex terms. So that made it too easy to simply boil down the claims to alleged abstract ideas:  "We agree with Defendants that claims of the ‘789 and the ‘291 Patents are directed to the same abstract idea: monitoring locations, movement, and load status of shipping containers within a container-receiving yard, and storing, reporting and communicating this information in various forms through generic computer functions."  Physically moving 20 ft. shipping containers and tracking their locations in a physical shipping yard is abstract? In what universe, two-dimensional Flatland? Contrary to the implication of Allvoice, the court did not consider the "tangible" aspects of shipping containers, yards, and other physical aspects of the claims to have any significance:  "Although Plaintiff is correct that the claim incorporates tangible components into the monitoring system, this is not enough for the system to become patent-eligible subject matter."  This decision is not even wrong.

Two other notable decisions are Mobile-Plan-It LLC v. Facebook Inc. and Good Technology Corp. v. MobileIron, Inc.  In Mobile-Plan-It, the court denied Facebook's motion to dismiss.  The patent dealt with organizing meetings for attendees at a conference by using temporary proxy email addresses so that they can communicate with each other without revealing their actual email addresses.  I attended the motion hearing and I have to say that Facebook had the upper hand, with a powerful argument that the claims were nothing more than messaging through proxies--even citing Cyrano de Bergerac--and dominating the "time of possession" for the lectern. Nonetheless, the court was willing to give Mobil-Plan-it the win: "while the question is close, MPI has offered at least an argument that its patent offers more than a list of steps human beings were routinely carrying out long before the patent existed."  

Finally, there is Intellectual Ventures I LLC v. Symantec Corp..  I mention this case because of a personal connection:  the court invalidated U.S. 6,073,142, a patent I wrote back in 1997 for Park City Group, the software company that did all of the enterprise software for Mrs. Field's Cookies.   I had no idea that the invention was merely an abstract idea.  I guess it's back to the drawing board...

 

Fenwick Launches Post-Alice Analysis Site

Today Fenwick & West launched a new website on which users can easily browse the Post-Alice decisions of the PTAB, the Federal Circuit, and the district courts to see how the law on patent eligibility is evolving. The purpose of this site is to allow those who want to learn more about the subject to easily browse cases and locate decisions that may be of interest to them, as well as to compare decisions involving different types of inventions and coming from different tribunals. We welcome comments from users on how we can grow this site to be of greatest use to the community.  

This is the second such website Fenwick has produced, the first being devoted to decoding PTAB decisions. Patent law continues to change week-by-week, and we want to make it as easy as possible for people impacted by those changes to best understand them. 

Check back on these sites frequently, as our team updates the contents regularly.

Comments on USPTO’s Interim Patent Eligibility Guidance (Part 3)

 By: Robert R. Sachs 

See Part 1 and Part 2. 

 

Interim Guidance: Summaries of Patent Eligibility Cases

The Interim Guidance provides succinct summaries of various Supreme Court and Federal Circuit decisions.  As explained by the Office at the January 21, 2015 Patent Eligibility Forum, these summaries were provided as an initial attempt to give examiners examples and explanations of eligible and ineligible claims.

While a laudable and creative effort, there are several problems with this approach.  As acknowledged by the Office at the Patent Eligibility Forum, the case law is “apparently inconsistent.”  Yet, the Interim Guidance does not admit that this fact, and instead presents the cases as if they are all consistent with each other.  This creates a false impression in the minds of the examiners that the evaluation of patent eligibility is a precise and deterministic exercise—as evidenced by the “flowchart” on page 9. 

Worse, it overlooks the fact that statements made in cases such as Parker v. Flook or Alice, can be easily used to demonstrate that presumptively eligible claims in Diamond v. Diehr are ineligible.  For example, Alice’s prohibitions on well understood, routine and conventional steps, and Flook’s exclusion of pre-solution (“data gathering”) and post-solution activity eliminate all but the “repetitively calculating” and “comparing” steps, since it was found by the examiner and the Board that the rests of the steps of the claim were conventional.  Diehr, 450 U.S. 175, 208 (1972).  The claim was directed to the abstract idea of using a mathematical algorithm, the Arrhenius equation, to control a chemical process.  This abstract idea was implemented on generic computer, claimed only at the highest level of generality, without identifying any inventive hardware.  Thus, the claim should have been ineligible.  David Stein provides an excellent demonstration of how Alice invalidates Diehr.