Section 101 and the Growing Alice Backlash

By Michael Borella --

35 U.S.C. § 101 states that "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof" is patent-eligible.  However, the Supreme Court has traditionally acknowledged the existence of several exceptions to these categories -- namely that laws of nature, natural phenomena, and abstract ideas are not patentable in and of themselves.  Despite the Court's warnings that one should "tread carefully in construing this exclusionary principle lest it swallow all of patent law," and that "all inventions . . . embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas," lower courts and the USPTO have often viewed these exceptions with a wide lens.

In the nearly two years since the Alice Corp. v. CLS Bank decision, this lens has grown dramatically for certain types of inventions.  For instance, in 2015, approximately 70% of all patents challenged under Alice in district courts were invalidated, while the monthly § 101 rejection rates for USPTO Technical Centers 3620, 3680, and 3690 were over 85% for most of the year.[1]  These sobering statistics are due to the new subject matter eligibility test set forth in Alice.  Particularly, one must first determine whether the claim at hand is directed to a judicially-excluded law of nature, a natural phenomenon, or an abstract idea.  If so, then one must further determine whether any element, or combination of elements, in the claim is sufficient to ensure that the claim amounts to significantly more than the judicial exception.  Notably, generic computer implementation of an otherwise abstract process does not qualify as "significantly more."

The Court refrained from explicitly defining the scope of abstract ideas, and provided only limited examples of what might be "significantly more" than a judicial exclusion.  As a consequence, the Alice test is inherently subjective, and is often applied in a conclusory fashion.  Perhaps because of this subjectivity, as well as the thousands of claims shot down under Alice, we may be seeing the beginning of a backlash against applying the test too strictly.

In April, David Kappos, the former USPTO Director, stated that "[i]t's time to abolish Section 101, and the reason I say that is that Europe doesn't have 101 and Asia doesn't have 101 and they seem to be doing just fine in constraining patent-eligible subject matter."  Kappos was concerned that the same software and biotech fields that have been the most impacted by Alice are also "the crown jewel of the innovation economy" and that patentees may be inclined to seek protection in other countries instead of the U.S. for these types of inventions.  This may lead to foreign competitors of U.S. companies taking advantage of the relatively weak U.S. patent protection in these areas, and being able to exploit such technologies without being subject to an actionable remedy.

Kappos is now in private practice, and thus one might argue that he is biased toward a strong U.S. patent system.  But he is far from the only member of the patent community to raise issues with Alice.  Indeed, federal judges and the USPTO administration, neutral parties who apply the law as they understand it, seem to be pushing back at the Alice juggernaut.

Judge Sue Robinson of the District of Delaware recently wrote four opinions upholding the validity of patents challenged under § 101 (Improved Search LLC v. AOL, Inc., Intellectual Ventures I LLC v. Ricoh Americas Corp., Network Congestion Solutions, LLC v. U.S. Cellular Corp., and SRI International Inc. v. Cisco Systems Inc.).  Prior to these decisions, the District of Delaware had the highest rate of finding patents invalid based on Alice in the entire country.  Judge Robinson was critical of the Supreme Court's patent-eligibility jurisprudence, writing that "most of the patent claims now being challenged under § 101 would have survived such challenges if mounted at the time of issuance, [but] these claims are now in jeopardy" and that "it is less than clear how a § 101 inquiry that is focused through the lens of specificity can be harmonized with the roles given to other aspects of the patent law (such as enablement under § 112 and non-obviousness under § 103)."

Is Judge Robinson resisting the broad application of Alice?  Or are these four rulings, all coming down within a month of one another -- with three on the same day -- merely a coincidence?

The Federal Circuit recently found claims to be patent-eligible post-Alice for only the second time in Enfish, LLC v. Microsoft Corp.  In this decision, however, the Court made a point of strongly reiterating the patentability of properly-claimed software inventions, noting that "[w]e do not read Alice to broadly hold that all improvements in computer-related technology are inherently abstract."  Further, the Federal Circuit criticized the District Court from which this case was appealed, noting that, when carrying out prong one of Alice, "describing the claims at such a high level of abstraction and untethered from the language of the claims all but ensures that the exceptions to § 101 swallow the rule."

The latter quote may be a sign that the Court has heard the concerns from numerous parties about how the Alice test is being misapplied.  For instance, it is all too common for a judge or a USPTO examiner to: (1) view a claim at a 10,000 foot level to remove from it all devices and machines, (2) this subjective "gist" of the remaining aspects of the claim is declared abstract, and (3) when the devices and machines are examined separately from this gist of the claim, they are determined to be no more than routine and conventional, adding no patentable weight.  Following such a formula, virtually any software or business method claim can be rendered invalid.  But, as pointed out in Enfish, this formula fails to follow the Supreme Court's directive that we must consider claims as an "ordered combination" when carrying out prong two of the test.

