Is It Time for Federal Circuit to Rethink Its Subject Matter Eligibility Jurisprudence?

By Kevin E. Noonan --

The Federal Circuit's inchoate attempts to fashion a consistent, rational application of the Supreme Court's recent subject matter eligibility jurisprudence, while understandably Herculean in view of the difficulties inherent in that precedent, raises questions regarding the value of having a "specialized" Circuit Court for the purpose of harmonizing U.S. patent law (see "The Proper Role of the Federal Circuit"; "In Defense of the Federal Circuit: A Response to Judge Wood").  Such sentiments are understandable, particularly in view of the dissension amongst the Federal Circuit judges themselves (see, e.g., "Ariosa Diagnostics, Inc. v. Sequenom, Inc." and "Athena Diagnostics v. Mayo Collab. Servs.").  The most recent example of the fractured nature of the Court on this issue is American Axle & Mfg. v. Neapco Holdings LLC.  The opinions of the Circuit Judges on the question of granting American Axle's request for rehearing en banc is illustrative that these issues will not disappear soon without Supreme Court intervention.  (Whether such intervention would clarify or render the standard even more opaque is itself an open question.)

The Court split 6:6 on whether to grant rehearing, thus denying the request.  Of the Judges denying the request, Judges Dyk, Wallach, and Taranto based their decision not to grant en banc reconsideration squarely on O'Reilly v. Morse (all other precedent cited in their opinion relies on what they consider the proper application of this decision).  In their view, the claims whose invalidation here the panel affirmed (while reversing this determination in the revised opinion as to other claims) suffered under Section 101 by not reciting the specific means by which the scientific principle was applied; this determination was challenged by Judge Moore's dissent in both the original panel decision and the amended decision issued with the Court's decision not to rehear the matter en banc as amounting to a "super-enablement" requirement.

O'Reilly v. Morse was decided in 1853.  In the 167 years since that decision no court (not the Court of Customs and Patent Appeals, the Federal Circuit's predecessor court, no regional Circuit Court of Appeals including the Federal Circuit, not even the Supreme Court) has used the Morse precedent as the Federal Circuit has done in American Axle to support a finding of lack of subject matter eligibility for such claims. The ancient principle that "the exception probes the rule" here works in reverse:  the fact this the decision is an exception is an indication that the rule, fully probed, has been improperly applied in this decision. And Judges Dyk, Wallach, and Taranto provide cold comfort when their opinion against granting rehearing en banc asserts that their opinion is somehow narrow in scope.  As has been seen all too often in subject matter eligibility cases, when the Federal Circuit gives some litigants (and some district courts) a subject matter eligibility inch they take, if not a mile, then at least the next step in expanding the scope of claims that can be held ineligible.

Nor does Judge Chen's agreement with his naysaying brethren (joined by Judge Wallach) convince in stating the judicial equivalent of "nothing to see here, move along."  While the Judge is correct that the application of law to fact in the Section 101 context has always been a case by case judgment, it can also be a misjudgment, the characterization of which can be discerned, inter alia, by the reaction to the decision of other learned judges on the Court.  This decision is clearly terra nova for patent eligibility if only for the reason that six other Federal Circuit judges believe it to have been decided in error.  (While not discounting their views, it is not surprising that Judges Dyk and Taranto agree to not rehear en banc, being the two judges who joined in both the original panel decision and the amended decision; using this calculus four of the judges not on that panel agree with their decision and six at least think that the entire court should rehear the case.)  While the Judge is also correct that O'Reilly v. Morse "remains good law," that is not the issue; the question is whether (as six of his colleagues agree) the failure is in the application of the law by the panel majority.

One other aspect of Judge Chen's decision provides support for the position that the law has been improperly interpreted here.  Judge Chen writes:

If claim 22 had omitted any reference to mass and stiffness, such that the claim simply recited "tuning to match the relevant frequency or frequencies," there would be no basis to say that the claim invokes Hooke's law.

