PTAB Wonderland: Statistics show Alice PTAB interpretation not favorable to patent applicants

By Eli Mazour & James Bennin
September 27, 2015

uspto-madison-main-copyThe United States Supreme Court is commonly known to resolve difficult issues of law. Yet, Alice v. CLS Bank[ii], last year’s unanimous Supreme Court decision, has caused confusion about whether computer-implemented business methods and software innovations are patentable under 35 U.S.C. §101. The question of patentability of software-related innovations – even those involving merely implementations of business-related innovations – seemed settled after State Street v. Signature Financial[iii], the Court of Appeals for the Federal Circuit’s 1998 decision[iv].

After State Street, the U.S. Patent & Trademark Office (USPTO) granted thousands of patents related to computer-implemented business methods and software.[v] Simultaneously. America experienced an explosion of growth in e-commerce, Internet, and mobile phone technologies. Nonetheless, without even mentioning the terms “business method” or “software,”[vi] Alice has upended the understanding that computer-implemented business method innovations and software innovations are patentable under §101. One veteran litigation attorney starkly stated that the decision left us with the question of “[a]re software patents dead?”[vii] The Federal Circuit’s decisions after Alice have not provided much clear guidance to answer this question.

For example, in Ultramercial v.Hulu[viii], a panel of the Federal Circuit held that a computer-implemented method for distribution of media products over the Internet is not patentable. Yet, in DDR Holdings v. Hotels.com[ix]. a panel of the Federal Circuit found claims that are patentable under §101 in light of Alice and Ultramercial because the claims at issue “stand apart because they do not merely recite the performance of some business practice known from the pre-Internet world along with the requirement to perform it on the Internet. Instead, the claimed solution is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks.” Then, in a subsequent decision[x], another panel of the Federal Circuit found that claims directed to “Back and Forward navigation functionalities” of a web browser are not patent eligible under §101 in light of Alice. Interestingly, the panel did not mention DDR Holdings in that subsequent decision.

Therefore, there should be little surprise that examiners, at the USPTO, are unsure of what is patentable after Alice[xi] and these Federal Circuit decisions. Examiners now frequently issue § 101 rejections, based on Alice, by asserting that claims directed to more than mere software and Internet-related innovations are merely directed to abstract ideas that are not patent eligible.

As a result, patent practitioners and applicants have to decide how to best overcome these rejections and whether to appeal these rejections to the Patent Trial and Appeal Board (PTAB). To get a sense of when and how the PTAB is applying Alice, we decided to take a look at ex parte appeal decisions that were decided in the year following Alice (from June 19, 2014 to June 19, 2015). We note that Alice was not applied by examiners before the related ex parte appeals were filed since these appeals were filed before the Supreme Court issued the Alice decision.

 

Statistics Regarding PTAB Decisions on Appeal for Ex Parte Appeals

Initially, we identified 140 publicly available ex parte appeal decisions, for 140 applications, from the one year time period following Alice that mention both Alice and § 101.[xii] These decisions represent only about 3% of all of the publicly available ex parte appeal decisions from that time period.[xiii] Afterwards, we categorized the 140 identified decisions based on the context in which § 101 was mentioned.

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As shown in the above table and the chart below, in nearly half (69) of the 140 decisions, the PTAB indicated that the examiners should consider reviewing the claims for compliance under § 101 in light of Alice. In many of these applications, the examiners are likely to introduce § 101 rejections, in light of Alice, based on current USPTO application of the Alice decision.

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Examiners already rejected claims under § 101 in 57 of the 140 applications before the ex parte appeals were filed. The PTAB reversed the examiners’ § 101 rejections in only eight of the 140 decisions[xiv], resulting in a 14% reversal rate that is substantially lower than the historical reversal rate by PTAB for other rejections[xv]. However, Alice was mentioned only in the footnotes in three[xvi] of the eight decisions where the § 101 rejections were reversed. In these footnotes, the PTAB encouraged the examiners to review the claims for compliance under § 101 in light of Alice. Thus, the examiners are likely to reopen prosecution for these three applications in order to reject the claims under § 101 in light of Alice and based on this guidance from the PTAB.

