After several years in which the U.S. Patent and Trademark Office (PTO) did not seem to have an official position on the issue, and many Patent Trial and Appeal Board (PTAB) panels took a position that was clearly at variance with the Administrative Procedure Act (APA), the PTO recently seems to be acquiescing to principles that the patent bar has been urging for years: (a) the PTO is subject to the same Administrative Procedure Act obligations as any other agency, and therefore cannot make factual findings without substantial evidence, and (b) there’s no carve-out for factual findings underlying § 101 subject matter eligibility rejections.
In particular, as outlined below, the PTO has recently moved to vacate PTAB decisions in several Federal Circuit appeals that had challenged eligibility conclusions as being improperly based on unsupported factual findings. These cases are only the tip of the iceberg, and it is tough to estimate how many pending PTAB appeals will require reversal of examiner rejections for this same reason. When a party has to backtrack on this many cases, it is usually because multiple failsafes failed. In this case, it is because multiple failsafes were bypassed or intentionally disabled. The bypassed failsafes included laws, such as the APA, designed to ensure agency predictability, efficiency, precision, and fairness.
We are hopeful that the PTO is using this forced stand-down on multiple appeals as a teachable moment. Will the PTO apply the lessons learned in a § 101 context to improve predictability and efficiency of the entire examination process? And maybe—not so coincidentally—will the PTO take this opportunity to enhance compliance with laws and failsafes that are designed to ensure agency predictability, efficiency, precision, and fairness, laws and failsafes that could have prevented this need to ask the Federal Circuit to vacate PTAB decisions?
Patent examiners at the PTO have a very difficult job. One of the reasons that their job is so difficult is the requirement to locate and provide evidence to support their factual findings. Over the last several years, an unfortunate practice arose at the PTO in which some examiners, in examining claims under § 101 for eligible subject matter, would routinely dismiss claim elements as conventional or well-known for purposes of patent eligibility analysis, without citing supporting evidence.
In addition to being unfair to patent applicants, this approach was also unfair to other, more thorough patent examiners who spent comparatively more time providing a rigorous examination but would end up looking less productive than examiners who took shortcuts. And, of course, these shortcuts are contrary to the “substantial evidence” requirement of the APA.
Several recent events reversing this trend are well known to the patent bar.
First, in February, the Federal Circuit issued its decision in Berkheimer v. HP, Inc, (Berkheimer), holding that “[t]he question of whether a claim element or combination of elements is well-understood, routine and conventional to a skilled artisan in the relevant field is a question of fact.”
Second, in April, the PTO issued a memo implementing changes in examination policy limiting an examiner’s ability to find an element or combination of elements to be conventional without evidentiary support or taking of official notice. The PTO followed this up with examiner training guidance that further limits examiner discretion.
In June, a third, less visible, event evidenced that the PTO has truly taken Berkheimer to heart. As Gene reported here and here, the PTO filed motions (here and here) in several Federal Circuit appeals to vacate indefensible PTAB decisions that had affirmed § 101 rejections, and requested remand for reconsideration by the PTAB in view of Berkheimer and the Berkheimer memo.
The Federal Circuit has now issued orders in several of these cases, granting the PTO’s requested vacatur and remand.
Hopefully, the Director’s position in these appeals will affect the practice by some at the PTO of dismissing claim elements as well-known or conventional for purposes of § 101 analysis without providing any evidentiary support—we offer some suggestions in the concluding paragraphs of this article.
History: the PTO starts getting into trouble by neglecting the APA and other administrative law
The PTO’s 2014 Interim Subject Matter Guidance asks an examiner to consider whether “a claim that is directed to a judicial exception … include[s] additional features to ensure that the claim describes a process or product that applies the exception in a meaningful way, such that it is more than a drafting effort designed to monopolize the exception.” The 2014 Interim Guidance further indicates that “[l]imitations that may be enough to qualify as ‘significantly more’ when recited in a claim with a judicial exception include: … [a]dding a specific limitation other than what is well-understood, routine, and conventional in the field, or adding unconventional steps that confine the claim to a particular useful application.”