There is at least the following deficiency in this position.  It suggests that a way to obtain a claim to a practical application of a natural law is, no matter what you do, don't inform the public about the law upon which your method is based.  While Hooke's Law is of ancient provenance, that will not always be the case (indeed it may rarely be the case).  And to the extent that the law is interpreted in this way, that interpretation, and not permitting patenting of claims depending on a natural law, is the Constitutionally infirm position because it is directly contrary to "promoting progress."  This statement also is reminiscent of the U.S. Patent and Trademark Office's valiant but failed attempt to circumvent the Federal Circuit's Sequenom decision by setting a standard whereby a claim directed to merely detecting a natural law, without reciting the application of that natural law in providing a diagnosis, was patent eligible.  The Federal Circuit overruled that attempt ("properly" in view of the Sequenom decision) in Cleveland Clinic Foundation v. True Health Diagnostics LLC and at the same time rejected reliance on the Office's expertise for the sake of "the need for consistent application of our case law."

Judge Newman's dissent from denial of rehearing en banc, joined by Judges Moore, O'Malley, Reyna, and Stoll illustrates (albeit not as forcefully as Judge Moore's dissent from the panel decision) the state of the Court's doctrinally incoherent precedent.  (Respectfully, Judge Reyna's presence on this dissent speaks volumes about the serious questions raised by the panel majority's decision, if only to the extent that rehearing en banc is warranted.)  Judge Newman's views and concerns regarding the Court's subject matter eligibility decisions echo her dissent in Athena; she states "[t]he court's rulings on patent eligibility have become so diverse and unpredictable as to have a serious effect on the innovation incentive in all fields of technology" and her concern remains that "[t]he victim is not only this inventor of this now-copied improvement in driveshafts for automotive vehicles; the victims are the national interest in an innovative industrial economy, and the public interest in the fruits of technological advance."

The opinions of the Federal Circuit judges that denied rehearing en banc are not consistent with Supreme Court precedent to the extent that the Court recognized and cautioned that invalidation or denial of patent eligibility based on an overbroad application of Section 101 posed significant risks to innovation:

At the same time, we tread carefully in construing this exclusionary principle lest it swallow all of patent law.  . . .  At some level, "all inventions . . . embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas."  . . .  Thus, an invention is not rendered ineligible for patent simply because it involves an abstract concept.  . . .  "[A]pplication[s]" of such concepts " 'to a new and useful end,' " we have said, remain eligible for patent protection.  . . .  Alice Corp. v. CLS Bank Int'l, 573 U.S. 208, 217 (2014) [some citations omitted].

Judge Newman's dissent recognizes these principles, citing Le Roy v. Tatham, 55 U.S. 156 (1852), that "[a]ll technology is based on scientific principles—whether or not the principles are understood" and that "[t]he Court then and now understood the distinction between the basic principles of science and their practical application."  Her dissent also cites many of the cases following from O'Reilly v. Morse cited by her brethren denying rehearing en banc but distinguishing them in ways they do not, based on principles versus their application.

Judge Stoll writes (joined by Judges Newman, Moore, O'Malley, and Reyna again), specifically challenging her colleagues' argument that what Judge Moore in her dissent from the panel opinion and the amended opinion characterizes as the "nothing more test" is consistent with O'Reilly v. Morse.  Indeed, Judge Stoll questions Judge Chen's reliance on the Morse precedent, stating:

I note that Judge Chen does not identify any prior court opinions or articles that specifically refer to an "O'Reilly test," nor am I aware of any.  To the extent that the Supreme Court has cited O'Reilly, it has been for the general propositions that there is an implicit exception to § 101 and that preemption is an important concern in patent law.

And with regard to the "how to" aspect of the majority's opinion, Judge Stoll writes:

Even assuming that claim 22 applies Hooke's law (or any other unnamed law of nature), the claim seems sufficiently specific to qualify as an eligible application of that natural law.  The claim identifies specific variables to tune, including "a mass and a stiffness of at least one liner."  . . .  It requires that the tuned liner attenuate specific types of vibration, including "shell mode vibrations" and "bending mode vibrations," and further requires that the tuned liner is inserted in a "hollow shaft member."  . . .  With this level of specificity, claim 22 appears to be properly directed to "the application of the law of nature to a new and useful end," not to the law of nature itself.  Funk Bros. Seed Co. v. Kalo Inoculant Co., 333 U.S. 127, 130 (1948) (collecting cases).  Yet this level of detail is insufficient in the majority's view, and it remains unclear how much more "how to" would have been sufficient to render the claim eligible under the majority's approach [citations to the record omitted].