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In addition to analyzing the decisions, we also identified the USPTO technology centers (TCs) that handled the applications as shown in the chart below.[xvii] Unsurprisingly, nearly a third of the applications[xviii] were handled by TC 3600, which includes art units that examine business method-related applications. TC 2100 and TC 2800, which include art units that examine computer-related applications, together handled nearly 40% of the applications.[xix] TC 3700, which includes the “Amusement and Education Devices” art units, handled slightly fewer than 20% of the applications.[xx] Finally, TC 2600, which examines communications-related applications, handled about 7% of the applications[xxi], and TC 2800, which includes art units that examine applications related to semiconductors, electrical circuits and systems, printing, testing, and optics, handled only about 2% of the applications.[xxii]

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Finally, we identified the technology centers and art units associated with the eight decisions that reversed examiners’ § 101 rejections. Four of the eight corresponding applications are associated with TC 3700, with three of those four applications being assigned to Art Unit 3711, which is classified as handling applications related to “Games, Games using Tangible Projectile,” and the other one of the four applications being assigned to Art Unit 3765, which is classified as handling applications related to “Apparel and Apparatus, Textiles and Apparatus, Weaving, Sewing, Knitting, Knots and Knot Tying, Leather, Wire Fabrics and Apparatus.” TC 2100, TC 2400, TC 2600, and TC 3600 each handled only one of the eight applications.[xxiii] In particular, Art Unit 3626 of TC 3600, which is classified as handling applications related to “Electronic commerce” in “Health Care, Insurance,” handled one of the applications[xxiv].

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Analysis of Decisions Where PTAB Reversed 101 Rejections

Appeals from Art Unit 3711 (TC 3700), which handles “Games, Games using Tangible Projectile”

In the decision on appeal No. 2013-001127 regarding U.S. Patent Application No. 12/033,611, the PTAB reversed the examiner’s § 101 rejection of claims directed to “arranging a plurality of cards on a base to indicate a path of movement, wherein said base comprises a plurality of compartments, sized and shaped to receive and retain each card . . . ; playing a game on said base . . . ; and retaining each card in place for the duration of a game” (claim 12 of U.S. Patent Application No. 12/033,611).

In reaching the decision, the PTAB applied the framework set forth by Alice and indicated that 1) “claim 12 is directed to an abstract idea” because claim 12 is “directed to the rules for playing a type of game . . . [which is] akin to the ‘method of organizing human activity’”; and 2) confirmed that “MPEP § 2106 (9th ed., Mar. 2014)” identifies “a game defined as a set of rules” as not patent eligible. However, “[h]aving determined that claim 12 is directed to a patent-ineligible concept,” the PTAB considered the elements of claim 12 individually and as an ordered combination to determine whether the additional elements of the claim transform the nature of the claim into a patent-eligible application.”

The PTAB found 1) that “the method could not be performed with a generic deck of cards and a table because playing a game on an ordinary table would not satisfy” the claimed features of “the base includes compartments ‘sized and shaped to receive and retain each card in place for the duration of a game after said cards have been arranged in one of a plurality of different configurations’” and “retaining each card in place for the duration of a game”; 2) that the claimed features “tie the method to a base having specific structural characteristics that allow it to perform a specified function in the claimed method”; and 3) that the claimed features “add a degree of particularity so as to “‘transform’ the claimed abstract idea” into patent eligible subject matter. In other words, the PTAB reversed the § 101 rejection because the claim included features that transforms the alleged abstract idea into patent eligible subject matter.

In the decision on appeal No. 2012-009601 regarding U.S. Patent Application No. 12/506,666, the PTAB reversed the examiner’s § 101 rejection of claims directed to a “method of playing a game” (claim 1 of U.S. Patent Application No. 12/506,666) using a rationale similar to the rationale summarized above with regard to appeal No. 2013-001127 .

In the decision on appeal No. 2012-011084 regarding U.S. Patent Application No. 12/427,040, the PTAB reversed the examiner’s § 101 rejection of claims directed to “a method of playing a card game that simulates a game of football with kibitz and side bet options, the method comprising providing a table as a playing area . . . ; providing a deck of special team cards” (claim 1 of U.S. Patent Application No. 12/427,040). The examiner alleged that the claims are not patent eligible because the claims are directed to “a new set of rules for playing a card game.” In reaching the decision, the PTAB indicated 1) that the claims are instead directed to “the playing of a football game, using a table and cards, with kibitzing and betting features, i.e., a simulation of a football game using a table and cards”; and 2) that “a simulation of a football game using a table and cards” is not an abstract idea under Alice (essentially disagreeing with the examiner).

Appeal from Art Unit 3765 (TC 3700), which handles “Apparel and Apparatus, Textiles and Apparatus, Weaving, Sewing, Knitting, Knots and Knot Tying, Leather, Wire Fabrics and Apparatus”

In the decision on appeal No. 2012-002155 regarding U.S. Patent Application No. 11/820,364, the PTAB reversed the examiner’s § 101 rejection of claims directed to “providing information pertaining to the sleep position of the infant on an exterior surface of a front of infant sleep garment that is designed to be worn by the infant when sleeping” (claim 19 of U.S. Patent Application No. 11/820,364). The examiner alleged that the claims are not patent eligible because they are directed to an abstract idea.

