Posts Tagged: "Alice"

Alice Corp v. CLS Bank Int’l, 134 S. Ct. 2347 (2014) sent rejections under 35 U.S.C. § 101 skyrocketing from under 10,000 per year prior to the Alice decision to nearly 35,000 the year the Supreme Court handed down its decision (2014). Peaking at just over 100,000 rejections in 2018, the USPTO’s January 2019 Revised Patent Subject Matter Eligibility Guidance (2019 PEG) helped to stabilize and ultimately lower the number of rejections under Section 101 to just over 20,000 in 2021. Though this number may continue to drop – the data on Section 101 rejections for 2022 is not yet complete – one thing is for sure: The number of rejections under Section 101 post Alice still far outnumber the Section 101 rejections made prior to Alice by at least 10,000 per year. As illustrated in Fig. 1 (data gathered using juristat.com), the majority of rejections under Section 101 made since 2014 are still Alice rejections, which leaves room for this number to decrease further.

Few lawyers have tried patent eligibility, 35 U.S.C. Section 101, to a jury. Our research found just four such cases since the Supreme Court created its muddled two-step test in Alice v. CLS Bank. In every one of those, the jury issued a pro-ineligibility verdict, while none resulted in a final Section 101 determination either way. Understanding how that issue has been handled at and after trial is important for practitioners with cases where Section 101 is at issue, which has become increasingly common.

On March 30, Judge Sean D. Jordan of the United States Federal District Court for the Eastern District of Texas, issued a rather atypical Order, at least for the Eastern District of Texas. A defendant prevailed on a motion to dismiss. See Repifi Vendor Logistics, Inc. v. IntelliCentrics, Inc., Civil No. 4:20-CV-448-SDJ. Those familiar with patent litigation know that, over many years, the Eastern District of Texas has been a notoriously favorable venue for patent owners to pursue patent infringement lawsuits against alleged infringers. One of the things that has made the Eastern District of Texas so compelling from the patent owner perspective is the extraordinary reluctance of judges to rely on procedural motions to dispose of lawsuits in favor of defendants. It is no exaggeration to say that virtually everything that is filed in the Eastern District of Texas will go to trial unless it settles, which can raise the pressure on defendants to settle, sometimes for nuisance value alone.

To the surprise of Lemley and Zyontz, their study uncovered a striking disparate treatment in the way federal courts handle patent eligibility matters based on entity size, with startup companies doing poorly when it comes to Alice-related patent eligibility matters, and individual inventors doing even worse. Their abstract summarizes their findings thusly: “Most surprisingly we find that the entities most likely to lose their patents at this stage are not patent trolls but individual inventors and inventor-started companies,” Lemley and Zyontz write. “As biotech worries about deterrence of new innovation and software worries about patent trolls dominate the debates, we may be ignoring some of the most important effects of Alice.”

Since the Supreme Court’s Alice decision in 2014, the Judiciary’s development of 101 law has caused such an upheaval, Congress may need to intervene. In a July 2018 joint position paper entitled “Congress Must Remedy Uncertainty in 35 U.S.C. §101 and Return Balance to the U.S. Patent System,” the American Bar Association’s IP Law section, the IP Owner’s Association, and the American Intellectual Property Law Association contended the “Supreme Court’s jurisprudence has injected significant ambiguity into the eligibility determination . . . .” and there is now “[u]ncertainty about what types of inventions qualify at the most basic level for patenting.” This ambiguity, however, may be a blessing in disguise. By creating demand for Congress’ intervention, we have an opportunity to change course from the patent policy that has resulted in this mess. But to turn a corner, Congress needs to first understand the shortcomings of its and the Judiciary’s fundamental assumptions that have created this situation. For more than a decade, both Congress and the Judiciary have approached patent policy from a foundational presumption: the inherent problem with our patent system stems from a bad actor.Under a single-minded bad actor presumption, the Judiciary and Congress have framed our patent policy to increase roadblocks for this bad actor, to prevent it from taking advantage of the system. But this presumption has spawned a policy that is contrary to economic principles, and it has systematically weakened and undermined the U.S. patent system. Even if Congress manages to fix 101 law, if it fails to correct its and the Judiciary’s foundational shortcomings regarding patent policy for the past decade+, we’re doomed to repeat mistakes of the past. If, on the other hand, we switch our patent policy principles to a rational actor model, we can begin to understand our patent system from a foundation rooted in economics. More importantly, we can use economic principles to improve our patent system.

