“The court has never explicitly stated that the USPTO guidance is inconsistent with the caselaw, but the implication is unmistakable. And a close reading of the Federal Circuit’s decisions reveals several categories of ineligible subject matter that are not acknowledged in the agency guidance.”
Incoming U.S. Patent and Trademark Office (USPTO) Director Kathi Vidal’s answers to Senators’ written questions following her recent confirmation hearing provide reasons for hope to those concerned about the current state of the patent system.
Vidal’s responses emphasize three priorities: strengthening patents and trademarks, ensuring that U.S. intellectual property is protected abroad, and expanding the reach of the patent system to underrepresented groups.
This article focuses on five important issues that any new USPTO Director will need to address—and looks for clues as to how she may approach them.
1. The Hot Potato of Discretionary Denials
No USPTO policy has generated more controversy in recent years than its new rules restricting access to post-issuance proceedings at the Patent Trial and Appeal Board (PTAB). These policies have created a crisis in several critical industries, eliminating what is often the only meaningful source of review for patents claiming complex technologies. In fields such as semiconductors and wireless communication, objectively weak patents that were shielded from PTAB review by these rules have gone on to secure multi-hundred million and even billion-dollar damages awards.
Given the polarized debate over these policies—which extends inside the Senate Judiciary Committee—it is to be expected that Vidal’s answers avoid any pre-confirmation commitment on this issue.
At several places, the answers describe the relatively uncontroversial General Plastic precedential decision as having reined in serial petitions. The General Plastic policy effectively requires a party to show good cause for filing an additional petition after the patent owner has replied to the party’s first petition challenging the patent. Vidal’s answers also acknowledge the need to consider the 822 comments that were filed after the agency finally sought public views on discretionary denials at the end of 2020.
No position is taken on Fintiv, which cuts off PTAB review if a district court schedules an early trial date, or Valve Corp., which bars review to a litigation defendant if a different party had sought PTAB review earlier.
Both of these policies have been applied in different ways at different times, so it is hard to speak about them with precision, but at their core each allows the plaintiff’s litigation choices to control the defendant’s access to PTAB review.
Fintiv shields a patent from scrutiny if the plaintiff chooses to file its complaint in one of the districts that routinely set early (if illusory) trial dates. Valve Corp., on the other hand, allows a plaintiff to avoid review by running a staggered enforcement campaign—for example, by initially suing only small defendants or a manufacturers’ customers. If one of those small entities or customers files an early but incomplete review petition, Valve prevents the supplying manufacturer from defending its technology at the Board when it is later sued.
Though Vidal’s written answers make no promises to the industries that are frustrated with these policies, they do offer a glimmer of hope. She did not outright reject support for the Restoring the America Invents Act (S.2891), which Senators Leahy and Cornyn recently introduced. And her responses to Senator Cornyn affirm that litigation defendants should be allowed a reasonable opportunity to defend themselves in America Invents Act (AIA) proceedings, and that there is no public interest in allowing the enforcement of invalid patents.
The responses to Senator Cornyn may seem obvious—indeed, unavoidable. Yet they are at odds with the unstated premises of Fintiv and Valve, which block review of invalid patents that are being asserted in litigation and violate the letter and spirit of the AIA.
2. Patent Eligibility: Agency Guidance vs. Caselaw
A close rival to PTAB institution policies as a source of controversy in the patent world is Section 101. Not only does the current patent eligibility jurisprudence deny protection to some classes of important inventions and occasionally produce inconsistent results, but there are now two parallel and distinct bodies of this law.
In 2019, the USPTO issued new guidance on patent eligibility law to its examiners and judges. The Federal Circuit has now addressed this guidance in half a dozen decisions, issuing increasingly blunt reminders that the USPTO guidance “is not the law” and that to the extent it “contradicts or does not fully accord with our caselaw,” it is the caselaw that “must control.”
The court has never explicitly stated that the USPTO guidance is inconsistent with the caselaw, but the implication is unmistakable. And a close reading of the Federal Circuit’s decisions reveals several categories of ineligible subject matter that are not acknowledged in the agency guidance.
The information and data-display cases.
The guidance does state that economic and business practices are within the “human activities” category of ineligible subject matter, as are rules for playing games and voting.
Unmentioned in the guidance, however, is the series of decisions holding that information cannot be claimed for that content that it conveys—that is, based on how it is mentally processed by a person. The guidance does not incorporate the Federal Circuit decisions invalidating claims to tailoring media content on the basis of things such as the viewer’s location, demographic data, viewing habits, or the out-of-region status of the content.