Judge Stoll is also properly concerned with how far the Court has strayed from traditional principles of patent eligibility:

The majority invokes § 101 to hold ineligible a method for manufacturing a drive shaft assembly for a car—a class of invention that has historically been patent eligible.  See, e.g., Diehr, 450 U.S. at 184 ("Industrial processes . . . have historically been eligible to receive the protection of our patent laws.").  In my view, the result in this case suggests that this court has strayed too far from the preemption concerns that motivate the judicial exception to patent eligibility.  The claims at issue here are far removed from the canonical ineligible claim that "simply state[s] the law of nature while adding the words 'apply it.'"  Mayo, 566 U.S. at 72 (citing Gottschalk v. Benson, 409 U.S. 63, 71–72 (1972)).  Indeed, the claims at issue do not recite any particular law of nature, much less preempt the use of Hooke's law in any particular context.  Instead, they are directed to a specific "method for manufacturing a shaft assembly" with a liner that attenuates certain types of vibrations.  '911 patent col. 11 ll. 24–36.  Even assuming that Hooke's law is required to tune the claimed liner (despite not being mentioned anywhere in the specification or claims), so are innumerable other laws of nature.  And there remain innumerable ways to apply Hooke's law to achieve the goal of mitigating problematic vibrations in a shaft assembly—perhaps, for instance, by using something other than a liner tuned to attenuate at least two different kinds of vibrations.

After all, Judge Stoll notes that as one amicus posited, "the majority's original approach would have placed the combustion engine at risk of ineligibility—a proposition that would have seemed absurd just a few years ago, but now seems eerily plausible. . . one can still reasonably ponder whether foundational inventions like the telegraph, telephone, light bulb, and airplane—all of which employ laws of nature—would have been ineligible for patenting under the majority's revised approach" (see, e.g., "Federal Circuit Finds Calculating Machine Ineligible"; "Federal Circuit Invalidates Edison's Light Bulb Patent"; "Federal Circuit Invalidates A. G. Bell's Telegraphy Patent").

All these are ample reasons, for Judge Stoll and in a more rational age anyone conversant in patent law to believe rehearing en banc is warranted.

Finally, Judge O'Malley writes in dissent (joined by Judges Newman, Moore, and Stoll) based on her view that the panel majority, in both their original and amended opinion, transgressed the procedural standards advocated by The Advisory Committee on Appellate Rules pursuant to a letter to all Circuit Courts of Appeal from the American Academy of Appellate Lawyers.  The majority's rulings in her view were subject to the following procedural defects:

(1) it announces a new test for patentable subject matter at the eleventh hour and without adequate briefing; (2) rather than remand to the district court to decide the issue in the first instance, it applies the new test itself; and (3) it sua sponte construes previously undisputed terms in a goal-oriented effort to distinguish claims and render them patent ineligible, or effectively so.

These are enough, in Judge O'Malley's view, to merit rehearing en banc.

The answer to the question posed in the title is clearly "yes" but it is good to consider why it should be done (and soon).  There is a principle in rhetoric of reductio ad absurdum, that you can probe whether a logical argument is flawed by taking it to its extreme and seeing whether the outcome is ridiculous.  The American Axle decision is a good illustration of the application of this principle by the Federal Circuit (no matter how unintentional or unrecognized by at least half of the judges).  While it is but a faint hope, the trend is somewhat positive:  in Sequenom the vote to deny rehearing en banc was 8 to 4; in Athena it was 7 to five, and in American Axle it was 6 to 6.  Like a lifeline, the opportunity to revisit if not reverse the Federal Circuit's trend to affirm invalidating granted patents under Section 101, no matter how absurd the outcome, is the only one that might compel the Supreme Court to clarify its position on subject matter eligibility.  Nothing in the Court's decisions has mandated the lengths to which the district courts have applied this section of the statute, nor compelled the Federal Circuit to affirm against the better judgment of an increasing percentage of its judges.  To the extent that several of those judges have stated in their opinions that they are compelled by the Supreme Court's recent decisions to apply the law as they have applied it, they have at the same time ignored the Court's admonition that it is up to the inferior courts to apply the law in light of the broad proscriptions in their decisions to (like Blackstone) probe the contours of what the law commands.  The failure to do so has provided no impetus for the Court to reconsider its own decisions or to correct any over-application of them to cases that they did not consider (American Axle being the latest and most egregious of these).  The Federal Circuit, a court created to apply its specialized expertise (an expertise recognized by the Supreme Court; see Warner Jenkinson Co. Hilton-Davis Chemical Co., 520 U.S. 17 (1997), and other cases), owes it to its institutional integrity (and to the rest of us) to give the Court the opportunity to do so.  After all, if the front page of The Wall Street Journal one day runs the headline "Court Destroys American Industry," shouldn't that court be the Supreme Court?

