Whether Facts Matter in the Patent Eligibility Analysis: HP Files Petition for En Banc Rehearing

By Michael Borella --

In Franz Kafka's novel The Trial, a man is accused of a non-specified crime by a shadowy governmental agency.  The man repeatedly attempts to understand the nature of his alleged wrongdoing and his accusers.  Ultimately, he is executed without these questions being answered.

Under current Supreme Court and Federal Circuit rulings (Alice Corp. v. CLS Bank Int'l and its progeny), a patent can be invalidated or an application can be rejected simply by (i) making a high-level analogy between the claimed invention and one that has been previously found to be directed to a patent-ineligible law of nature, natural phenomena, or abstract idea, and (ii) stating in a purely conclusory fashion that the additional elements of the claim are well-understood, conventional, and routine.  Kafka might crack a sardonic smile at this situation.

One might presume that to establish that claim elements are well-understood, conventional, and routine, a challenger must undertake a factual inquiry.  But this is not the case.  Instead, a form of judicial notice is used to declare claims invalid based on mere contention -- because patent eligibility has been treated as if it is purely a matter of law.  While in some cases, those who employ this short cut are undoubtedly correct (e.g., a general purpose processor certainly is a conventional component of a computer), it has also been used extensively in a questionable manner.

As an example, a challenger (a USPTO patent examiner, for instance) states:  "The claim elements are well-understood, conventional, and routine -- no patent for you!"  In response, the applicant rebuts the examiner both procedurally and substantively:  "Examiner, your conclusory statements do nothing to establish that the claim elements are well-understood, conventional, and routine, and here is some evidence that they are not."  The examiner replies:  "I don't care, eligibility is a matter of law and I am not required to provide factual evidence to support my reasoning, nor do I have to consider any factual evidence that might suggest that I am wrong."  And MPEP § 2106 supports the examiner's position.  Thus, the Kafkaesque irony of patent-eligibility in 2018.

But the times may be a-changing.  Last month, in Berkheimer vs. HP Inc., the Federal Circuit stated:

The 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.  Any fact . . . that is pertinent to the invalidity conclusion must be proven by clear and convincing evidence.  Like indefiniteness, enablement, or obviousness, whether a claim recites patent eligible subject matter is a question of law which may contain underlying facts [emphasis added].

The Court noted that some § 101 disputes may be resolved as a matter of law when there is no material issue of fact regarding whether one or more claim elements, or combination thereof, are well-understood, routine, or conventional to a person of ordinary skill in the art.  Based on this reasoning, HP's summary judgment motion for ineligibility was reversed and remanded to the District Court for further proceedings.  The Court reiterated this position a few days later in Aatrix Software Inc. v. Green Shades Software, Inc. and three times since then in nonprecedential decisions.

This line of cases, all but one involving Judge Moore in the majority opinion, has sent patentees, practitioners, and commentators into a minor tizzy.  And certainly it has opened the door for a number of interesting questions:  What does it take for a patentee to establish that there is a material issue of fact?  Will § 101 disputes become a battle of experts?  Will § 101 issues now need to be explained to a jury?  How "understood" does a claim element need to be in order to qualify as "well understood?"

In a move that surprised absolutely nobody, HP filed for en banc rehearing of the appeal.  HP starts off its argument with a strong statement:

Under the panel decision in this case, the crucial, threshold determination of patent eligibility under Section 101 is predominantly a question of fact.  That result is inconsistent with the Supreme Court's decisions in Bilski, Mayo, and Alice, with this Court's own precedent, and with the need to resolve issues of patent eligibility as a question of law early in the litigation process to avoid unnecessary, costly, and protracted litigation.

