Patent Docs

USPTO on Patent Eligibility -- Examples 38 & 39

By Michael Borella --

On January 7, 2019, the U.S. Patent and Trademark Office published updated examination guidance, instructing the examining corps and the PTAB how they should apply 35 U.S.C. § 101.  On the same day, the USPTO also published the latest in its series of examples of how this application of the § 101 inquiry should be carried out.  This latest set, encompassing Examples 37-42, apply the updated guidance (Examples 1-36 were previously published over the last four years).  Our analysis of Example 37 was recently published.

The USPTO emphasizes that these examples are "hypothetical and only intended to be illustrative of the claim analysis" under the updated guidance.  Furthermore, the examples "should be interpreted based on the fact patterns set forth below as other fact patterns may have different eligibility outcomes."  In other words, even if an applicant's claim recites similar language and functionality as that of one of the examples, that does not mean the applicant's claim is patent-eligible.  Context matters.

The updated guidance modified only part of the § 101 analysis (step 2A in the USPTO's parlance).  As set forth in Alice Corp. v. CLS Bank Int'l, this step involves determining whether a claim is directed to a judicial exception, such as an abstract idea.  If not, then no § 101 rejection can be made.

The updated guidance breaks step 2A into a pair of sub-steps:

• In sub-step 2A(i), one is to determine whether the claim recites a judicial exception, such as an abstract idea. Abstract ideas are now limited to three categories: mathematical concepts, certain methods of organizing human activity, and mental processes.  If there is no exception recited, the claim is eligible.

• If the claim recites such an exception, then in sub-step 2A(ii) one is to determine further "whether the recited judicial exception is integrated into a practical application of that exception." If so, the claim is eligible.

If the claim fails to establish its eligibility in step 2A, the second part of the § 101 analysis (step 2B) is applied to 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.  If this is the case, the claim is patent-eligible under § 101.  If not, it can be rejected.

Example 38

Example 38 relates to simulating an analog audio mixer.  The background provided by the USPTO is as follows (abbreviated to focus on key aspects):

[Many audiophiles prefer] listening to music in its analog form, as digital audio files are considered to "lose" much of the sound quality in the conversion from analog to digital.  Prior inventions attempted to create digital simulations of analog audio mixers to simulate the sounds from analog circuits.  However, the prior art audio mixer simulations do not produce the same sound quality as the actual analog circuits.

Applicant's invention . . . begins with a model of an analog circuit representing an audio mixing console.  The model includes a location of all the circuit elements within the circuit, an initial value for each of the circuit elements, and a manufacturing tolerance range for each of the circuit elements.  A randomized working value of each element is then determined using a normally distributed pseudo random number generator (PRNG) based on the initial value of the circuit element and the manufacturing tolerance range.  The model is then simulated using a bilinear transformation to create a digital representation of the analog circuit.

The claim of Example 38 recites:

A method for providing a digital computer simulation of an analog audio mixer comprising:
    initializing a model of an analog circuit in the digital computer, said model including a location, initial value, and a manufacturing tolerance range for each of the circuit elements within the analog circuit;
    generating a normally distributed first random value for each circuit element, using a pseudo random number generator, based on a respective initial value and manufacturing tolerance range; and
    simulating a first digital representation of the analog circuit based on the first random value and the location of each circuit element within the analog circuit.

Applying the first sub-step of 2A, the USPTO states that this claim does not recite any of the three types of abstract ideas.  Notably, the USPTO concludes that despite explicitly reciting "generating a normally distributed first random value," the claim does not recite a mathematical calculation.  The USPTO's reasoning to support this rather surprising outcome is that "[w]hile some of the limitations may be based on mathematical concepts, the mathematical concepts are not recited in the claims."  The USPTO quickly concludes that the claim also does not recite a mental process ("because the steps are not practically performed in the human mind") or a method of organizing human activity.  Therefore, the claim is eligible and the analysis ends without moving on to the second sub-step.