Similarly, the court has held that methods of displaying information in a way that helps a person to understand or absorb it are not eligible for patenting. In the leading Trading Technologies decision, for example, the Federal Circuit invalidated claims to an innovative graphical user interface that helps a commodities trader to understand the market and decide whether to sell or to hold.
The court found that the “invention makes the trader faster and more efficient, not the computer.” It concluded that the claims are ineligible because they are “focused on providing information to [people] in a way that helps them process information more quickly” rather than on improving the underlying technology.
None of this caselaw is incorporated into the guidance. The only one of these decisions that is even mentioned is Trading Technologies—which the guidance attempts to fit into the category of “fundamental economic practices” and characterizes as focused on stock trading.
It is plain from that decision, however, that the claimed invention was ineligible because it was directed to helping a person to “process information more quickly.” The human-centered nature of the invention would not have changed if the information being absorbed was, for example, medical data rather than commodities prices.
Fraud detection, claiming results, and mental steps.
The guidance also does not acknowledge the lines of cases holding that the “human activities” category of ineligibility includes techniques for detecting human fraud—strategies for anticipating the tactics of computer hackers, spam-email senders, or thieves impersonating an account holder. The Federal Circuit has invalidated claims to detecting improper access to health information, identifying spam email, and systems of using pre-existing technology to authenticate the identity of an account holder.
Nor has the USPTO guidance been an unqualified boon for patent applicants. Its elevation of “mental steps” and “mathematical algorithm” exceptions to eligibility has breathed new life into these previously moribund doctrines, an approach that—unlike the guidance’s pro-eligibility improvisations—appears to have gained some traction at the Federal Circuit.
Whose job is it to say what the law is?
In her written answers, Vidal acknowledges the need to “update” USPTO guidance in view of, among other things, “intervening law.” She also pledges to Senator Tillis to work with the Judiciary Committee on ongoing legislative efforts, concluding that “congressional action may be the most efficient and effective way to impart clarity and certainty into this area of law.”
These are the right answers. The USPTO should not be ignoring Federal Circuit caselaw. The court’s data display and fraud detection cases are appropriately within the Supreme Court’s “human activities” exception to patent eligibility. These types of inventions, like business methods, depend on a human being’s mental response to them; they are outside the patent system’s traditional realm of advances in technology. Similarly, the functions and effects cases, though controversial with the patent bar, are grounded in a long line of Supreme Court decisions.
And even if they were not, all these cases are decisions of the United States Court of Appeals with jurisdiction over appeals arising under the Patent Act. They are entitled to the agency’s respect unless and until they are displaced by the full court or the Supreme Court. Moreover, issuing patents that will not be upheld in court hardly strengthens the patent system.
The agency’s Section 101 guidance needs to be revised to reflect the caselaw that it is obligated to implement.
The Congress should particularly welcome the new Director’s willingness to work with it on legislation. The USPTO, with its expertise and ability to marshal information, has played an important if often unacknowledged role in past major legislation such as the AIA and the 1952 Act. To the extent that the current state of the law does not serve public needs, the legislative process is the avenue through which the agency is most likely achieve lasting and effective change.
3. Judicial Independence and Transparency at the PTAB
In June 2021, the leaders the House Judiciary Committee’s IP Subcommittee asked the Government Accountability Office (GAO) to investigate concerns about political interference in PTAB post-grant proceedings. The Subcommittee asked the GAO to inquire whether political appointees had been “prescribing or changing APJs on a panel” or had surreptitiously “chang[ed] a decision in [a] case.”
That investigation, which is now under way, was spurred in part by some of the Supreme Court’s comments in its Arthrex opinion. The government had argued that the PTAB is sufficiently supervised for Appointments Clause purposes because the Director can “jump in before the Board issues” its decision if he or she “catches wind of an unfavorable ruling on the way.” It also argued that the Director can “manipulate the composition of the PTAB [rehearing] panel” with “APJs assumed to be more amenable to his preferences.”
The Supreme Court’s terse response was that such “machinations” are “the problem,” not “the solution.” It emphasized the need for a “transparent decision” that is made by “an impartial panel of experts.”
The court’s comments also appear to have caught the attention of the U.S. Senate. The recently introduced Leahy-Cornyn bill, S. 2891, would amend the Patent Act to expressly prohibit ex parte communications with PTAB judges regarding their pending cases. The bill would also require that any changes to the composition of a Board panel be publicly recorded.
Vidal’s answers to questions are congruent with these legislative and judicial-branch concerns. She agrees that behind-the-scenes manipulation of Board panels is improper and emphasizes the need for transparency in PTAB proceedings.
