The Federal Circuit’s Hidden Agenda

“The Villena decision ignores flagrant abuses of an administrative agency that the APA was designed to prevent.  The decision is wrong.  The decision should be reversed.”

For those unacquainted with appeals from the Patent Trial and Appeal Board (PTAB) to the Federal Circuit, the first thing one should consider is whether the PTAB met its burden under the Administrative Procedure Act (APA), Title 5, §§ 551 et seq.  See  Allentown Mack Sales & Serv., Inc. v. NLRB, 522 U.S. 359, 374 (1998).  Section 706 of the APA recites in part:

“To the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action. The reviewing court shall—
.   .   .
(2) hold unlawful and set aside agency action, findings, and conclusions found to be—

(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;
.
.
.
(E) unsupported by substantial evidence in . . . reviewed on the record of an agency hearing . . .” (emphasis added).

The “substantial evidence” requirement for USPTO findings of fact was solidified in Dickenson v. Zurko, 527 U. S. 150 (1999), which stressed “the importance of not simply rubber-stamping agency fact-finding.”  Id at 162.

Under the APA, the PTAB is obligated not only to come to a sound decision, but to fully and particularly set out the bases upon which it reached that decision.  In re Sang-Su Lee, 277 F.3d 1338, 1342 (Fed. Cir. 2002).  The USPTO “must set forth its findings and the grounds thereof, as supported by the agency record[.]”  Id.  “Judicial review of a Board denying an application for patent is thus founded on the obligation of the agency to make the necessary findings and provide an administrative record showing the evidence on which the findings are based[.]”  Id.  Factual inquiries “must be based on objective evidence of record.”  Id. at 1343.  “[R]eview of an administrative decision must be made on the grounds relied on by the agency.” Id. at 1345.  “If those grounds are inadequate or improper, the court is powerless to affirm the administrative action by substituting what it considers to be a more adequate or proper basis.” Id. at 1345-46.

Turning to issues under 35 U. S. C. § 101, the Supreme Court’s Diamond v. Diehr decision held that, in determining patent eligibility, “claims must be considered as a whole, it being inappropriate to dissect the claims into old and new elements . . . .” Diehr, 450 U.S. at 188.  Mayo v. Prometheus later clarified that, not only must claims be considered as a whole, but that all claim limitations must be considered individually and “as an ordered combination.” Mayo, 132 S. Ct. at 1298.  Alice Corp. repeatedly repeated this rule.  Alice, 134 S. Ct. at 2350, 2351, 2355 and 2359.

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Accordingly, one might naturally expect that, if a rejection under § 101 appealed from the PTAB failed to address all the claim limitations and had zero supporting evidence to determine whether something was abstract or well-understood, routine and conventional, the case would be a slam-dunk at the Federal Circuit.  After all, according to Supreme Court and Federal Circuit precedent, the Federal Circuit would be “powerless to affirm the administrative action by substituting what it considers to be a more adequate or proper basis.”

Unfortunately, nothing could be farther from the truth as is demonstrated by the Federal Circuit’s recent decision of In re Villena, Appeal No. 2017-2069 (August 29, 2018)(Prost, Hughes, Stoll) where, as is proved by the joint appendix (J. A. 113-115) (found HERE), the examiner failed to:

  1. address each and every claim limitation separately,
  2. address the claim limitations as a whole, ordered combination, and
  3. provide any evidence whatsoever to support his factual assertions.

Patent practitioners naturally expect this sort of rude behavior from the business methods art units, and patent practitioners naturally expect the PTAB to rubber-stamp these rejections citing Electric Power Group v. Alstom and/or SAP America v. Investpic.  However, who expects the inquisition to extend to the Federal Circuit in light of the protections mandated by the APA?

Despite a time period of nearly five months from oral argument, the analysis in In re Villena is a mere two and one-half pages long, and oddly enough made no mention of the APA.