This memo reflected PTO confusion on the relationship of patent eligibility inquiries to the law of evidence, administrative law, and several related topics. Comment letters from the public reminded the PTO that all decisions are subject to the APA, and that APA requirements are significantly different (and, in many respects, stricter) than fact-finding and evidence rules available to Article III courts. Under a directive from the Executive Office of the President, the PTO was obligated to produce a “robust response to comments.” Unfortunately, the PTO didn’t follow this law. This neglect of this failsafe led to neglect of careful consideration of the public letters that the PTO itself solicited, and a lost chance to correct an error.
Legal principles that are basic and unassailable to lawyers are seldom self-implementing among examiners (very few of whom are lawyers, and all of whom operate under a production count system). Without guidance, basic legal principles can be overlooked, especially those that take time. Some examiners would routinely issue § 101 rejections in which claim elements were dismissed as conventional with no evidentiary support.
The trouble deepens—the PTAB neglects the APA
Although it is understandable that examiners might make this mistake, the patent bar expected that the PTAB would act with “competent legal knowledge” as required by 35 U.S.C. § 6, and recognize its “substantial evidence” obligations under the APA and course-correct on this issue. Initially, it seemed like this issue might work itself out quickly.
For example, in 2015 in Ex parte Poisson, the PTAB indicated that “[t]he PTO bears the initial burden of establishing a prima facie case of patent-ineligible subject matter under 35 U.S.C. § 101” and held that “absent supporting evidence in the record—of which there is none, the Examiner’s opinion is an inadequate finding of fact on which to base the Alice analysis.”
Unfortunately, rather than this view catching on more broadly at the PTO, some PTAB panels swung the opposite direction. Another of the failsafes failed: many PTAB decisions on the issue brushed aside the APA, and instead relied on a naïve understanding of the law to affirm evidence-less examiner rejections. If one searches PTAB decisions that cite Poisson or 2012-011084, one will find several dozen decisions that brush aside the “substantial evidence” requirement of the APA, misallocate the burden of proof, and confuse “issues of law” with underlying “issues of fact,” to affirm an examiner on issues of fact for which the examiner proffered no evidence.
This line of PTAB decisions is especially surprising: in the very case that sparked the increase in § 101 rejections, Alice Corp., the Supreme Court thoroughly cited support for factual findings.
This “no evidence” practice could have ended early, had other PTAB panels appreciated what the Poisson panel had recognized: administrative agencies cannot make factual findings without substantial evidence support. In this regard, both the Supreme Court and Federal Circuit have made clear that the APA governs the PTO and examiners just like any other agency, and that “[a]n abuse of discretion occurs where the decision is based on … factual findings that are not supported by substantial evidence.” But this failsafe failed as well.
Even before Berkheimer I, it seemed inarguable that the question of whether a claim element or combination of elements is conventional is a question of fact, and that an examiner finding that a claim element is well-known or conventional requires substantial evidence support. As Judge Moore noted in May 2018 in her concurrence of the denial for rehearing en banc in Berkheimer II, “Berkheimer and Aatrix stand for the unremarkable proposition that whether a claim element or combination of elements would have been well-understood, routine, and conventional to a skilled artisan in the relevant field at a particular point in time is a question of fact.” This is reinforced by the Supreme Court’s recent § 101 decisions that cite evidentiary support for factual findings that certain practices were long prevalent.
Moreover, it didn’t seem like this practice could be justified by exercise of official notice. The Manual of Patent Examining Procedure (MPEP) limits the situations in which an examiner can take official notice of a fact, and both case law and the MPEP make abundantly clear that facts eligible for official notice are only those “capable of such instant and unquestionable demonstration as to defy dispute.” Precedent has “reject[ed] the notion that judicial or administrative notice may be taken of the state of the art” because “[t]he facts constituting the state of the art are normally subject to the possibility of rational disagreement among reasonable men and are not amenable to the taking of such notice.” The Federal Circuit has indicated that the PTO “cannot simply reach conclusions based on its own understanding or experience—or on its assessment of what would be basic knowledge or common sense,” instead, the PTO “must point to some concrete evidence in the record in support of these findings.”