Which brings us to the USPTO.  On May 6th, the Office published a memorandum entitled Formulating a Subject Matter Eligibility Rejection and Evaluating the Applicant's Response to a Subject Matter Eligibility Rejection.  The memo states that "it is particularly critical to address the combination of additional elements, because while individually-viewed elements may not appear to add significantly more, those additional elements when viewed in combination may amount to significantly more than the exception by meaningfully limiting the judicial exception."  As noted in the USPTO's July 2015 Update Appendix 1: Examples, under Alice, the claims in Diamond v. Diehr are patent-eligible only when considered as an ordered combination: "when viewing the claim as a whole, the combination of all these steps taken together, including the constant determination of the temperature of the mold, the repetitive calculations and comparisons, and the opening of the press based on the calculations, amount to significantly more than simply calculating the mold time using the Arrhenius equation because they add meaningful limits on use of the equation."

In issuing this memo, the USPTO seems to be requiring that examiners provide more detailed written memorializations of their Alice analyses as part of the examination records.  Particularly, some (but certainly not all) examiners have been rejecting claims under Alice without explicitly considering all elements of the claim, without reviewing these elements as a whole or an ordered combination, and while omitting any discussion of dependent claims.

The USPTO is likely recognizing these procedural problems.  Notably, with respect to the latter, the memo states that "the eligibility of each claim should be evaluated as a whole using the two-step analysis detailed in the Interim Eligibility Guidance" (emphasis added).  When required to make the Alice analysis more explicit, examiners may find that fewer claims are invalid.

Ultimately, it may take months to determine how all of this will play out.  Examiners are just beginning to be trained on the memo, and the USPTO may have to publish a significant update to its overall § 101 guidance to account for Enfish.  Further, district court interpretation of Enfish remains to be seen, but undoubtedly patentees in litigation will be advocating that the Federal Circuit has changed its approach to Alice in a major way.  Also, Judge Robinson's recent decisions may have persuasive weight on other judges presiding over patent cases.

On the policy level, Kappos's words may grab the attention of Congress.  In view of the current election cycle, members of the legislature now realize that there is a strong protectionist sentiment in certain constituencies, and that the weakening affect that Alice has on the patent system will not play well with software and biotech businesses seeking to secure their investments in technology from foreign competitors.

Within the course of two months, four sources have provided reasoned criticisms of procedural and substantive aspects of Alice.  It seems that the § 101 pendulum is finally swinging back to a more moderate view of subject matter eligibility.

[1] Statistics derived in part from http://www.bilskiblog.com/.

Comments

[EG]

Hey Michael,

As I've repeatedly stated, the nonsensical 2-part Alice test was broken from the outset. The criticism of SCOTUS' blatant judicial overreach on the standard for patent-eligibility is on point, and the problem for this mess lies squarely at the feet of Our Judicial Mount Olympus. What will the Royal Eight also say when its nonsensical Alice test, as is or as applied by the lower courts and USPTO, is deemed to be in violation of TRIPS by the WTO (see amicus brief by the Bioindustry in the Sequenom petition)?

[Atari Man]

Michael, interesting observations about a possible swing of the judicial pendulum in the other direction, but as you say, time will tell. I have a quibble, though, with something early in your post:

"Kappos is now in private practice, and thus one might argue that he is biased toward a strong U.S. patent system." How does being in private practice equate with being biased toward a strong patent system? At the moment, there are plenty of patents to attack in court or in a PGR as being invalid under 101, and pretty much every US law firm with a self-respecting IP practice will now tell potential client how experienced its attorneys are in such modes of invalidating patents. The fact that this gravy train may eventually disappear as more and more potential applicants are dissuaded from applying for patents due the 101 threat is likely of little interest to those firms' senior partners, who will be retired by the time the well of patents to attack runs dry.

Practitioners who engage in the less lucrative business of procuring patents will certainly be happy if this 101 mess ever gets fixed, but let's suspend our cynicism for a moment and consider that such practitioners see innovations when they're fresh, and are aware of the role patents play in the development and commercialization of many inventions. At least some of those practitioners think that providing the necessary incentives for such development and commercialization is good for society at large, independent of their desire to preserve their livelihoods.

[step back]

Michael, the underlying witches' brew ingredients (the cause of the bubbles and the troubles) in this remake of Emperor Macbeth Wears Substance-less Clothes (a.k.a. the Alice/Myriad fiasco) are the amicus briefs.