Representative claim 57 recites:
“57.   A system for distributing real-estate related information, comprising:
one or more computers configured to:
receive user-provided information and determine a geographic region based on received user-provided information;
produce a plurality of automated valuation method (AVM) values using residential property information, the residential properties being within the geographic region, the AVM values reflecting current market estimates for the residential properties;
provide display information to a remote terminal over a publically accessible network based on the user-provided information, the display information enabling the remote terminal to generate a map-like display for the geographic region, the map-like display containing at least:
 respective icons for each of a plurality of residential properties within the geographic region, the icons being spatially distributed relative to one another based on geographic information also residing in one or more computer-readable mediums; and
an AVM value for at least one of the plurality of residential properties within the maplike display, wherein each AVM value is preprocess such that an AVM value for the at least one residential property pre-exists before a user query of the respective property is performed,
and wherein the one or more computers update each of the AVM values without requiring a user query” (emphasis added).

The USPTO ignored three-quarters of claim 57, including the “preprocess” limitation.   This is proved by the official record (J. A. 113-115), which shows that the examiner’s rejection failed to address all the limitations individually and as a whole, ordered combination anywhere in the Alice/Mayo test.

For this reason alone, the rejection should have been set aside under the statutory rule of § 706.

Turning to the issue of substantial evidence, the Villena decision (p. 5) asserts “[n]ot every § 101 determination contains genuine disputes regarding underlying facts material to the § 101 inquiry.”   However, Villena involves genuine disputes of fact – lots of them.   The only issues of fact not contested are: (1) the claims perform new, non-obvious and useful processes as is demonstrated by an absence of § 102 and § 103 rejections, and (2) a computer is used for these new and useful processes.

As stated above, judicial review obligates the USPTO “to make the necessary findings and provide an administrative record showing the evidence on which the findings are based[.]”  Sang-Su Lee, 277 F.3d at 1342.  While the rejection under scrutiny in Villena is under § 101, the substantial evidence problem that plagued Sang-Su Lee over sixteen years ago is the same problem that now plagues Villena.

Thus, there is no need for the Villena Appellants to address the correctness of any particular fact-based conclusion to prevail under the APA.  To the contrary, the Villena Appellants need only address the total lack of record evidence to support such conclusions.

The Villena decision (p. 4) asserts that “[c]laim 57 merely recites the familiar concept of property valuation.”  Claim 57 recites much more, but more importantly where is evidentiary support for the assertion that property valuation is “familiar?”

The Decision (p. 4) also states:

“As the Supreme Court explained in Alice, claims involving ‘a fundamental economic practice long prevalent in our system of commerce,’ . . . [it] follows that the claims at issue here are directed to an abstract idea.  .  .  .  Like the risk hedging in Bilski and the concept of intermediated settlement in Alice, the concept of property valuation, that is, determining a property’s market value, is “a fundamental economic practice long prevalent in our system of commerce.” Prospective sellers and buyers have long valued property and doing so is necessary to the functioning of the residential real estate market” (internal citations omitted).

Where is the evidence for these factual assertions?   It is not part of the record (see J. A. 113-115), and the instant Decision points to no place in the official record for evidentiary support.

Certainly, one might assume that laws of nature, naturally-occurring events and ideas of themselves may be determined as abstract without evidence.

However, to merely assume, without evidence, that a particular activity is “a fundamental economic practice long prevalent in our system of commerce” cannot be maintained.  The Supreme Court never held that a single man-made thing was abstract without supporting evidence. See, e.g., Alice, 134 S. Ct. at 2356 (citing evidence in the form of textbooks to demonstrate that the claims at issue were directed to “a fundamental economic practice long prevalent in our system of commerce”).

Further, Berkheimer en banc (slip op. at. p. 3) holds that “there must be evidence supporting a finding that the additional limitations are well-understood, routine and conventional.”  Alice Corp. and Berkheimer are controlling authority.