The problem with this proclamation is that HP stretches the truth in at least three ways.  First, the panel did not state nor did it imply that the § 101 inquiry is "predominantly a question of fact" -- if anything, the panel merely held that in some cases, it will involve questions of fact.  Second, this result is quite consistent with Mayo, where Justice Breyer wrote that the § 101 inquiry may overlap with fact-sensitive inquiries such as novelty under § 102.  Third, while incorporating a factual analysis into § 101 disputes could increase the cost and length of litigation, it is far from unnecessary.

To that latter point, the Alice decision has been post-hoc justified due to its ability to rapidly dispose of so-called "bad" patents.  Nobody will argue that "bad" patents don't exist, though a better term for them might be "patents that the USPTO should not have granted."  In practice, however, Alice allows the USPTO and courts to throw the proverbial baby out with the bathwater.  Given its broad scope and sweeping application, § 101 has been used in a questionable fashion to invalidate patents that could have easily been viewed as technical inventions that offer advances over the status quo (see Recognicorp, LLC v. Nintendo Co., Ltd., Smart Systems Innovations, LLC v. Chicago Transit Authority, Two-Way Media Ltd. v. Comcast Cable Communications, LLC, and Move, Inc. v. Real Estate Alliance Ltd. as recent examples).  Many times, claims shot down under Alice are not "good" but their not-goodness would have been properly addressed under §§ 102, 103, and/or 112.

HP goes on to note correctly that many, if not all, previous § 101 appeals were decided as a matter of law, and that the Berkheimer panel deviated from this trend.  Nonetheless, neither the Supreme Court nor the Federal Circuit ever mandated that all § 101 analyses must ignore facts -- only that eligibility decisions could be ripe for judgment on the pleadings or summary judgment when facts are not in dispute.  HP attempts to make hay of the extent that the courts (and the USPTO) may have carried out the analysis otherwise.

HP also states that asking "whether the invention describes well-understood, routine, and conventional activities" is the wrong question.  HP does have a point that "[a] claim that merely applies a new abstract idea . . . might not describe well-understood, routine, and conventional activities."  (For instance, a newly-discovered equation is abstract, but by definition not conventional).

Nonetheless, HP is misconstruing the Alice test.  In the words of the Supreme Court, Alice requires that one first consider the claim to determine whether it is directed to an abstract idea (or other judicial exception).  If this is the case, then one must "consider the elements of each claim both individually and as an ordered combination to determine whether the additional elements transform the nature of the claim into a patent-eligible application."  Well-understood, routine, and conventional elements do not (unless the combination thereof is innovative).  Thus, the well-understood, routine, and conventional question is appropriate once an abstract idea is identified in a claim that has additional elements.  HP's hypothetical does not provide any additional elements.

HP further raises an alarm over a patent owner being able to use "an expert to testify to some 'inventive concept' captured by a patent or to testify that the claim limitations, although known and disclosed in the prior art, were not 'routine and conventional.'"  Rather than addressing the substantive issue -- that in fact, there is a difference between a claim limitation that is disclosed and one that is conventional and routine -- HP merely points out that rapid litigation victories will be harder for defendants.  This will be the effect of the Berkheimer panel decision, of course, when such easy wins are not actually justified.

HP's next issue in the parade of horribles is that:

Under the panel's analysis, a fact issue will arise in any case where the specification recites that the claims do not describe "well-understood, routine, and conventional activities."  That means a fact issue will arise in virtually every case, because for a patent to issue in the first place, every claim should at least allegedly recite something new.

HP points out that this could have resulted in the Alice and Mayo claims surviving summary judgment.  Perhaps.  According to Rule 56, "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."  Is HP attempting to shift this burden to the patentee?  Furthermore, if the claims do recite something new, then why should this be ignored when the goal of the statute is to define the scope of patentable innovation?

HP's final point is that if the panel decision holds, litigation will be "more complex, expensive, and lengthy," in comparison to the common practice of applying § 101 early in a case to dispose of a patent.  HP points out that at least one Federal Circuit judge (Judge Mayer for those of you keeping track) has lauded this early dismissal practice because "[p]atent eligibility issues can often be resolved without lengthy claim construction."  But the notion of invalidating a patent without determining the meaning of the claims seems antithetical to the constitutional mandate of promoting "the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries."