The situation became a bit strange in that examiners would commonly make an unsupported factual finding that a claim limitation was conventional for purposes of § 101 analysis, even though they would clearly recognize that it would be inappropriate to take official notice that the same claim limitation was known for purposes of a § 103 rejection. And the situation becomes stranger still when one considers jurisdictional effects: the MPEP (and MPEP § 2144.03 in particular), like all other agency staff manuals that state mandatory obligations of agency personnel, limits the authority that the Director delegates to examiners—when examiners act outside of agency guidance, their actions are “illegal,” “of no effect,” and not within the authority of 35 U.S.C. § 131. And that, in turn, affects the scope of judgment available to the PTAB—when an examiner acts outside the scope of his or her delegated authority, as a matter of procedure, the PTAB has no rejection before it, and can at most examine de novo to raise a “new ground of rejection.” The PTAB cannot “affirm” a non-existent rejection.
Given all of this, it seemed odd that the PTAB would affirm an examiner rejection based on a factual finding that was not supported by substantial evidence, and it is surprising that the approach in Poisson was not more widely followed.
Berkheimer and its consequences
Fortunately, after Berkheimer, some PTAB panels had already begun to overturn examiner rejections making an allegation of conventionality unsupported by evidence. For example, in Ex parte Bhogal, the PTAB found that “[t]he Examiner has not set forth with sufficient specificity or provided any finding … that the specifically claimed manner of rendering order prioritization technique is well-understood, routine, or conventional,” and held that “[a]s such, on the record before us, we cannot find that ensuring rendering priority by adjusting rendering start time to account for rendering delay is well-understood or routine.”
Following issuance of the Berkheimer memo, the Berkheimer approach seems to be increasingly common at the PTAB. For example, in Ex parte Galloway, in May 2018, the PTAB cited Berkheimer and found that “[t]he Examiner has not established with appropriate factual evidence that the claimed method uses conventional cell counting methods,” indicating that “we do not find that the Examiner has provided a prima facie case of patent ineligibility supported by factual evidence.”
Opportunities to avoid future problems—reinvigorating failsafes
It is great to see the PTAB increasingly appreciating its obligations under the APA. Regardless of the path taken, the PTO’s shift in approach to this issue seems very promising, and hopefully applicants will no longer have to address rejections in which claim limitations are dismissed as conventional for purposes of the § 101 analysis without any evidentiary support.
We are hopeful that this shift in approach is a harbinger of a larger trend towards emphasis on adherence to established administrative law principles, which in turn should improve predictability during the examination process. In this regard, we wanted to take this opportunity to highlight a couple of items that the PTO is most likely already well aware of, but that we think can help further this goal of predictability.
First, the Executive Office of the President issued a memorandum in 2007 that gives all agencies a short primer in administrative law as it relates to guidance documents:
- If a guidance document may have $100 million in annual economic effect, amendments to that guidance must be made through notice and comment as if it were a regulation, and the agency must provide a “robust response to comments.”
- Agencies must review their guidance documents for “mandatory language such as ‘shall,’ ‘must,’ ‘required’ or ‘requirement’” and remove such language “unless the agency is using these words to describe a statutory or regulatory requirement, or the language is addressed to agency staff.” Guidance documents are not to be applied as “law” against applicants—the agency may not rely on guidance to “foreclose consideration by the agency of positions advanced by private parties,” but must consider alternatives.
- When a guidance document uses mandatory language with respect to the agency or an agency employee, that language is binding against the agency or employee, and before departing from that language, the employee needs “appropriate justification and supervisory concurrence.”
- “Each agency shall maintain on its website . . . a current list of its significant guidance documents in effect. . . . The agency shall provide a link from the current list to each significant guidance document that is in effect. . . . The list shall identify significant guidance documents that have been added, revised or withdrawn in the past year.”
- Agencies are to train their employees in the above principles.
In his first ten days in office, President Trump reminded all agencies of their obligations under the Good Guidance Bulletin. These are simple requirements: some required by law, some required by concerns for predictability and efficiency. This might be a good opportunity for the PTO to implement the Bulletin. Implementation of the Bulletin is one of the easiest things the PTO could do to improve predictability and precision of agency proceedings.