Example 39

Example 39 relates to training a neural network for facial detection.  The background provided by the USPTO is as follows (again abbreviated to focus on key aspects):

In facial detection, a neural network classifies images as either containing a human face or not, based upon the model being previously trained on a set of facial and non-facial images.  However, these prior methods suffer from the inability to robustly detect human faces in images where there are shifts, distortions, and variations in scale and rotation of the face pattern in the image.

Applicant's invention addresses this issue by using a combination of features to more robustly detect human faces.  The first feature is the use of an expanded training set of facial images . . . developed by applying mathematical transformation functions on an acquired set of facial images.  Unfortunately, the introduction of an expanded training set increases false positives when classifying non-facial images.  Accordingly, the second feature of applicant's invention is the minimization of these false positives by performing an iterative training algorithm, in which the system is retrained with an updated training set containing the false positives produced after face detection has been performed on a set of non-facial images.

The claim of Example 39 recites:

A computer-implemented method of training a neural network for facial detection comprising:
    collecting a set of digital facial images from a database;
    applying one or more transformations to each digital facial image including mirroring, rotating, smoothing, or contrast reduction to create a modified set of digital facial images;
    creating a first training set comprising the collected set of digital facial images, the modified set of digital facial images, and a set of digital non-facial images;
    training the neural network in a first stage using the first training set;
    creating a second training set for a second stage of training comprising the first training set and digital non-facial images that are incorrectly detected as facial images after the first stage of training; and
    training the neural network in a second stage using the second training set.

Applying the first sub-step of 2A, the USPTO states that this claim does not recite any of the three types of abstract ideas.  It is reasonably well known that neural networks can be considered mathematical structures (albeit very complex ones), and are often modelled using linear algebra and calculus.  But, not unlike the analysis of Example 38's claim, the USPTO finds this claim to not recite any mathematical concepts.  Also like that of Example 38's claim, the USPTO further concludes that the claim does not recite a mental process or a method of organizing human activity.  Even the admittedly mathematical image transformations escape unscathed.  Therefore, the claim is eligible and the analysis ends at the first sub-step.

Analysis

If the goal of Example 38 is to draw a clearer line around the nebulous notion of abstract ideas, it has failed spectacularly.  Randomly generating a variable according to proscribed distribution is almost always a mathematical calculation.  And if the USPTO is giving patentable weight to the notion of pseudorandom generation being the differentiator, that would be a mistake.  Under a broadest reasonable interpretation, pseudorandom number generators include linear congruential generators, which are simple recursive mathematical functions.

Of course, even if one were to conclude that the claim of Example 38 does recite the abstract idea of a mathematical calculation, it could be argued that the additional elements of the claim integrate this abstract idea into a practical application thereof -- notably, a circuit simulation that can be used to general audible analog impurities.  Still, it remains difficult to rectify the USPTO's reasoning with the scientific and technical reality underlying its example.

Example 39 on the other hand, provides some relief to patentees who are attempting to protect advances in machine learning.  This example does not describe the structure of the neural network being trained, and essentially treats it like a black box.  But the claim is eligible because of the two-phase training technique in combination with the transforming of the facial images.  In this example, the USPTO is signaling that it will not treat a reasonably-claimed machine learning invention as "just a bunch of math."

USPTO on Patent Eligibility -- Example 37

By Michael Borella --

On January 7, 2019, the U.S. Patent and Trademark Office published updated examination guidance, instructing the examining corps and the PTAB how they should apply 35 U.S.C. § 101.  On the same day, the USPTO also published the latest in its series of examples of how this application of the § 101 inquiry should be carried out.  This latest set, encompassing examples 37-42, apply the updated guidance (examples 1-36 were previously published over the last four years).

The USPTO emphasizes that these examples are "hypothetical and only intended to be illustrative of the claim analysis" under the updated guidance.  Furthermore, the examples "should be interpreted based on the fact patterns set forth below as other fact patterns may have different eligibility outcomes."  In other words, even if an applicant's claim recites similar language and functionality as that of one of the examples, that does not mean the applicant's claim is patent-eligible.  Context matters.

The updated guidance modified only part of the § 101 analysis (step 2A in the USPTO's parlance).  As set forth in Alice Corp. v. CLS Bank Int'l, this step involves determining whether a claim is directed to a judicial exception, such as an abstract idea.  If not, then no § 101 rejection can be made.