These not-cross-examined admissions into evidence of nonsensical techno-talk (i.e. generic computers, plucking leaves off DNA trees, laws "of nature") make the appellate level judges feel good about themselves. But they are a violation of due process and of required expert testimony gate keeping. It is not we the back lashing practitioners who are at fault here but rather the media stars of the higher appellate benches. They should know better. Shame on them.

[GrzeszDeL]

"Kappos was concerned that the same software and biotech fields that have been the most impacted by Alice are also "the crown jewel of the innovation economy" and that patentees may be inclined to seek protection in other countries instead of the U.S. for these types of inventions."

Who cares if inventors file in Japan or the EPO but not in the U.S. The point of the U.S. patent system is to incentivize innovation, not to procure filings in the U.S. The measure of a good patent system is "does this incentivize innovation?" All other considerations are beside the point.

I happen to agree with Mr. Kappos that current 101 jurisprudence is depressing the incentive to innovate, but this is a totally separate matter from applicants filing or not filing in the U.S.

"This may lead to foreign competitors of U.S. companies taking advantage of the relatively weak U.S. patent protection in these areas, and being able to exploit such technologies without being subject to an actionable remedy."

Why are we focusing on "foreign" competitors? If U.S. patents are weak, then domestic and foreign competitors alike will move in on the innovator's U.S. market share (regardless of whether the innovator is foreign or domestic). Similarly, if protection in (e.g.) the E.U. is strong, then both U.S. and ex-U.S. competitors will be less inclined to encroach on the innovator's E.U. market share.

The question is not whether we want a system that favors "foreign" or "domestic" interests. It is not possible to design laws that will (ex ante) favor "foreign" or "American" businesses, at least not laws that comply with our treaty obligations. Rather, the question is whether we want a system that favors innovators or copiers. The distinction between "foreign" and "domestic" entities is irrelevant to this question.

[Mike Borella]

FWIW, my thoughts on foreign versus domestic entities is entirely in the context of a recent groundswell in protectionism in the U.S., namely what is coming out of our somewhat ridiculous run up to the November presidential election.

That us vs. them dynamic might make a Congress that is notorious for doing very little move toward strengthening patent rights for all by chipping away at Alice.

[Distant Perspective]

I respectfully suggest that Enfish v. Microsoft is simply applying Alice as intended, and carrying out a proper analysis of what the claim is directed to. In particular the first step of the Alice analysis should not be a "reverse Rich/Rader" looking to the wording of the claims, drawing conclusions from the presence or absence of certain words or phrases like "computer-implemented" to determine eligibility, but determining what the claims are actually directed to. And, on the basis of the claim construction, the CAFC panel saw that the claims are directed towards a manner of managing a portion of computer memory, with data in some memory locations being related to data in other memory locations via physical/logical connections not founded on what in the world of human society (prices, preferences, advertisements, contractual obligations etc.) the data is supposed to "represent". It is argued that this improves computer technology and at first glance doesn't seem to be "routine, conventional steps long practiced in the art".

And if FAT filesystems are patent eligible, then it would be difficult, I suggest, to argue that an invention directed to method for managing data storage that arguably provides a more efficient method of doing so is not patent eligible.

By contrast, maybe the thoroughness of the 101 analysis by the honorable district judge in Delaware is not commensurate with the length of her preliminary boilerplate. Maybe the claim examined in Intellectual Ventures v. Ricoh is "interesting" on 101 grounds? What is the claim directed to? And does the claim really meet the utility criterion included in 101?

In this invention, I presume that the cameras, or light detecting cells (or whatever you like to call them) are on an arm that moves underneath the platen glass of the scanner that is pushed horizontally by a driving wheel driven by the motor. The Memorandum Opinion does not suggest that claim construction was required before consideration for summary judgment, so presumably the claim has its ordinary meaning.

Claim 1 of the '761 patent (according to the memorandum opinion) centres on three parameters, T_G = the period of the triggering signal, i.e. the interval between the times that images are recorded, T_M, the period of the driving signal. Assuming a wheel to convert rotary motion into horizontal motion, the speed with which the horizontal camera arm moves under the platen is presumably C / T_M, where C denotes the circumference of the driving motor wheel. The inventor seems to have discovered that T_G = T_M times N, where N is the number of rotation steps of the motor within one triggering period. And the "predetermined resolution" determines N. (Developing this further, the resolution can be taken as the reciprocal of the horizontal distance travelled by the camera arm between triggerings, and this would be T_M / (C T_G).)