Second, at the March 2018 Federal Circuit Judicial Conference, Judge Plager (the Federal Circuit’s administrative law expert) recommended that all members of the patent bar would do well to understand administrative law better, and that a really good starting point is a paper from ABA Landslide, The PTAB is Not an Article III Court, Part 1: A Primer in Federal Agency Rulemaking. If it’s a good read for the patent bar, it might be a good read for all adjudicatory staff at the PTO.
Third, there are most likely a large number of appeals sitting at the PTAB with an examiner § 101 rejection that lacks substantial evidence support. Perhaps the PTAB should institute a triage procedure for incoming appeals (and the entire docket up to cases that are up for imminent decision) to get untenable rejections off the PTAB’s backlog (and, incidentally, send a signal to examiners that the PTO will not allow incomplete work to clog the entire workflow pipeline)—any rejection where the examiner has a clear omission in the prima facie evidence or explanation should be remanded. The patent bar would likely be willing to help with this triage: one possible approach might be for the PTAB to invite appellants to file a paper requesting this triage for appeals where no “competent legal knowledge” balancing or deliberation is required, with the remedy being a simple remand under MPEP § 1211 with an instruction to the examiner to correct an omission of evidence or explanation (on § 101 or any other issue).
Overall, Director Iancu has done a great job in working to ensure that the PTO’s approach to § 101 eligibility rejections is in compliance with the APA. We respectfully suggest that Director Iancu’s concern for “predictability” of operations throughout the PTO extends to all other issues as well, and that the PTO’s public policy goals can be facilitated by attention to the APA and related laws, all of which are aimed at agency predictability, “reasoned decisionmaking,” fair benefit-cost analysis, and agency action in the public interest. These laws can improve predictability and reduce costs and time for both the PTO and for applicants—for all agency actions, not just § 101. Sometimes following the law just makes sense
[Disclosure: One of the authors was counsel of record in the Allscripts case mentioned in the article.]
 Berkheimer v. HP, Inc, 881 F.3d 1360, 1368 (Fed. Cir. 2018) (Berkheimer I)
 Robert W. Bahr, Memorandum to Patent Examining Corps, Changes in Examination Procedure Pertaining to Subject Matter Eligibility, Recent Subject Matter Eligibility Decision (Berkheimer v. HP, Inc.), (Apr. 19, 2018).
 In re Intelligent Medical Objects, Inc., appeal no. 2018-1586, Order, document 28 (Fed. Cir. Jun. 27, 2018); In re Allscripts Software, LLC, appeal no. 2018-1451, Order, document 25 (Fed. Cir. Jun. 4, 2018). We suspect there are other similar Federal Circuit appeals—we are aware of at least one appeal where this issue was raised that is currently awaiting a decision (In re Villena, appeal no. 2017-2069).
 Patent and Trademark Office, 2014 Interim Guidance on Patent Subject Matter Eligibility, 79 Fed. Reg. 74618, 74624 col. 1, lines 58-66 (Dec. 16, 2014).
 79 Fed. Reg. at 74624, col. 2, lines 19-38.
 See e.g, IEEE?USA, Comments on July 2015 Update on Subject Matter Eligibility, https://www.uspto.gov/sites/default/files/documents/2015ig_a_ieee_02nov2015.pdf (Oct. 30, 2015).
 Executive Office of the President, Final Bulletin for Agency Good Guidance Practices, OMB Bulletin 07-02, at § IV(1)(d), (Jan. 18, 2007), 72 Fed. Reg. 3432, 3440 (Jan. 25, 2007).
 Note the absence of any response to comment on the PTO’s web page—the comments are at https://www.uspto.gov/patent/laws-and-regulations/comments-public/comments-july-2015-update-subject-matter-eligibility and https://www.uspto.gov/patent/laws-and-regulations/comments-public/comments-2014-interim-guidance-patent-subject-matter. But there’s no response to comments.
 Ex parte Poisson, U.S. Pat. App. No. 12/427,040, appeal no. 2012-011084, slip op. at 5-6 (PTAB Feb. 27, 2015).
 Ex parte Frye, 94 USPQ2d 1072 (BPAI 2010) (on ex parte appeal, burden of proof lies with examiner).
 Alice Corp. Pty. Ltd. v CLS Bank Int’l¸ 134 S.Ct. 2347 (2014).