The updated guidance breaks step 2A into a pair of sub-steps:

• In sub-step 2A(i), one is to determine whether the claim recites a judicial exception, such as an abstract idea.  Abstract ideas are now limited to three categories:  mathematical concepts, certain methods of organizing human activity, and mental processes.

• If so, then in sub-step 2A(ii), one is to determine further "whether the recited judicial exception is integrated into a practical application of that exception."

If the claim involves such an exception, the second part of the § 101 analysis (step 2B) is applied to 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.  If this is the case, the claim is patent-eligible under § 101.  If not, it can be rejected.

Hypothetical Background

Example 37 relates to relocation of icons on a graphical user interface (GUI).  The background provided by the USPTO is as follows (abbreviated to focus on key aspects):

[C]omputer users may have a large number of icons on their display, making it difficult to find the icons most used.  The typically available ways to organize icons are alphabetically, by file size, and by file type.  If a computer user wants a non-typical arrangement of icons, the user would need to manually manipulate the icons on their display.

Accordingly, applicant's invention addresses this issue by providing a method for rearranging icons on a [GUI], wherein the method moves the most used icons to a position on the GUI, specifically, closest to the "start" icon of the computer system, based on a determined amount of use.

Claim 1

Claim 1 of Example 37 recites:

A method of rearranging icons on a graphical user interface (GUI) of a computer system, the method comprising:
    receiving, via the GUI, a user selection to organize each icon based on a specific criteria, wherein the specific criteria is an amount of use of each icon;
    determining, by a processor, the amount of use of each icon over a predetermined period of time; and
    automatically moving the most used icons to a position on the GUI closest to the start icon of the computer system based on the determined amount of use.

Applying the first sub-step of 2A, the USPTO states that claim 1, under its broadest reasonable interpretation, "covers performance of the limitation in the mind but for the recitation of generic computer components."  In other words, "nothing in the claim element precludes the step from practically being performed in the mind," and "[t]he mere nominal recitation of a generic processor does not take the claim limitation out of the mental processes grouping."  Thus, the claim recites an abstract idea.

Moving on to the second sub-step, the USPTO notes that the claim "recites the combination of additional elements of receiving, via a GUI, a user selection to organize each icon based on the amount of use of each icon, a processor for performing the determining step, and automatically moving the most used icons to a position on the GUI closest to the start icon of the computer system based on the determined amount of use."  Thus, the claim integrates the mental process into a practical application by reciting "a specific manner of automatically displaying icons to the user based on usage which provides a specific improvement over prior systems."  As a result, the claim is eligible under step 2A because it is not directed to a judicial exception, and step 2B need not be applied.

Claim 2

Claim 2 of Example 37 recites:

A method of rearranging icons on a graphical user interface (GUI) of a computer system, the method comprising:
    receiving, via the GUI, a user selection to organize each icon based on a specific criteria, wherein the specific criteria is an amount of use of each icon;
    determining the amount of use of each icon using a processor that tracks how much memory has been allocated to each application associated with each icon over a predetermined period of time; and
    automatically moving the most used icons to a position on the GUI closest to the start icon of the computer system based on the determined amount of use.

Key differences between claim 2 and claim 1 are highlighted.

Applying the first sub-step of 2A, the USPTO states that claim 2 does not recite any of the three types of abstract ideas.  According to the USPTO, the determining step now "requires action by a processor that cannot be practically applied in the mind" because it involves "a processor accessing computer memory indicative of application usage."  The USPTO further states that the claim does not recite either of the other two types of abstract ideas (mathematical relationships and methods of organizing human activity) either.  Like claim 1, claim 2 is eligible under step 2A because it is not directed to a judicial exception, and step 2B need not be applied.

Claim 3

Claim 3 of Example 37 recites:

A method of ranking icons of a computer system, the method comprising:
    determining, by a processor, the amount of use of each icon over a predetermined period of time; and
    ranking the icons, by the processor, based on the determined amount of use.