Claim 1 of the '761 patent is drawn towards determining T_M and T_G, wherein T_G = T_M times N, and then operating the scanner with the motor speed so determined. So merely determining T_M and T_G in whatever manner you please and operating the scanner will infringe the patent - assuming a standard generic construction for the scanner with the horizontal speed of movement of the camera bar proportional to the speed of rotation of the motor arm. According to the memorandum opinion the defendents, Ricoh, argued that the patent "simply claims an unpatentable mathematical formula used in a generic prior art scanner". According to a quote in the memorandum opinion, the inventor claims that "the lower the resolution, the larger the number of rotation steps of the motor within one triggering period, and the faster the scanning rate". In other words, if you are prepared for a lower resolution image, you can run the motor faster and get the scanning done more quickly. But even instructions regarding this are not included in Claim 1! Is it not the case that merely operating a scanner that provides a choice of resolutions, with knowledge of the inescapable logical relationship between T_G and T_M infringes the patent? And, given this, what is the utility in the invention as claimed?

[DB]

Former Chief Judge of the CAFC Paul Michel's comments on the Enfish case and Alice in general:

After reading Enfish LLC, I conclude that, although labouring mightily to give clarity and administrability to Mayo/Alice, the court has failed to impart meaningful predictability to the vast expanse of computer or software-related patent claims. I estimate that hundreds of thousands of issued patents remain under a cloud of possible invalidity. That is even worse than being plainly valid or plainly invalid. The problem is that patent practitioners, examiners, judges, PTAB members and others charged with adjudicating eligibility or advising business executives cannot do so with any confidence at all.

That is not the fault of the Federal Circuit, but of the Supreme Court which has "legislated" a two-step inquiry that is fundamentally flawed. At step 1, one must decide what a claim is "directed to", a meaningless construct. So, in Enfish, the Federal Circuit tried to give it meaning by equating it with "focusing on" or "improving" compared to prior art, as revealed in the Written Description.

The only clarity I discern is that, as in DDR, since the claimed invention in Enfish touts improvements in the functioning of the computer itself or solves a problem particular to the computer arts, it escapes Alice, step 1. But we already knew that. And, DDR remains one of only a very few decisions upholding eligibility and thus validity. This "safe harbour" looks exceedingly small to me. But, it is better than none.

Therefore, innumerable claims issued before Mayo/Alice that were perfectively valid when issued will gradually fall, ultimately in massive numbers, because the Supreme Court suddenly, radically and retroactively upended the law of Section 101. That these two decisions pretend to follow Flook and Diehr is hollow because Diehr overruled Flook, as its authour (Stevens) made clear in his dissent in Diehr. When Mayo purported to reconcile Flook and Diehr, it was sheer sophistry. Then, Alice expanded on statements in Mayo and Bilski, compounding the chaos.

In addition to pervasive uncertainty, we now face fundamental unfairness as 8,300 examiners, 275 PTAB judges, 1000 District Judges and other adjudicators cannot possibly apply the law consistently, and they are not. Many more thousands of patent attorneys cannot accurately advise clients, either. Their clients, likewise suffer both the uncertainty, which makes business decisions impossible, and unfairness, which adds considerable additional costs to securing and enforcing patents when the costs were already excessive, and now are indeed unbearable, in combination, by smaller entities. Yet, it is precisely those organisations (universities, research institutes, start-up, hospitals, emerging companies) that create most net new jobs, most economic growth, most new technologies.

I am sure the Supreme Court did not intend or foresee these damaging effects. However, only it or the Congress can remedy the problem. The Federal Circuit has been rendered ineffective, trapped by Supreme Court decisions filled with loose dicta, some of it tracing back many decades, even to the 1800s. We can see its frustration in its plea for the eligibility of the health diagnostic method in Sequenom, while invalidating it.

The recent "Guidelines" issued by the PTO are likewise unable to fix the problem; the PTO, like the Federal Circuit, has been given an impossible task: to make sense of illogical nonsense, unwittingly unleashed by the high court.

Worst of all is that this entire episode was unnecessary. Bad claims are readily invalidated under sections 102, 103, 112. But, for whatever reason, Justice Breyer's opinion in Mayo assumed that the 101 inquiry is "better established" and the other sections not up to the task. In my opinion, it is just the opposite.

Even if the high court wanted to end the chaos, it could do so only gradually, one case at a time, over many years. Thus, as a practical matter, only Congress can end the nightmare, but it is still fixated on the greatly exaggerated, though real enough, "troll problem."

The Federal Circuit will continue, valiantly, to contain, limit and marginally reduce the harm. But, it will not be enough. That is the lesson of Enfish.