Posts Tagged: "Alice Corp. v. CLS Bank"

Could the United States Supreme Court once again weigh in on Section 101 subject-matter eligibility? With the Court having asked for the views of the Solicitor General yesterday, it seems increasingly likely. Late in 2020, patentee American Axle & Manufacturing, Inc. (American Axle) petitioned the Supreme Court for writ of certiorari, arguing that the Federal Circuit is “at a loss as to how to uniformly apply § 101.” Pet. for Writ of Certiorari at 3 (Dec. 28, 2020). Organizations such as the New York Intellectual Property Law Association, the New York City Bar Association, and the Chicago Patent Attorneys organization have all submitted amicus briefs supporting American Axle’s ask. On March 1, former USPTO Director David Kappos, former Federal Circuit Chief Judge Paul Michel, and Senator Thom Tillis from North Carolina also jointly filed an amicus brief, arguing that the “disparate and inconsistent application” of the current Section 101 jurisprudence has led to “an unpredictable and unstable” patent system. Br. in Support of Am. Axle’s Pet. for Writ of Certiorari at 5 (Mar. 12, 2021).

Since the Supreme Court’s Alice decision in 2014, inventors have faced extra hurdles trying to protect their software-related inventions with patents. A chief obstacle has been satisfying the two-part test for eligibility under Section 101 set forth in Alice and Mayo. To meet this test, claimed subject matter must not be directed to a judicial exception, such as an abstract idea, (Step One), and if it is, must add “significantly more” to provide an inventive concept (Step Two)…. Theodore Rand reported in IPWatchdog last week, a disturbing but not surprising trend. Rand found that, in 2020, 81% of software-related patents on appeal for subject matter eligibility in decided precedential cases (22 of 27) were found invalid. But in three cases, software-related patents were found drawn to eligible subject matter for patent purposes. Id. In each of the three cases, the appeals court pointed to aspects of the patent specifications themselves. Looking more closely at the representative claims and court’s comments with respect to the corresponding patent specification is illuminating. In particular, the court looked to the specifications for evidence of performance improvements over conventional systems, description of a technical problem/solution, and technological advantages.

On October 13, 2020, Cybergenetics filed a notice of appeal to the Federal Circuit from a decision of the Northern District of Ohio, Eastern Division, that held the patent claims asserted by Cybergenetics invalid under 35 U.S.C. 101, and granting the defendant’s Rule 12(b)(6) motion to dismiss.  Cybergenetics’ brief on appeal is due December 28, 2020.

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 issuance by the United States Supreme Court of its opinion in Alice Corporation Pty Ltd. v. CLS Bank International, 573 U.S. 208, 134 S. Ct. 2347 (2014), the United States Patent and Trademark Office (USPTO) has increased its focus on patent eligibility. As a consequence, patent applicants now receive more claim rejections under 35 U.S.C. § 101, leading to protracted prosecution. While rejections under 35 U.S.C. § 101 are likely unavoidable, patent attorneys and agents can take steps during application preparation and prosecution to minimize the likelihood of such rejections and to successfully rebut such rejections when they do arise.

The most effective way to protect an inventive business method is with a patent on a technical invention. Ever since the U.S. Supreme Court’s 2014 Alice decision, the U.S. courts and the U.S. Patent and Trademark Office (USPTO) have consistently held that you can’t patent a business method by itself. The Alice decision overturned several related business method patents as being nothing more than an attempt to patent a fundamental economic process. Lower court decisions have since affirmed that “no matter how groundbreaking, innovative or even brilliant” a business method might be, you still can’t patent it. The only way to use patents, therefore, to protect business method inventions, is to patent the technological inventions required to make the business methods work. These inventions will be patentable since they will “improve the functioning of the computer itself.” See Buysafe, Inc., v. Google, Inc. 765 F.3d 1350 (2014) citing Association for Molecular Pathology v. Myriad Genetics, Inc., ___ U.S. ___, 133 S.Ct. 2107, 2116, 186 L.Ed.2d 124 (2013).

The Federal Circuit recently reversed the District of Minnesota’s denial of summary judgment in Solutran, Inc. v. Elavon, Inc., Nos. 2019 U.S. App. LEXIS 22516 (Fed. Cir. July 30, 2019) (Before Chen, Hughes, and Stoll, Circuit Judges) (Opinion for the Court, Chen, Circuit Judge), holding that the claims at issue, which related to processing paper checks, were invalid under 35 U.S.C. § 101. The physicality of the limitations of the claims did not save the claims. See Physicality of Processing Paper Checks Does Not Save Solutran’s Claims. “[W]e have previously explained that merely reciting an abstract idea by itself in a claim—even if the idea is novel and non-obvious—is not enough to save it from ineligibility,” Judge Raymond Chen of the Federal Circuit explained for the majority. The Federal Circuit can state that proposition until every single judge is blue in the face and there will be one exhausting, inescapable truth—it is wrong! Indeed, this logical impossibility is written into so many Federal Circuit decisions one must wonder how it is possible any of the judges who believe this nonsense were ever able to achieve an acceptable score on the LSAT in order to gain admission to law school in the first place.