Applying the first sub-step of 2A, the USPTO states that claim 3, like claim 1, "covers performance of the [determining] limitation in the mind but for the recitation of generic computer components."  Therefore, claim 3 recites a mental process.  The USPTO notes that the ranking limitation also recites a mental process because "the claim encompasses the user thinking that the most-used icons should be ranked higher than the least-used icons."

Under the second sub-step of 2A, the USPTO finds that the only additional element is the processor, and that "[t]his generic processor limitation is no more than mere instructions to apply the exception using a generic computer component."  Thus, the claim does not integrate the abstract idea of the recited mental process into a practical application thereof, and the claim is therefore directed to an abstract idea.

Invoking step 2B, the USPTO similarly concludes that "the additional element in the claim amounts to no more than mere instructions to apply the exception using a generic computer component."  Thus, the 2B analysis follows that of the second sub-step of 2A, resulting in the claim not containing significantly more than the abstract idea.  Accordingly, the claim is patent-ineligible.

Analysis

The USPTO makes it clear in this example that the mental process category of abstract ideas is not meant to be taken literally.  It is not limited to steps that are carried out wholly in the human mind.  Instead, a step that (in theory) could be performed in the mind but is recited as being performed by a processor is still considered a mental step.  This is a bit of legal fiction to note well.

The distinction between claims 1 and 2 is also quite fine.  Claim 1 recites "determining the amount of use of each icon over a predetermined period of time" while claim 2 recites "the amount of use of each icon using a processor that tracks how much memory has been allocated to each application associated with each icon over a predetermined period of time.  While claim 2 is narrower than claim 1, it is not 100% clear why claim 2 is not also reciting a mental process.

The USPTO's justification for concluding that it does not is that claim 2 involves "a processor accessing computer memory indicative of application usage."  But if we are allowed to ignore the literal meaning of the term "processor" in these claims, why is the processor's use of memory not ignored as well?  Why isn't the "computer" qualifier disregarded to find the term "memory" broad enough to encompass human memory?

Perhaps the answer is that the combination of a processor and the specific use of the memory is enough to find the claim not directed to a mental process.  But the USPTO is silent in this regard, and it remains difficult to know where to draw the line.

Further, the determination of whether a recited abstract idea is integrated into a practical application is similarly vague.  In claim 1, such an integration is found because the claim recites specific requirements that leads to an improvement over the prior art.  In claim 3, however, the apparent lack of recited detail was enough to conclude that any such integration was de minimis at best.  Perhaps the absence of any movement of the icons damned claim 3 to abstractness hell.

From the outset, the Alice test has required a certain suspension of logic in order to follow the Supreme Court's reasoning.  By expanding the test with two additional sub-steps, the USPTO is attempting to provide clarity.  Unfortunately, the USPTO appears to be adopting the same legal fictions that have made the post-Alice § 101 inquiry so subjective in the first place.

Coqui Technologies, LLC v. Gyft, Inc. (D. Del. 2018)

By Joseph Herndon --

In the U.S. District Court for the District of Delaware, a patent directed to electronic gift card distribution was found to be directed to patent-ineligible subject matter.

Coqui filed related patent infringement actions claiming infringement of U.S. Patent No. 7,580,864, entitled "Method for Circulating an Electronic Gift Certificate in Online and Offline System," which claims a method of circulating electronic gift certificates and managing sales of electronic gift certificates according to requests made through wired and wireless networks.

The '864 patent describes that a gift certificate database and a gift certificate service server manage sales of the electronic gift certificates according to requests by a communication terminal through wired and wireless networks.  A user provides a purchase request from a communication terminal, and the server determines if proper funds were supplied for the gift certificate.  If so, the purchased electronic gift certificate is provided to the user and stored in the gift certificate database.  A user can buy a desired product at an online shopping mall through a terminal such as a subscriber's computer, and perform an online settlement with the user's electronic gift certificate.  Here, the electronic gift certificate circulation system can authenticate the user by using a telephone number of the subscriber's communication terminal and an electronic gift certificate password through the online shopping mall, and then settle the corresponding electronic gift certificate.