While the Villena decision states “the pre-processing limitations are directed to using a computer to perform routine computer activity” (emphasis added), observe that: (1) the Villena decision cites no evidence for this limitation, (2) the PTAB found no such evidence (J. A. 39), and (3) the examiner never addressed the preprocessing limitation in his § 101 rejection as is required under Alice Corp. and the APA.  J. A. 113-115.

Where does the Federal Circuit find evidence when the USPTO found none – especially given that evidence in a § 101 rejection poses a higher burden than for a §102/§103 rejection?  See, Exergen Corp. v. KAZ, Appeal No. 2016-2313, slip op. at p. 4 (Fed. Cir. 2018).

Of equal interest, the Villena decision does not address preemption despite the fact that Appellants timely raised the issue and the Supreme Court made clear that the preemption concern is the sole basis for the creation of exceptions to statutory patent eligibility.  Alice Corp, 134 S. Ct. at 2354–55.  The Villena decision completely decouples preemption from the Alice/Mayo test, and thus tacitly declares that preemption is now totally irrelevant to patent eligibility regardless of Supreme Court precedent.

While the Villena decision does assert that the present claims provide no “inventive concept,” this term is meaningless.  The Federal Circuit cannot even define “invention” or “inventive concept.”  This isn’t a failure of the intellect and wisdom of its member judges, however.

“Invention” lacks clarity.  So much clarity that the Supreme Court admitted that “the word cannot be defined in such manner as to afford any substantial aid[.]”  McClain v. Ortmayer, 141 U. S. 419, 427 (1891).  See also, “Efforts to Establish a Statutory Standard of Invention: Study of the Subcommittee of Patents, Trademarks, and Copyrights of the Committee on the Judiciary”  United States Senate; Eighty-fifth Congress, First Session pursuant to Senate Resolution 55, Study No. 7 (published 1958) (hereinafter “the 1958 Study”) and Rich, Giles. ‘The Principles of Patentability’ (Journal of the Patent Office Society, Vol. XVII, No. 2, pp. 87-8 (February 1960)).

Given that the American legal system failed to adequately define the word “invention” in over two-hundred years, the Federal Circuit’s belief that it can competently apply the term today is not just an act of hubris, but a violation of statutory patent law and congressional intent as is embodied by the 1952 Patent Act.

Despite the avalanche of criticisms of the Federal Circuit from the patent community due to the endless conflicting and legally wrong holdings emanating from that court, the Federal Circuit’s member judges are not stupid.  There is an apparent hidden agenda at the Federal Circuit that will not reveal itself.  Nothing else explains a panel of three very bright judges each having four very bright clerks spending five months to produce a stream of profoundly absurd errors in two and a half pages which is the Villena opinion.

The Villena decision ignores flagrant abuses of an administrative agency that the APA was designed to prevent.  The decision is wrong.  The decision should be reversed.  Naturally, there will be a petition for rehearing and rehearing en banc in Villena, and it is a near-certainty that Investpic will file another petition for rehearing en banc in the SAP America v. Investpic case after the Federal Circuit embarrassingly rejected the wrong claims in its first go-round.

Those in the patent community need to make your voices known directly to the Federal Circuit.  It is estimated that there are now about 14,000 pending § 101 rejections on appeal at the USPTO of which more than 90% will be rubber-stamped by the PTAB.  If you desire the Federal Circuit to reign in the abuses of the USPTO before your clients’ patent portfolios are destroyed, invest in an amicus.    Incessant grumbling is not enough.

The Author

Burman York (Bud) Mathis III

Burman York (Bud) Mathis III is a sole-practitioner in the Washington D.C. area with experience in patent drafting and prosecution, opinion writing, due diligence, litigation and appellate work. Mr. Mathis technical expertise and experience is far-ranging. For example, Mr. Mathis’ experience covers a wide variety of highly-technical subject matter that includes wired and wireless communications (including MIMO, 3G, 3GPP/LTE, D2D and 4G technology), analog and digital electronics, image processing, semiconductor devices and processes, solid-state physics, material science, printers and copiers, projectors, cameras, speech recognition and synthesis, xerography, cryptography, control systems, magnetic and optical disc technologies, fiber optics, MEMS technologies, nanosensors, GPS navigation systems, software, computer networking and business methods.