In reaching the decision, the PTAB indicated that 1) “the rejected claims are limited to using the specific structure of an infant sleep [garment] to perform the method of communicating”; 2) the “claims do not preclude a number of other methods of communicating infant sleep position”; and 3) “the claims include ‘additional features’ that ensure the claims are ‘more than a drafting effort designed to monopolize the [abstract idea],’” as set forth in Alice. In other words, the PTAB reversed the § 101 rejection because the claims included features that did not preclude monopolizing the concept of communicating infant sleep position.

Appeal from Art Unit 3626 (TC 3600), which handles “Electronic Commerce” in “Health Care, Insurance”

In the decision on appeal No. 2012-009430 regarding U.S. Patent Application No. 12/286,751, the PTAB reversed the examiner’s § 101 rejection of claims directed to “a method and system for monitoring at least one health attribute of an individual during an artificial sensory experience, associating a characteristic of the artificial sensory experience with the at least one health attribute of the individual, and modifying at least one of a bioactive agent or the artificial sensory experience at least partly based on associating a characteristic of the artificial sensory experience with the at least one health attribute of the individual” (claim 1 of U.S. Patent Application No. 12/286,751). The examiner alleged that the claims are not patent eligible because the “claims are broad enough to cover ‘software’ per se.”

In reaching the decision, the PTAB applied the “‘2014 Interim Guidance on Patent Subject Matter Eligibility,’ 79 Fed. Reg. 74618 (Dec. 16, 2014), which supplements the “Preliminary Examination Instructions in view of the Supreme Court Decision in Alice,” and indicated 1) that “‘[s]oftware’ per se does not fit within one of the four statutory categories of § 101”; and 2) that “the claims are broad enough to read on software per se that is not within any statutory category and on hardware (that may contain software) that is within one or more categories” and are, therefore, non-statutory because the claims “are broad enough to read on statutory and non-statutory subject matter” (essentially agreeing with the examiner). However, the PTAB went on to indicate that “the claims, as construed, are not broad enough to read on software per se and the claimed subject matter falls within § 101 as a ‘machine’ and/or ‘manufacture’” because 1) “the ‘means-plus-function’ language requires the claims to be construed to cover the structure disclosed in the Specification and equivalents thereof”; 2) the “means” is supported by structure; and 3) the “‘circuitry’ in claim 71 to be limited to structure.” In other words, the PTAB reversed the § 101 rejection because the claims included means-plus-function language that was construed to include structure.

Appeals from TC 2100, TC 2400, and TC 2600

Alice was only mentioned in the footnotes of the three decisions discussed below. In the footnotes, the PTAB merely encouraged the examiner to review the claims for compliance under § 101 in light of Alice.

In the decision on appeal No. 2012-007517 regarding U.S. Patent Application No. 11/888,395, the PTAB reversed the examiner’s § 101 rejection of claims directed to a “signal-processing system comprising . . . a processing component; and a signal-processing routine executed by the processing component” (claim 1 of U.S. Patent Application No. 11/888,395). The examiner alleged that the claim 1 is not patent eligible because “claim 1 may be embodied as pure software and lacks definite structure.” In reaching the decision, the PTAB indicated that they did not agree that “claim 1 is directed to pure software as found by the Examiner.”

In the decision on appeal No. 2012-005321 regarding U.S. Patent Application No. 12/245,669, the PTAB reversed the examiner’s § 101 rejection of claims directed to “a network storage system comprising: means for communicating” (claim 21 of U.S. Patent Application No. 12/245,669). The examiner alleged that the claims are not patent eligible because “the specification describes [the system of claim 21] as being merely software.” In reaching the decision, the PTAB indicated that the means for communicating, in claim 21, is described in the specification as “a hardware network adapter.” In other words, the PTAB reversed the § 101 rejection because the claims did not amount to mere software and, instead, include a hardware element.

In the decision on appeal No. 2012-003212 regarding U.S. Patent Application No. 12/571,271, the PTAB reversed the examiner’s § 101 rejection of claims directed to a “system for managing resources in a cloud network allocated to a private enterprise network” (claim 1 of U.S. Patent Application No. 12/571,271). The examiner alleged that claim 1 is not patent eligible because the “claim is directed to software per se.” In reaching the decision, the PTAB indicated 1) that the claim recites “a second series of tangible servers comprising computing resources in the private enterprise”; and 2) that “a person of ordinary skill in the art, on reviewing the Specification [of Appellants], would understand that the term ‘computing resources’ encompasses hardware components” because the specification describes computing resources as representing, for example, “‘processing capacity, bandwidth, and storage capacity’ (Spec. ¶ 25), i.e., hardware components.” In other words, the PTAB reversed the § 101 rejection because the claim recited elements that are hardware components.