 Star Fruits S.N.C. v. U.S., 393 F.3d 1277, 1281 (Fed. Cir. 2005); see Dickinson v. Zurko, 527 U.S. 150, 152 (1999); In re Gartside, 203 F.3d 1305, 1313 (Fed. Cir. 2000).
 Berkheimer v. HP Inc., 890 F.3d 1369 (Fed. Cir. 2018).
 Berkheimer II, 890 F.3d at 1370 (Moore, J. concurring).
 See Alice, 134 S.Ct. at 2355; Bilski v. Kappos, 130 S.Ct. 3218, 3231 (2010); see also Parker v. Flook, 437 U.S. 584, 588 (1978) (assuming, “since respondent does not challenge the examiner’s finding, that the formula is the only novel feature of respondent’s method.”).
 In re Ahlert, 424 F.2d 1088, 1094 (CCPA 1970); MPEP § 2144.03.
 In re Eynde, 480 F.2d 1364, 1370 (CCPA 1973).
 In re Zurko, 258 F.3d 1379, 1385 (Fed. Cir. 2001).
 Service v. Dulles, 354 U.S. 363, 387–88 (1957) (agency action without the procedures set forth in the agency’s unpublished manual was set aside); Vitarelli v. Seaton, 359 U.S. 535, 545 (1959) (agency action inconsistent with agency’s guidance was “illegal and of no effect”).
 37 C.F.R. § 41.50(b).
 Ex parte Bhogal, appeal no. 2016-008742, slip op. at 6 (PTAB Mar. 19, 2018).
 Bhogal, slip op. at 6, citing Berkheimer I, 881 F.3d at 1368).
 Bhogal, slip op. at 6.
 Ex parte Galloway, appeal no. 2017-004696, p. 6 (PTAB May 24, 2018).
 Good Guidance Bulletin (supra note 8), § IV(1)(d), and Preamble § A.
 In these two respects, the Good Guidance Bulletin is merely a restatement of the law arising under the APA, Housekeeping Act, etc.
 Good Guidance Bulletin (supra note 8), § II(1)(b).
 Good Guidance Bulletin (supra note 8), § III(1).
 Office of Management and Budget, Memorandum, Interim Guidance Implementing Section 2 of the Executive Order of January 30, 2017, Titled “Reducing Regulation and Controlling Regulatory Costs”, https://www.whitehouse.gov/sites/whitehouse.gov/files/briefing-room/presidential-actions/related-omb-material/eo_iterim_guidance_reducing_regulations_controlling_regulatory_costs.pdf (Feb. 2, 2017). (“Agencies should continue to adhere to OMB’s 2007 Memorandum on Good Guidance Practices.”). Another in the PTO’s chain of errors is the view that a Deputy Assistant Commissioner for Patent Examination Policy has the authority to tell the President to go take a hike. E.g., Application 10/113,841, Decision on Petition at 19-20 (Jul. 14, 2011).
 David Boundy, The PTAB is Not an Article III Court, Part 1: A Primer on Federal Agency Rule Making, ABA Landslide 10:2, pp. 9-13, 51-57 at 51-52 (Nov-Dec. 2017), available here. Another recent article, The PTAB is Not an Article III Court, Part 2, examines the relationship between the PTAB and the PTO’s regulations.
 E.g., Ex parte Braeken, 54 USPQ2d 1110, 1112 (BPAI 1999) (remanding when examiner failed to explain correspondence between claim and reference—though at the end of the long appeal backlog, rather than at the beginning).
 5 U.S.C. § 555(e) (all adverse agency decisions must include a “statement of grounds”); Tourus Records Inc. v. Drug Enforcement Admin., 259 F.3d 731, 736–37 (D.C. Cir. 2001) (the § 555 statement of grounds must fairly address the issue presented); Roelofs v. Secretary of the Air Force, 628 F.2d 594, 599 (D.C. Cir. 1980) (same); compare PPC Broadband, Inc. v. Iancu, Appeal 2017-1362 (Fed. Cir. Jul. 3, 2018) (remanding for a second time, after the PTAB failed to fill the gap in its explanation that led to the first remand).