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 16 Comments comments. Join the discussion.

  1. step back September 6, 2018 6:55 pm

    Excellent article.

    I am shocked, shocked to learn the law is not being adhered to even at the Fed. Cir. level. (Said of course with tongue in cheek and allusion to the famous gambling money exchange scene in Casablanca the movie.)

  2. Anon September 6, 2018 7:09 pm

    While not disagreeing with the rampant errors of the panel (and noting who is on the panel, not being surprised), I take (a minor) issue with:

    the Federal Circuit’s member judges are not stupid. There is an apparent hidden agenda at the Federal Circuit that will not reveal itself.

    This is not like SAWS and the rampant indicators of shadow work.

    Instead, this is not a hidden agenda at all, but rather this is an open and overt showing of pre-judgment to the level of judicial abuse.

    If this abuse were in the direction of being pro-patent, you would be guaranteed that the Supreme Court would be frothing in anticipation of smacking down the CAFC.

    I would also add that culpability for this (at least in part) goes to that same Supreme Court. I have previously shared the tale of the psychological thought experiment of simians in a cage being trained with a fire hose, and this type of incredibly-wrong-but-who-cares-since-it-is-the-patent-holder-getting-the-beating-AND-we-feel-these-claims-are-close-enough-to-those-the-fire-hose-wielders-have-disdained self-evident decision is exactly what one may expect when the Emperor parades too long without clothes.

    Umbrage? Absolutely – and for more than one body of the judicial branch.

    Hidden agenda? No. Clearly not hidden at all.

  3. JNG September 6, 2018 8:12 pm

    Sorry to read this result Bud, its just part of the continuing disingenuous behavior we’re seeing from the CAFC. Truly pathetic.

  4. Night Writer September 6, 2018 8:18 pm

    What is going on here is that Obama let Google select all the CAFC judges after O’Malley. It would be hard to find a worse group of people.

  5. B September 6, 2018 10:00 pm

    “I am shocked, shocked to learn the law is not being adhered to even at the Fed. Cir. level.”

    Your losings, sir.

    (Great comment)

  6. B September 6, 2018 10:10 pm

    @JNG “Sorry to read this result Bud, its just part of the continuing disingenuous behavior we’re seeing from the CAFC. Truly pathetic.”

    I’m filing for rehearing in a few hours.

    Let’s see what the majority of the CAFC has to say. Also consider the possibility that the panel wants to force an en banc review. I think the CAFC is tired of the avalanche of 101 cases clogging their docket and the righteous criticism gone their way.

    A rehearing en banc will have greater authority than the dozens of cases they’ve screwed up. Like a do-over. If you read the briefing, you’d understand why I think this is a possibility.

    Accordingly, they’re either being really smart or very corrupt. The rehearing will tell all.

  7. B September 7, 2018 12:18 am

    @ Night Writer

    The New Federal Circuit building:

    http://indalaw.com/media/news/18/03/30/012ed697421a8db1865ea9e341661fc2.jpg

  8. concerned September 7, 2018 5:04 am

    Agree with every post above.

    There is a higher authority and he is in charge. On my invention, I have seen his hand move plenty of times over the last 42 years to get me to this point. My attorney’s name is even Miracle, no kidding. I am just a small-town boy who has traveled far.

    I often wonder why I was given this idea, of all people to get receive the thought. In addition, people with disabilities are getting screwed by this patent nonsense, so are their caregivers and taxpayers.

    Sometimes screwing the wrong group of people sparks an outrage and a movement, the #MeToo movement for example. And this movement brought down some heavy hitters at the highest of levels.