While HP is not wrong to state that litigation will be more complex when issues of fact are part of the eligibility inquiry, its justification for supporting the pre-Berkheimer status quo is shaky, and there is nothing in any of the recent cases that suggest one cannot still obtain an early dismissal under § 101.  In fact, that is exactly what happened in Automated Tracking Solutions, LLC v. Coca-Cola Co. and the recent Intellectual Ventures I v. Symantec Corp.

If anything, HP lost an opportunity to invoke fear, uncertainty, and doubt by asking the unanswered questions that the panel did not address:  What is required for the patentee to establish that there is a material issue of fact?  How does one explain § 101 issues to a jury?  How "understood" does a claim element need to be in order to qualify as "well understood?"  The Federal Circuit needs to flesh out these issues in order to fully develop the factual inquiry.

If the Court does grant en banc review, we will find out how much of this recent jurisprudence is a Judge Moore thing.  Judge Moore wrote the majority opinions of the Berkheimer panel decision, as well as those of Aatrix and Exergen Corp. v. Kaz USA, Inc.  All three decisions applied a factual analysis to a § 101 dispute.  Joining her across these opinions were Judges Taranto, Stoll, and Bryson.  Dissenting from this view was Judge Reyna.  Judge Hughes' dissent in Exergen was directed to the majority's outcome rather than the process they employed to arrive at it.

Applying some educated guesswork based on past § 101 opinions, Judge Newman is likely to side with Judge Moore, while Judge Lourie is likely to go the other way.  The positions of Judges Prost, Linn, Dyk, O'Malley, Wallach, and Chen are unknown.  Thus, the probable Federal Circuit math puts 5 judges in favor of the factual inquiry, 2 against, and 7 (including Judge Hughes) up in the air.

Comments

[Atari Man]

HP argues, "That means a fact issue will arise in virtually every case, because for a patent to issue in the first place, every claim should at least allegedly recite something new". Well, uh, yeah. Sorry to burst your post-Alice bubble thinking that patents are just wallpaper.

It's attorneys who make these kind of arguments that give the other 1% a bad name.

[skeptical]

To counter the notion supplied by MPEP 2106:

An important aspect at the examination level is the "binding" rules for examiners as to when Official Notice (that is, that very "conclusory statement and nothing more" avenue) may and may not be taken.

One avenue that is forbidden: to establish the state of the art.

While state of the art is typically thought of in regards to the prongs requiring LESS evidence such as novelty and non-obviousness, state of the art certainly covers the more heavily evidence-required state of "well-understood, conventional, and routine" or in other words, in widespread use.

The Office has already barred itself from merely swinging the Court's "Gist/Abstract" sword.

[Skeptical]

The following statement from the write-up is in error:

"If this is the case, then one must "consider the elements of each claim both individually and as an ordered combination to determine whether the additional elements transform the nature of the claim into a patent-eligible application." Well-understood, routine, and conventional elements do not."

Transformation may very well happen from the ordered combination (one may read that as "configuration" of elements, each of which in their own stead are eminently well-understood, routine and conventional.

Quite in fact, ALL matter (anything within the statutory categories typically considered to be "hard goods") are - at their core - merely configurations of elements (elementary particles) that are eminently well-understood, routine and conventional. For such, it is ENTIRELY the configuration or "ordered combination" of the underlying well-understood, routine and conventional items with which innovation and invention inure.

Will the anti-patentists recognize the frailty of their own "logic?"

I remain:

[JCD]

Your point is taken, but I think you and Mr. Borella are actually in agreement on this point; you just are looking to clarify any confusion from the phrasing to note that elements and combinations of elements must be considered.

[Mike Borella]

He has a good point and I've updated the post with a parenthetical.