Claim 1 of the '864 patent is representative and is reproduced below:

1.  A gift certificate service system for managing sales, gifting, and usage of electronic gift certificates according to a request by a user's communication terminal through a wired network, wireless network, or both, comprising:
    a gift certificate service server for managing purchase, gifting, and usage operations on the electronic gift certificates from the communication terminal;
    a gift certificate database, accessed by the gift certificate service server, for storing electronic gift certificate information prior to transferring the gift certificate to a transferee, and processing a reply to an inquiry of electronic gift certificate usage from the gift certificate service server; and
    a network server, accessed by the gift certificate service server and accessed by the user's communication terminal through the wired network, wireless network, or both, for performing a client interface function with the purchase, gifting, and usage of the electronic gift certificates, and transmitting the user's gift certificate purchase particulars and gift certificate information for usage of the corresponding gift certificate to the communication terminal,
    wherein the electronic gift certificate is a multimedia message including barcode data, wherein the network server is responsive to use of the electronic gift certificate occasioned by displaying the barcode data on the communication terminal, and wherein the electronic gift certificate information stored by the gift certificate database includes at least one of a gifting history of the gift certificates or a usage history of the gift certificates.

The '864 patent describes that by unifying an electronic gift certificate management system and a mobile communication system into a single system, the invention simplifies an electronic gift certificate circulation system and allows the electronic gift certificates to be quickly and accurately purchased, gifted, and used.

Defendants filed motions to dismiss for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6).  According to Defendants, Coqui's complaint fails to state a claim because the patents-in-suit are ineligible for patent protection under 35 U.S.C. § 101.

The Court followed the two-step framework for distinguishing patents that claim laws of nature, natural phenomena, and abstract ideas from those that claim patent-eligible applications of those concepts.

A.    Step 1

In step 1, the Court determined whether the claims at issue are directed to a patent-ineligible concept.  Applying the first step of the framework to the asserted claims, the Court concluded that the claims are directed to the abstract idea of selling, gifting, and using electronic gift certificates over a network, which is a longstanding commercial practice.

Coqui argued that claims of the '864 patent represent patent eligible material unique to the Internet directed to a concrete method of purchasing and using an electronic gift card-in the form of a barcode received via a MMS message and displayed on a display device with Internet access-as well as tracking the usage and gifting history of the particular electronic gift card.  In addition, Coqui argued that the additional security provided by the patented method's authentication of gift certificate membership and usage histories is not an established commercial practice defeating Defendants' abstract idea allegation.

However, the Court found that the claims of the '864 patent relate to the abstract idea of selling, gifting, and using an electronic gift certificate.  The preamble of claim 1 identifies a gift certificate service system for managing sales, gifting, and usage of electronic gift certificates according to a request by a user's communication terminal through a wired network, wireless network, or both.  Claim 1 subsequently lists the following elements:  (1) a gift certificate service server; (2) a database; and (3) a network server.  Each of the subsequent claim 1 limitations refer back to either managing the purchase, gifting and usage operations or the gifting or usage history of electronic gift certificates.

The Court noted that a gift certificate is defined in the '864 patent as a bill that has an exchangeable value so that a user may give it to a shop to make a purchase or get a discount on a desired product.  Applying the Internet and computer components to the commercial practice of electronic gift certificates does not preclude a finding that the '864 patent is abstract.

The Court highlighted that the claims of the '864 patent do not improve the functioning of a computer or any of the other components involved in the method.  Instead, the asserted claims add conventional computer components to well-known business practices.

The Court found that the '864 patent's alleged security benefits do not confer patent eligibility because the authentication of a gift certificate transaction could be performed by a human with a pen and paper.  The preferred embodiment of the '864 patent describes a database that stores a gifting history and usage history as well as a history of gift certificates bought by the client to authenticate that the client's gifting or usage of the electronic gift certificate is fair.  Such authentication could be performed using a pen and paper; therefore, the Court found that the '864 patent is directed to an abstract idea despite the added security benefits that might result from using a computer to perform authentication.

In addition, authenticating and verifying the balance of the electronic gift certificate was found to be abstract because it relates to the "organizing of human activity."

