On Monday, March 13th, the U.S. Court of Appeals for the Federal Circuit issued a decision upholding the Patent Trial and Appeal Board’s (PTAB) finding that a patent application covering a patient health information management system is invalid under the Alice standard. The decision is a disturbing reminder that, despite recent cases in which the Federal Circuit has overturned PTAB decisions, short-sightedness in the U.S. judiciary continues to negatively impact important burgeoning sectors of innovation.
This decision by the Federal Circuit upholds the PTAB’s determination of invalidity for U.S. Patent Application No. 20100030580, entitled Physician to Patient Network System for Real-Time Electronic Communication & Transfer of Patient Health Information. It claimed a physician to patient system for transfer of patient health information among healthcare user groups and patients, the system having a network connected to a plurality of healthcare user computers, a network connected to a plurality of patient computers, at least one secure central server to store patient information to be shared among authorized healthcare user groups and patients, at least one private server to store patient health information private to the healthcare user group and means for authorizing users to connect to the network. The claimed invention is an integrated system which provides solutions to a majority of the cost-quality problems which have faced the U.S. healthcare system, including cost inefficiencies in electronic health record (EHR) systems and redundant patient record storage.
After this patent application was filed in February 2010 by solo inventor Angadbir Singh Salwan, it received a final rejection from an examiner which declared that 41 claims of the the patent application, including claim 1, under 35 U.S.C. Section 101 for lack of patentable subject matter, 35 U.S.C. Section 103(a) for obviousness and 35 U.S.C. Section 112 for lack of a written description. Salwan appealed the decision to PTAB but it returned a decision upholding the Section 101 invalidity charge as claim 1 was “directed to the abstract idea of billing and also to a fundamental economic practice of calculating a patient’s bill.” PTAB also upheld the Section 103 and Section 112 invalidity charges and Salwan appealed the decision further to Fed. Cir.
To reach its decision, Federal Circuit applied the two-step patentability test set down by the U.S. Supreme Court’s June 2014 decision in Alice Corporation v. CLS Bank International. In step one of the test, Fed. Cir. found that the claims of the patent application are directed to the abstract idea of billing insurance companies and organizing patient health information. Salwan lost on an argument that the calculation of a patient’s bill, as well as the transfer of patient EHR data, are not theoretical concepts. “While these concepts may be directed to practical concepts, they are fundamental economic and conventional business practices,” Fed. Cir. wrote, further noting that the Alice standard set down by SCOTUS views these practices as abstract and unpatentable. In step two of the Alice test, Fed. Cir. agreed with PTAB that the recited method steps failed to transform the nature of the claim, merely implementing practices which are long known to the industry.
This non-precedential decision from Federal Circuit, taken in the context of other recent decisions, shows that the appellate court cannot restore sanity to the nation’s patent system despite its willingness to rein in the PTAB elsewhere. Last November, Federal Circuit overturned a PTAB decision on appeal after it found that PTAB instituted a review proceeding as a covered business method (CBM) review when the technology covered by the patent wasn’t a covered business method. In December, Fed. Cir. overturned the results of an inter partes review (IPR) at PTAB after it found that PTAB judges combined prior art references in a way that wasn’t obvious. A similar decision was reached in a February decision by Federal Circuit to vacate another IPR decision petitioned by Apple to challenged the validity of a data file naming technology. Of course, although Salwan’s ‘580 patent application did go through PTAB, the case arose out of an examiner rejection and not a PTAB proceeding instituted after the patent grant, making the patent application more susceptible to an Alice challenge.
This distrust of software and computing innovations as unpatentable subject matter will hurt the American economy and probably has already done damage. According to market research firm MarketsandMarkets, the global market for patient flow management solutions will grow from $251 million in 2014 up to $678.4 million in 2019, increasing at a compound annual growth rate (CAGR) of 22 percent. Reasons for this increase include cost reductions and enhanced staff productivity, benefits noted in Salwan’s ‘580 patent application. An inability to commercialize such a technology by refusing patent protection simply because computers are involved will cause a chilling effect in this and other valuable growth sectors.