Trading Technologies International, Inc. (TT) has filed a petition for certiorari with the U.S. Supreme Court asking it to clarify U.S. patent eligibility law, including whether the Court should overrule its “abstract idea” precedents. The petition relates to the Federal Circuit’s April 2019 decision siding with the Patent Trial and Appeal Board (PTAB) that certain claims of TT’s patents for graphical user interfaces (GUI) for electronic trading were eligible for covered business method (CBM) review and also patent ineligible. IPWatchdog has written much about this and related Trading Technologies cases. Though earlier Federal Circuit panels had found other TT patents not eligible for CBM, as the court found they were directed to technological inventions, Judge Moore said in her April opinion that the patents at issue here—numbers 7,533,056, 7,212,999, and 7,904,374—”relate to the practice of a financial product, not a technological invention,” and that “the specification makes clear that the invention simply displays information that allows a trader to process information more quickly.”

I don’t really know why we need the Federal Circuit anymore. Witness the denial of en banc rehearing in Athena Diagnostics, Inc. v. Mayo Collaborative Services, LLC on July 3. This denial of rehearing provoked eight separate opinions, with no single opinion achieving more than four judges in support. With 12 judges deciding whether to rehear the case en banc that means no single opinion gained support from more than one-third of the Court. And that opinion that gained the most support was a dissenting opinion, meaning those judges wanted to rehear the case and specifically said that the claims “should be held eligible”.  In fact, as Retired Chief Judge of the Federal Circuit, Paul Michel, noted yesterday, “all 12 active judges agreed that the Athena patent should be deemed eligible, even though seven judges apparently felt helpless in view of Mayo.”  The truth is the Federal Circuit is not helpless. The Federal Circuit is choosing to interpret Mayo—on the life science side—and Alice—on the software side—expansively. The Federal Circuit has one primary job, which is to bring stability and certainty to U.S. patent laws. It would be easy to distinguish both Mayo and Alice, but rather than recognize the peculiar facts of these cases as representing the most trivial of innovations, the Federal Circuit has used Mayo to destroy medical diagnostics and Alice to destroy software. More analytical prowess would be expected from a first-year law student.

The presently pending petition for en banc review in Athena Diagnostics, Inc. v. Mayo Collaborative Servs., LLC has been addressed by Sherry Knowles and Meredith Addy and is supported by a number of amicus briefs. The patent in issue has been described by the present author as a paradigm of patent eligibility, supporting the argument that en banc review is merited. Mayo has now filed its response brief, submitted on May 7, and argues that the panel’s decision invalidating the asserted claims as ineligible properly applied the two-step Alice framework in light of precedent, that the full Court need not re-examine it, and accordingly, that Appellants’ petition should be denied.

This morning, the American Civil Liberties Union (ACLU), which will be represented in Wednesday’s hearing on Section 101 reform by Senior Legislative Counsel Kate Ruane, announced an urgent phone briefing for members of Congress and staff to address the contention that the “Proposed Patent Bill Would Jeopardize Health Care and Harm Medical Research.” The phone briefing, which all interested stakeholders should join, takes place today at 2:30 pm EST and will be jointly held by representatives from the ACLU, the Association for Molecular Pathology, a breast cancer survivor and patient, My Gene Counsel, and Invitae. Anyone who would like to listen should dial in to the number provided here. Below, Sherry Knowles, a well-known patent attorney, policy expert and also a breast cancer survivor, rebuts the arguments made in both the ACLU’s briefing announcement and associated letter to Congress on this topic.

When discussing potential patent purchases with buyers, we continue our push to end the use of the phrase “low quality” to broadly characterize rejected patents. We often hear that there are junk, low quality or weak patents on the patent market. Clearly, there are some patents that we can objectively agree are low quality, just as there are in most portfolios. However, buyers with an efficient buying program should never test the majority of patents for “quality” metrics (e.g. enforceability) because these tests are simply too expensive. Sophisticated buyers create targeted buying programs rather than general ones. When buying, you should have a use case in mind and analyze the value of the patents in that particular context. If you want patents to counter assert against Qualcomm, do not waste time and money evaluating clean energy patents. The “quality” of anything in that technology area is irrelevant. Buyers also tend to conflate quality and value when discussing packages. A package with no value to you for your particular business use should be rejected from your buying program, but again, this is not a comment on the quality. It is easier and cheaper to reject a patent for lack of value that to analyze it for quality. Necessarily, a well-run buying program has visibility into only a small set of the available packages on the market; for the rest of the packages, the program should have no visibility into the quality of the packages because the packages were rejected before any quality metrics were evaluated.