B.    Step 2

Because the '864 patent was found to be directed to the abstract idea of selling, gifting, and using electronic gift certificates, the Court turned to the inventive concept analysis in step 2.

The '864 patent claims implement the longstanding commercial practice of selling, gifting, and using gift certificates by using a generic computer and networking components in conventional ways.

Coqui argued that the '864 Patent offers a useful, non-conventional and non-generic arrangement of components and functionality, namely, an inventive configuration of components that solve problems associated with conventional gift certificate circulation like the requirement of being physically present to purchase a gift certificate and additional settlement processes.

But the computer components described in the '864 patent are generic and function in conventional ways.  The communication terminal is used as a "mobile user interface."  The service server is used for "managing purchase, gifting, and usage operations."  The database is used "for storing electronic gift certificate information."  The network server is used for "transmitting . . . gift certificate information . . . to the communication terminal."  These components, as described in the '864 patent, operate in their typical capacities in conventional ways and do not embody an inventive concept.  The '864 patent does not specify precise devices that must be used in the method or provide any explanation about how the software solves a technological problem.

Coqui also did not explain or argue that the arrangement of the components or some type of configuration unique to the '864 patent improves the functionality of a generic computer or solves a technical problem.

The Court noted that the application of barcodes, MMS messages, and devices with Internet access to a system comprising generic computing components for circulating electronic gift certificates is not an inventive concept.

The Court discounted the idea that the '864 patent improves the electronic gift certificate process by facilitating the purchase, usage, and gifting of certificates without requiring the customer to be physically present in the store as not being an inventive concept because it was found that the claims at issue here do not solve a technological problem.  Instead, the claims provide a conventional technological environment (i.e., computers and the Internet) in which to carry out the abstract idea of using electronic gift certificates.

Because the claims were found to be directed to an abstract idea without an inventive concept, the Court recommended to grant defendants' motions to dismiss pursuant to Rule 12(b)(6).

Coqui Technologies, LLC v. Gyft, Inc. (D. Del. 2018)
Report and Recommendation by U.S. Magistrate Judge Sherry R. Fallon

USPTO Issues Updated Subject Matter Eligibility Guidance

By Michael Borella --

On January 4, the U.S. Patent and Trademark Office published updated examination guidance regarding the subject matter eligibility of inventions involving abstract ideas.  The guidance went into effect on January 7, upon its publication in the Federal Register.

In substance, the new guidance falls in line with statements made previously by USPTO Director Andrei Iancu.  But at first blush, it does not appear to be a radical departure from substantive USPTO examination practice despite raising a few additional procedural hurdles that examiners are to overcome before rejecting claims under 35 U.S.C. § 101.  Further, the guidance is non-binding on examiners and the PTAB.[1]

Will the existence of the guidance result in more consistent examining practices across USPTO technical centers, art units, and examiners?  Time will tell.  But at the very least, the way in which § 101 rejections are rebutted by applicants is likely to become more nuanced.

Prior USPTO § 101 examination practice was to combine the § 101 statutory language with the exceptions set forth in Alice Corp. v. CLS Bank Int'l.  First, in what the USPTO refers to as step 1, the examiner was to determine "whether the claimed subject matter falls within the four statutory categories of patentable subject matter identified by 35 U.S.C. 101: process, machine, manufacture, or composition of matter."  If the answer to this question is that it does not, then the claims are to be rejected as non-statutory.

Otherwise, the two-part Alice test is applied.  The USPTO refers to these parts as steps 2A and 2B.  Step 2A involves determining whether a claim is directed to a judicial exception, such as an abstract idea.  If not, then no § 101 rejection can be made.  But if the claim involves such an exception, step 2B is applied to determine further 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.  If this is the case, the claim is patent-eligible under § 101.  If not, it can be rejected.  Notably, under step 2B, elements that are well-understood, routine, and conventional, alone and in combination, have no patentable weight.

The January 4 guidance only modifies step 2A, and leaves steps 1 and 2B intact.  But in a rather odd and semi-redundant manner, the USPTO is now breaking step 2A into two sub-steps that mirror the language and procedure of steps 2A and 2B.