Comments

[MaxDrei]

Looking in from outside, I'm trying to five the judges of the Federal Circuit credit where any credit is due. I wonder whether they are exasperated with the efforts of the Supreme Court thus far, and see Axle as a rare chance to tee up to the Supreme Court a case on eligibility in which the subject matter is simple enough for even the Justices of the Supreme Court to grasp.

And by now, with the length and depth of the furore over Axle, the Supreme Court might itself feel confident enough in its abilities to take the case and thereby re-set the compass on eligibility.

In short, is the 6:6 engineered by those 12 judges to get the case up to the Supreme Court.

[Lawrence Husick]

The courts have already destroyed vast areas of innovation. Too little, too late.

[Kevin E. Noonan]

Max: you old optimist, you! I think a thorough rehashing of the whole sorry state of affairs in the opinions that would have been rendered on rehearing en banc might have been a better way to get the Supreme Court's attention. The Court has had many (almost 50) cert petitions on the issue since Alice and has denied in every case, including Athena where the original grumblings in Sequenom were raised to a shout. It is clear that at least 6 members of the Federal Circuit think they are mandated by the Court to find ineligibility wherever they can, and have lost their compass in using the other, more specific potions of the statute to strike down inter alia overbroad claims. It is sad that the Court has reached this point; Judges Markey, Nies, and particularly Judge Rich must be rolling in their graves. I occasionally read In re Bergy to be reminded of how the Federal Circuit should have responded to Mayo and Myriad; a first year law student is taught how to distinguish cases, I wonder why this court cannot

[Greg DeLassus]

"I wonder whether they... see Axle as a rare chance to tee up to the Supreme Court a case on eligibility in which the subject matter is simple enough for even the Justices of the Supreme Court to grasp."

I doubt it. There has been no better illustration of the perversity of current subject matter eligibility jurisprudence than Ariosa v. Sequenom. If the Court was not willing to take cert. on that travesty, I am dubious that they are going to be moved by the outcome here.

[Greg DeLassus]

"I occasionally read In re Bergy to be reminded of how the Federal Circuit should have responded to Mayo and Myriad..."

Exactly. Indeed, this is sort of the attitude that the CAFC is taking in the Vanda line of cases---distinguish pure "method of diagnosis" claims from "method of treatment" claims in which the only difference between the claimed treatment and the prior art treatment is the interposition of a diagnostic method step. In other words, distinguish Mayo into formalistic irrelevancy around which the skilled practitioner can easily draft.

Regrettably, that is not how the court is approaching pretty much any other sort of inane subject matter eligibility challenge that has arisen in the last six years.

[MaxDrei]

Kevin, Greg, I defer to your assessments. Nevertheless, I cling to my gut feeling that vibrating prop shafts and resonant frequencies are easier for a lay person to relate to than chemical cases, if only because they have all experienced vibrations in their everyday lives.

When will there ever be a more suitable case than Axle, to tempt SCOTUS into having another look at the ever more bloated absurdity of the consequences of its eligibility jurisprudence?

Once one has become an expert in any particular field it is almost impossible to imagine how difficult it is for a lay person to read themselves into that field. Do not under-estimate i) the disinclination of the Justices to "do a Mark Twain" (ie open their mouth and reveal how little they understand) by once again wandering into the minefield of the chem-bio arts, and ii) the appreciation that they nevertheless have a duty somehow to clear up the mess they have made of eligibility.

OK. I'm an incorrigible optimist. But there are worse things to be, eh?

[Pro Say]

Thanks for the excellent explication Kevin.

While Congress dilly-dallies, American innovation burns.