In any market, pricing is where the rubber meets the road. As a buyer, you will not be taken seriously if you significantly underbid, yet you want to get a fair price. Conversely, if you are a seller who will not negotiate near the market price, it will be almost impossible to close a deal. We understand that patents are definitionally unique, have varying relative strengths and market applicability, and also that the demand for patents varies by technology area and many other factors. But when it comes down to it, you have to have a place to start. This is where average pricing statistics become useful. And to every seller who says: “My patents aren’t average, so average pricing should not apply to me,” we respond by saying: “We’ll accept that as true, you just have to show us why.” In the vast majority of cases, starting with the average price and moving up or down from there is an effective way to set a price for buyers and sellers. In 2018, the average price per asset shifted significantly: it fell by 30%, from $176,000 per asset to $123,000. The asking price per U.S.-issued patent also dropped by 30% from $251,000 to $176,000. If you are a seller and these were the only facts you had, it would look like it’s time to panic. But this is not the whole story. The drop was primarily due to an adjustment in the asking price for single-asset packages. For most package sizes, the asking price did not change at all. Figure 8 shows the asking prices per asset across packages of different sizes. In the 2017 market, there was a massive premium on single-asset packages. In 2018, the price for single-asset packages dropped by 56% and came more in line with the pricing for other package sizes. This drop in single-asset prices accounts for 48% of the overall drop in per-asset prices. The asking price in the 26-50 asset range also dropped significantly, while the price for 6-10 asset packages went up.

Senators and Representatives Coons, Tillis, Collins, Johnson, and Stivers recently announced in a press release a proposed framework to fix patent eligibility law in the United States. If written as proposed in the draft framework, section 101 may do harm to the patent system. The senators and representatives are now soliciting feedback on the draft framework. They are likely to take additional action on the framework as soon as early this week. Please send the following text with any of your edits to [email protected].

In our fourth article studying patent trends data across industries, we turn to the computational biology and bioinformatics industry. Computers have transformed many aspects of our everyday lives. However, much of drug-discovery, treatment testing and biology research is performed using the same wet-lab techniques developed decades ago. Rather recently, biotech companies have begun to capitalize on the impressive computational power, sophisticated models and skilled workforce to integrate computers into their operation. This integration can facilitate generating more accurate hypotheses, conducting more efficient tests and more thoroughly evaluating results. For example, modeling can be used to identify a set of therapeutics that have a physical structure complementary to a target, to better define a screen. Given that this valuable technological area sits at the intersection of biology and computers—which traditionally are associated with very different types of applications, examination and applicants—it is important to be well informed about the patenting arena when identifying patenting strategies.Our study not only identified a set of applications that pertained to this industry, but also—for each application in this set—it was determined whether the application pertained to one or more of the categories shown in the topology below. If so, the application was appropriately tagged, such that it could be included in one or more category-specific data subsets for subsequent analysis.

Recently, I’ve written several articles laying the blame for the patent eligibility crisis squarely on the Federal Circuit. Yes, we all know the Supreme Court is obviously to blame. They are the court with primary national jurisdiction, and there can be no doubt that the Mayo v. Prometheus decision is the root of the patent eligibility problem because it intentionally conflates novelty and obviousness with patent eligibility. In my recent writings, and in a variety or presentations and speeches I have been giving across the country—from Utah to Orlando to Charlotte—I’ve criticized the Federal Circuit for not distinguishing Mayo and Alice on the facts. If we listen to the Supreme Court at least, at issue in both Mayo and Alice were unusually simple “inventions” that are really not innovations at all. As I filed my latest article, Eileen said that she thought it was good because it would provoke discussion since I disagreed with Judge Michel’s view in the interview with him she had just published. There was a long pause in our conversation. “Am I really disagreeing with Judge Michel?” I asked. Whenever I disagree with Judge Michel, I pause. It isn’t that I am unwilling to disagree with him, but, over the years, I have come to learn that, when one is going to disagree with Judge Michel, prudence dictates reevaluating your position.