The USPTO should adopt regulations to protect the independence of PTAB panels—or better yet, work with Congress to enact permanent, statutory guarantees.
Even if the current public controversy dissipates, the recurrence of political interference in Board proceedings remains a risk—and poses a threat to due process. While the Supreme Court has never directly ruled on the issue, it has made clear its expectation that agency adjudications will be “structured so as to assure that the hearing examiner exercises his independent judgment on the evidence before him, free from pressures by the parties or other officials within the agency.” The Court also has placed emphasis on the Administrative Procedure Act’s guarantee that agency judges are “assigned to cases in rotation so far as is practicable.”
The parties to PTAB cases frequently have much at stake in the proceedings. They are entitled to have their cases decided in a fair and transparent manner.
4. Post-Grant Amendments and Admitted Prior Art
Two other PTAB issues have been the subject of legislative and judicial scrutiny and deserve further attention from the agency.
In the 2020 Hunting Titan precedential decision, the USPTO adopted a new rule for evaluating substitute patent claims that are proposed in an AIA review. The Precedential Opinion Panel held that the Board should only “rarely” consider record evidence on its own initiative, reasoning that an improperly issued substitute claim can be challenged again in a follow-on PTAB proceeding.
Hunting Titan stands in tension with the fact that an amendment that is allowed in a post-grant proceeding will be incorporated into the patent by a certificate issued by the Director. It becomes, in effect, an issued patent claim that carries the agency’s imprimatur.
The pending Leahy-Cornyn bill takes a different approach. It would require that an examiner conduct a prior art search and examine new substitute claims that are proposed in AIA proceedings. It would also assign to the patent owner the burden of proving that the claim is patentable.
The USPTO has ample authority to craft “standards and procedures” for post-grant amendments. It could choose the current model, the Leahy proposal, or anything in between.
But if the agency is concerned about the credibility of issued claims, it should reconsider Hunting Titan’s ostrich-like approach—and should assign examiners a role in the amendment process. As the court of appeals has noted, post-grant petitioners do not always have the motivation or expertise to conduct the search and analysis that are needed to determine whether a patent claim should be permitted to bear the agency’s seal.
The agency would also be wise to head off legislation on this issue. A statute with detailed instructions for how to conduct an agency process is much more difficult to amend than is a regulation when unforeseen circumstances later arise.
Another PTAB issue that deserves further consideration is the agency’s recent approach to admissions in a patent’s specification about what was known in the prior art. In the second half of 2020, the USPTO adopted a new policy that severely restricts the Board’s consideration of applicant admitted prior art. This new approach allows a patent owner to admit during prosecution that particular limitations were not his or her invention—and yet defend the patent in a PTAB proceeding on the basis of those same limitations.
This new policy is currently the subject of appeals to the Federal Circuit and is also addressed in the Leahy-Cornyn bill.
For decades, the USPTO has allowed applicant admitted prior art to be considered in reexaminations, which have the same substantive scope as AIA trials. The agency recognized that patent applicants take an oath as to what is their invention and are thereafter estopped from withdrawing those representations in other proceedings.
The USPTO should reconsider whether ignoring applicant admitted prior art in post-grant proceedings contributes to the strength and integrity of the patent system.
5. Expanding the Reach of the USPTO
Finally, Vidal’s written answers list as one of her top priorities the “need to incentivize and protect innovation from every demographic.”
The USPTO, spurred by Congress, recently has taken some positive steps in this direction. Last September, the agency announced that it will expand the types of technical qualifications that an applicant must possess to be admitted to the patent bar.
The new rule adds 14 degrees to the list of college degrees that automatically qualify a lawyer to sit for the patent bar. It also allows applicants to rely on advanced degrees rather than just undergraduate degrees. Some of the new qualifying degrees, such as biological sciences, are predominantly held by women. Also, in several technical fields, women earn a higher portion of the master’s and doctoral degrees than they do of bachelor’s degrees.
These changes will open more doors to women, who currently make up only 18% of the patent bar.
Increasing participation in innovation and patenting by underrepresented demographics is no small or simple task. Nevertheless, the agency has many resources at its disposal, including the four regional offices, which extend the Office’s reach to geographic areas that in the past rarely heard from a USPTO official.
Cause for Hope
The USPTO faces many challenges in the coming years, but also many opportunities. With its talented and motivated staff, the agency has the means to achieve positive changes. And with a new Director soon to be leading the agency, there is cause for hope for the future.
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