In particular, these two sub-steps (let's call them 2A(i) and 2A(ii) for purposes of clarity), involve the following:

• In sub-step 2A(i), the examiner is to determine whether the claim recites a judicial exception, such as an abstract idea.
• If so, then in sub-step 2A(ii), the examiner is to determine further "whether the recited judicial exception is integrated into a practical application of that exception."

In an attempt to make sub-step 2A(i) easier to follow, the USPTO has set forth three general classes of abstract ideas.  We can think of them as the "three M's" -- math, money, and mental steps.  Or, in the words of the USPTO:

a) Mathematical concepts – mathematical relationships, mathematical formulas or equations, mathematical calculations;

b) Certain methods of organizing human activity – fundamental economic principles or practices (including hedging, insurance, mitigating risk); commercial or legal interactions (including agreements in the form of contracts; legal obligations; advertising, marketing or sales activities or behaviors; business relations); managing personal behavior or relationships or interactions between people (including social activities, teaching, and following rules or instructions); and

c) Mental processes – concepts performed in the human mind (including an observation, evaluation, judgment, opinion).

Thus, rather than reviewing the case law and attempting to make an analogy between the claim under examination and a precedential opinion, examiners can consult this list of abstract ideas.  But the list is not meant to be exhaustive nor exclusive.  The USPTO notes that "[i]n the rare circumstance in which an examiner believes a claim limitation that does not fall within the enumerated groupings of abstract ideas should nonetheless be treated as reciting an abstract idea", the examiner can view the claimed as directed to a "tentative abstract idea."  If this categorization would result in a rejection, "the examiner should bring the application to the attention of the Technology Center Director," who then must approve the rejection and "provide a justification for why such claim limitation is being treated as reciting an abstract idea."

The new sub-steps of 2A are worth digging into.  The goal of step 2A as revised is to clarify the determination of whether a claim is directed to an abstract idea.  Presumably this clarification is needed because the exact scope of the "directed to" language of this step has proven difficult to define.

Sub-step 2A(i) instructs examiners to "identify the specific limitation(s) in the claim under examination (individually or in combination) that the examiner believes recites an abstract idea."  But examiners are also asked to "determine whether the identified limitation(s) falls within the subject matter groupings of abstract ideas" listed above.  Thus, the examiner's burden under sub-step 2A(i) is two-fold:  point out specific claim language reciting an abstract idea, and explain how that language fits into one or more of the three categories of abstract ideas.

If the analysis moves on to sub-step 2A(ii), the examiner determines "whether the claim as a whole integrates the recited judicial exception into a practical application of the exception."  Such a claim "will apply, rely on, or use the judicial exception in a manner that imposes a meaningful limit on the judicial exception, such that the claim is more than a drafting effort designed to monopolize the judicial exception."

The examiner carries out this latter inquiry by "(a) identifying whether there are any additional elements recited in the claim beyond the judicial exception(s); and (b) evaluating those additional elements individually and in combination to determine whether they integrate the exception into a practical application, using one or more of the considerations laid out by the [courts]."  A successful integration of an abstract idea into a practical application may include:

    an additional element reflects an improvement in the functioning of a computer, or an improvement to other technology or technical field;
    an additional element that applies or uses a judicial exception to effect a particular treatment or prophylaxis for a disease or medical condition;
    an additional element implements a judicial exception with, or uses a judicial exception in conjunction with, a particular machine or manufacture that is integral to the claim;
    an additional element effects a transformation or reduction of a particular article to a different state or thing; and
    an additional element applies or uses the judicial exception in some other meaningful way beyond generally linking the use of the judicial exception to a particular technological environment, such that the claim as a whole is more than a drafting effort designed to monopolize the exception.