    In my op-ed, I shared how every group is getting screwed by the lack of this invention, enough information to give it legs in the right hands. For example, a retired couple who has just learned that a monthly check is being cut in half and they owe $30k back on a situation. The situation could have been prevented but the effort is sandbagged by a sister Federal agency that clearly has a hidden agenda.

    Or the States being sued by the US Justice Dept (Olmstead lawsuits) and my invention could be a mitigating factor or a solution.

    During my career, all someone had to do is write their representative and alleged a person with a disability was being screwed and my agency was immediately guilty until proven innocent. We jumped all kinds of hoops.

    Whoever sees the heat coming? Maybe its time to fight fire with fire.

    I’m just saying….

  9. Robert M. Miller September 7, 2018 8:17 am

    I’m not surprised. While I have no experience or knowledge of patent law, I have extensive experience with the Federal Circuit in federal employment cases. In seven cases, the CAFC ignored on appeal numerous factual and legal errors by the MSPB and ignored blatant bias and pre judgement by an MSPB judge. In one case it issued a precedential decision on veterans preference rights that was a flagrant and obvious logical error in interpreting its own prior precedent. This logical error is literally taught on Day One of a Philosophy 101 and is tested on the LSAT.

    It is troubling whenever a court makes so many errors. It is more troubling when an observer can’t distinguish between judges who are corrupt and judges that are merely stupid or lazy.

  10. AP September 7, 2018 9:49 am

    Why didn’t the examiner just make a 103 argument here? It should have been easy to do. I wonder if sometimes these 101 rejections reflect laziness coupled with a gut feeling that the claims are too broad.

  11. B September 7, 2018 10:50 am

    @ AP “Why didn’t the examiner just make a 103 argument here? It should have been easy to do.”

    The Examiner did make a s103 rejection – and a s102 and a s112. Nothing stuck but the s101 at the PTAB b/c s101 has no standards thank you CAFC. Now the CAFC officially has no standards, and their analysis looks like every s101 rejection coming out of 3600.

  12. B September 7, 2018 11:02 am

    @ concerned

    I’m going to post all my briefing on this case. My email is still having issues.

    Also, FWIW, I filed a motion to have the case re-issued as precedential. It was shot down within the hour without comment. This is typically considered an abuse of discretion, and the CAFC must know this. Failing to explain a decision is the same as the decision being capricious and an abuse of discretion. Of course, the higher courts often think they’re above the standards they demand of lower courts.

    As the CAFC didn’t address all the issues of law presented to them, the decision is also an abuse of discretion.

    I am fighting hard for my clients. They are good people who didn’t deserve the abuse of the PTO and the courts.

  13. B September 7, 2018 12:59 pm

    @ Robert M. Miller “It is more troubling when an observer can’t distinguish between judges who are corrupt and judges that are merely stupid or lazy.”

    Stupid and lazy isn’t an option here. Every issue was front and center on appeal, and Stoll was on the Berkheimer panel. I’m hoping against hope that the CAFC merely wants an en banc decision.

  14. Anon September 7, 2018 2:28 pm

    Of course, the higher courts often think they’re above the standards they demand of lower courts.

    Learned from the very top.

    I’m hoping against hope that the CAFC merely wants an en banc decision.

    I would LOVE for you to be correct!

  15. Chris Whewell September 10, 2018 5:40 pm

    Wow, scary stuff. Nice analysis.

  16. B September 15, 2018 2:42 pm

    Apparently, the Federal Circuit is reconsidering its anti-APA position in the In re Villena case. Specifically, in response to Villena’s combined petition for rehearing and rehearing en banc, the Federal Circuit invited the USPTO to respond. That’s a first for a non-precedential case to my knowledge.

    As Villena is the first Alice/Mayo case taken from an ex parte PTAB decision to survive Rule 36, a decision en banc from the Federal Circuit has the potential to set precedent in a way that will profoundly affect tens of thousands of patent applications each year at the USPTO.

    Keep your fingers crossed

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