There is a lot of focus—and rightly so—on China’s stealing of U.S. intellectual property (IP). Recently, Trump economic adviser Larry Kudlow stated on CNBC’s Squawk Box that China has stolen at least $600 billion in American IP. Additionally, one in five North American-based corporations on the CNBC Global CFO Council said that Chinese companies have stolen their IP within the last year. In all, 7 of the 23 companies surveyed said that Chinese firms have stolen from them over the past decade. The annual cost to the U.S. economy for these actions is estimated to be greater than $600 billion. While this is a serious matter that must continue to be addressed, domestic theft of U.S. IP is just as bad if not worse. It is easy to point fingers at China, given their track record, but small U.S. companies and inventors are not having their dreams extinguished by the Chinese. They are being victimized by Silicon Valley’s big tech companies, which make billions of dollars using their stolen IP.

On July 31, Trading Technologies, a firm that develops software used for electronically trading derivatives, filed a combined petition for panel rehearing and rehearing en banc at the U.S. Court of Appeals for the Federal Circuit. The appellant is seeking review of the Federal Circuit’s earlier decision this May in Trading Technologies International v. IBG LLC (IBG IV), which confirmed the results of four covered business method (CBM) review proceedings at the Patent Trial and Appeal Board (PTAB) that invalidated patent claims owned by Trading Technologies as unpatentable under Section 101 of the patent law. In doing so, Trading Technologies argues that the Federal Circuit panel failed to follow both U.S. Supreme Court and Federal Circuit precedent, as well as previous Federal Circuit decisions upholding the validity of other Trading Technologies patents that share a specification with one of the invalidated patents.

Coverage of the Senate Judiciary Subcommittee on Intellectual Property hearings on proposed amendments to the Patent Act has trumpeted the possibility that Congress will undo the Alice test for Section 101 eligibility. Many stakeholders have commented on the benefits this could bring to patentees. But if this comes to pass, accused infringers won’t cease bringing early validity challenges—they’ll instead shift their focus from Section 101 to other grounds. Testimony before the Senate and the data on recent district court decisions strongly suggest that Section 112(f) will emerge as the preeminent ground for early validity challenges.

Last week, all eyes were on the first two days of historic Senate Judiciary IP Subcommittee Hearings, led by Senator Thom Tillis (R-NC), Chair of the Subcommittee, and Senator Chris Coons (D-DE), Ranking Member of the Subcommittee. The purpose of the hearing was simple: to determine a fix for the disaster foisted upon the industry by the patent eligibility jurisprudence of the Supreme Court of the United States. The testimony of the first 30 witnesses has already been summarized, so there is no need for me to dive into the particulars of who said what here. Suffice it to say that the Subcommittee heard a range of opinions—some better supported than others.

Business method patents have recovered under the new 2019 Revised Patent Subject Matter Eligibility Guidance. As the graph above shows, allowances per office action (APOA) dropped from 17% before the 2014 Alice decision to 4% right after the Alice decision. APOA then increased to about 11% in 2017 when a new business method director, Tariq Hafiz was appointed. Tariq made a special point of encouraging examiners to allow cases if they genuinely felt the claims met the 101 guidelines set forth by the patent office. APOA rose to 17% in 2019 after the new 2019 Guidance came out in January. It is now back at its pre-Alice level of 17%. It’s still not easy to get a business method patent. An APOA of 17% implies that, on average, an applicant will have to respond to five rejections before getting an allowance. Nonetheless, it is now at least a realistic possibility to get a business method patent in a reasonable amount of cost and time.

In the sixth installment of our 13-part patent-trends study (performed in collaboration with GreyB) providing high-level data across industries, we will examine trends in the medical-device industry. The United States has been the largest target medical-device market, at nearly 50% of the global market. These devices are highly variable in purpose, design and complexity. Thus, developing an effective patent strategy can be highly valuable yet complicated. 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.

In yesterday’s article, we introduced our patent-trends study (performed in a collaboration between Kilpatrick Townsend and GreyB Services) and provided high-level data across industries. Today’s article pertains to the Internet of Things (IoT) industry. With the prevalence of WiFi, cellular modems and devices configured for short-range connections, IoT systems are becoming all the more ubiquitous and exciting. No matter how powerful and sophisticated a single device is, its efficiency and usefulness will very often remain capped if it cannot “talk” to other devices. Only through these communications can the device gain a more comprehensive view (e.g., corresponding to where users are, what computations or controls may be helpful, what computations or actions other devices are already performing or coordinating). Thus, we can begin to start thinking about specifications (e.g., efficiency, speed, memory, accuracy) of a device and instead think about specifications of a system. This presents a large number of important use cases.