 

Conclusion

Overall, the above statistics provide a depressing prognosis for those who are hoping that the PTAB will overturn an examiner’s § 101 rejection (even when the examiner did not apply Alice) based on the PTAB’s current application of Alice. Moreover, while we identified no PTAB decisions that have been issued based on the examiner applying Alice during prosecution, the PTAB’s current trends strongly suggest that successfully appealing such a rejection in the future will be challenging. As a result, filing an appeal to the PTAB is no sure escape from Alice’s not-so-wonderful wonderland.

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[ii] Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. __, 134 S. Ct. 2347 (2014).

[iii] State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), cert. denied, 119 S. Ct. 851 (1999).

[iv] Broadly, in State Street, the Federal Circuit held that a computer-implemented invention that produces a “useful, concrete, and tangible result” is patent-eligible. Specifically, the Federal Circuit decided that patent claims of a patent “directed to a data processing system (the system) for implementing an investment structure” are directed to statutory subject matter. The court dismissed the idea that “business method” innovations are not patentable by declaring that “[w]e take this opportunity to lay this ill-conceived [‘business method’] exception to rest.”

[v] In Bilski v. Kappos, 561 U.S. 593 (2010), the Supreme Court did find a patent related to hedging risk not patent eligible under § 101, which called into question the patentability of at least some business methods. However, the even in Bilski, the Supreme Court seemed to dismiss a general notion that business methods are not patent eligible by stating “that a business method is simply one kind of ‘method’ that is, at least in some circumstances, eligible for patenting under §101.”

[vi] See Gene Quinn, The History of Software Patents in the United States, IPWatchdog, November 30, 2014.

[vii] Richard J. Stark, Managing Fallout From ‘Bilski’,‘Mayo’ And ‘Alice,’ New York Law Journal, January 20, 2015.

[viii] Ultramercial v. Hulu, 772 F.3d 709 (Fed. Cir. 2014).

[ix] DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245, 1258 (Fed. Cir. 2014).

[x] Internet Patents Corp. v. Active Networks, Inc., Case Nos. 14-1048; -1061; -1062 and -1063 (Fed. Cir., June 23, 2015) (Newman, J.).

[xi] See Manny Schecter, The Unforeseen Impact of Alice, IPWatchdog, March 26, 2015 (“There’s another impact of Alice on the daily operation of the US Patent & Trademark Office (USPTO) that is mentioned far less often, if at all. The fact is, patent examiners are struggling with the application of 35 USC 101 in light of the Alice decision just as much as everyone else”).

[xii] We used USPTO’s e-FOIA page to identify the decisions. We entered “06/19/2014” in the Start Date field, “06/19/2015” in the End Date field, and “Alice AND 101 AND ‘Ex Parte’” in the Search Document Text field (the same decisions are identified if “06/01/2014” is entered in the Start Date field and “06/30/2015” is entered in the End Date field). There were 143 items found based on the aforementioned search query, but three of them were duplicates of other items.

[xiii] We identified 4,135 items when we entered “06/19/2014” in the Start Date field, “06/19/2015” in the End Date field, and “‘Ex Parte’” in the Search Document Text field of the USPTO’s e-FOIA page. However, some of the items are duplicates.

[xiv] Appeal Nos. 2012-002155, 2012-007517, 2013-001127, 2012-005321, 2012-009430, 2012-011084, 2012-009601, and 2012-003212. These 8 decisions will be discussed in greater detail below.

[xv] See Kip Werking, 75% – The Real Rate of Patent Applicant Success on Appeal, IPWatchdog, May 2, 2012; and Kate S. Gaudry and Joesph J. Mallon, Appeals and RCEs — the Frequency and Success of Challenges to Specific Rejection TypesIntellectual Property Today, November 2011.

[xvi] Appeal Nos. 2012-003212, 2012-005321, and 2012-007517.

[xvii] Appeal No. 2014-007891 was for Application No. 90/011,479, which was being handled by the Central Reexamination Unit of the USPTO before the appeal. Therefore, it is not accounted in the Technology Centers statistics.

[xviii] TC 3600 handled 46 of the 140 applications.

[xix] TC 2100 handled 33 of the 140 applications, and TC 2400 handled 22 of the 140 applications.

[xx] TC 3700 handled 25 of the 140 applications. Specifically, art unit 3711, which is classified as handling applications related to “Games, Games using Tangible Projectile,” handled 13 of the 140 applications; art unit 3714, which is classified as handling applications related to “Electric Amusement Devices, Education,” handled 5 of the 140 applications; art unit 3715, which is classified as handling applications related to “Education and Demonstration,” handled 2 of the 140 applications; and art units 3717 and 3718, which are classified as handling applications related to “Electric Amusement Devices, Education,” handled 3 of the 140 applications.

[xxi] TC 2600 handled 10 of the 140 applications.

[xxii] TC 2800 handled 3 of the 140 applications.

[xxiii] As noted further below, even though the PTAB reversed the § 101 rejection in the appeal from the Communications technology center; the PTAB also encouraged the Examiner to review the claims for compliance under § 101 based on Alice.

[xxiv] U.S. Patent Application No. 12/286,751.

The Author

Eli Mazour

Eli Mazour is the host of the Clause 8 interview series and an Associate with Harrity & Harrity LLP in Fairfax, Virginia. Mazour has extensive experience in all aspects of the patent prosecution process, including preparing and prosecuting hundreds of patent applications related to computer software, Internet and e-commerce, business methods, electronic consumer products, and telecommunications. Eli has particular experience in helping clients identify and assess patentable inventions and developing patent prosecution strategies. He has also been involved with conducting patent infringement investigations and clearance of products.

Eli Mazour

James Bennin is an IP attorney with Caterpillar. Prior to joining Caterpillar in March 2016, James was an associate with Harrity & Harrity LLP in Fairfax, Virginia. While in private practice his practice focuses on Intellectual Property matters, including the preparation and prosecution of patent applications in the U.S. and foreign jurisdictions.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 7 Comments comments.

  1. Curious September 28, 2015 11:39 am

    News flash — the sun rose in the east this morning. Experts expect it to do so again tomorrow morning.

    But seriously — this is EXACTLY what I expected out of the PTAB. While the Supreme Court, in Alice, wrote “we tread carefully in construing this exclusionary principle lest it swallow all of patent law,” the PTAB doesn’t have any problems treading carelessly. Anybody reading the decisions after KSR shouldn’t be surprised to how the PTAB would react to Alice.

  2. Eric Berend September 28, 2015 3:41 pm

    There is little to add to the above astute comment by ‘Curious’, other than to note that said phenomenon of the ‘exception swallowing the rule’ – or not – in any particular instance or situation, is driven almost purely by which way the political winds (sometimes internal within the USPTO) blow.

    “A government of laws, and not of men” – John Adams, 1774

  3. Night Writer September 29, 2015 11:22 pm

    Alice is so clearly unconstitutional that it is hard to fathom how low we have sunk as a country that each justice put their name on it.

    What is so odd about Alice is that about 90% of the test is 103, and yet the SCOTUS just denies this to get the result they want.

  4. Patent observer September 30, 2015 4:53 pm

    All of the above comments are correct and can be harmonised by observing that there is virtually no part of the U.S. Government, except for the actual Patent Office and a few of the specialist Federal Circuit judges, that even cares one way or the other about patents any more.

    Here you have a system for allocating and administering patent rights that has been finely tuned over a century or so. But it is detailed, and attention spans have become so short that now it is too much trouble for the Congress and the courts to pay attention to.

    Even the Supreme Court opinion enforces this, if you understand that they only give Justice Thomas the cases to write, that nobody else cares about. So the logic is based on 103 not 101, so what.

  5. Night Writer October 1, 2015 4:29 pm

    >So the logic is based on 103 not 101, so what.

    Yes Alice should be called the SJ 103 test. Graham is clearly no longer good law, but no one is ready yet to deal with this. Graham needs a footnote that says this test is only valid if it gets through the initial SJ 103 Test (i.e. Alice.)

  6. Night Writer October 4, 2015 11:49 am

    >>So the logic is based on 103 not 101, so what.

    Of course too, the “so what” is that it breaks the patent system. It means rather than comparing claims to prior art, claims are being summary invalidated by judges and the PTO. That is a big “so what.” It breaks the whole innovation chain of the discipline of examining the claims in view of the prior art and learning to use hindsight. Now, the SCOTUS just said, who cares, just look at it and if it doesn’t float your boat invalidate it. A bit like walking into a criminal courtroom and the judge saying well, the evidence doesn’t really matter. You look pretty shady to me. You are going to jail.

    Plus, obviously need to replace the entire Congress. Patents are ingrained in our innovation engine right now.

  7. George D. Morgan October 22, 2015 9:06 pm

    No mention of the July 2015 update to the 101 Interim Guidelines. Why?

    Seems like they offer a ray of hope.