This language should look familiar.  It mirrors that of step 2B -- the second prong of the Alice test.  But the USPTO clarifies that "revised Step 2A specifically excludes consideration of whether the additional elements represent well-understood, routine, conventional activity."  Putting this together, revised 2A appears to require that examiners consider all elements of the claim, dividing the claim into the recitation of the abstract idea and the additional elements.  Then examiners are to determine whether the sum of the additional elements results in an integration into a practical application, but do so without any consideration of whether these additional elements are known (i.e., in the prior art).  In other words, for computer-implemented inventions, whether a claimed technique is performed by generic processors, memory, and peripherals should be irrelevant to revised step 2A.[2]

But even if the applicant loses on step 2A and the claim is found to be directed to an abstract idea by sub-steps 2A(i) and 2A(ii), step 2B still applies.  This guidance does not touch that part of the test.  Therefore, a claimed invention that is not well-understood, routine, or conventional should still be patent-eligible under Alice as interpreted in Berkheimer v. HP Inc.

The USPTO provides an example in an attempt to clarify the distinction between sub-step 2A(ii) and step 2B:

For example, when evaluating a claim reciting an abstract idea such as a mathematical equation and a series of data gathering steps that collect a necessary input for the equation, an examiner might consider the data gathering steps to be insignificant extra-solution activity in revised Step 2A, and therefore find that the judicial exception is not integrated into a practical application.  However, when the examiner reconsiders the data gathering steps in Step 2B, the examiner could determine that the combination of steps gather data in an unconventional way and therefore include an "inventive concept," rendering the claim eligible at Step 2B.

So why is the USPTO promulgating a potentially confusing two-prong test to replace one prong of another two-prong test?  Is this the first step of making the Alice inquiry infinitely recursive?  To hazard a guess, it is an attempt to mitigate one of the most controversial and problematic aspects of Alice -- how much of the § 101 analysis should be decided as a matter of law and how much should be a matter of fact.  By effectively eliminating prior art from the revised step 2A analysis, examiners can now find claims to be patent-eligible without comparing the claimed invention to what is well-understood, routine, and conventional.  But to find claims patent-ineligible, such a comparison should be made and it may incorporate factual questions per Berkheimer.

Despite all of that, revised step 2A opens a new can of worms.  What exactly does it mean for "the recited judicial exception [to be] integrated into a practical application of that exception?"  How much integration is required?  How does one identify a practical application thereof?  As noted above, the examples provided by the new guidance mirror the language of the Alice decision itself, which is not a paragon of clarity.  Further, how broadly are examiners going to interpret the three categories of abstract ideas?  While the "math" and "mental processes" buckets are relatively cut and dry, the "methods of organizing human activity" bucket is fairly expansive.

Current § 101 examination practice in the USPTO can vary dramatically between technical centers, art units, and even examiners within the same art unit.[3] While a handful of examiners appear to have a reasonable, if not above-average, grasp on the nuances of the § 101 case law, others do not.  Consider a business method invention that claims a technical improvement.  Review by a poorly-trained junior examiner, in an art unit with a § 101 specialist that believes virtually all data processing to be per se abstract, can rapidly devolve into absurdity that would make both Kafka and Monty Python proud.

And will the courts give any deference at all to claims issued under the new guidance?  Probably not, as the judiciary's concern is whether a claimed invention complies with the relevant case law rather than whether the USPTO's test is satisfied.

In sum, we will have to wait and see how the new guidance plays out in practice.  If anything, the additional procedural requirements introduced and the limiting of abstract ideas to only three categories is likely to favor applicants for at least some types of inventions.  It is unlikely that any claims that could be found patent-eligible under previous examination procedures are suddenly going to be viewed as ineligible under the new guidance.  Modulo examiner variability, of course.

Applicants will likely have to adjust their § 101 rebuttal strategies to specifically address and argue sub-steps 2A(i) and 2A(ii).  But applicants should still argue the case law as well, because it may be helpful to have such arguments on the record should the file history be reviewed.

[1] "All USPTO personnel are, as a matter of internal agency management, expected to follow the guidance.  Failure of USPTO personnel to follow the guidance, however, is not, in itself, a proper basis for either an appeal or a petition."

[2] Then again, if reciting "an improvement in the functioning of a computer" renders a claim patent-eligible under step 2A(ii), what is the frame of reference for evaluating this improvement?  What does the claim improve upon if not the prior art?

[3] In the new guidance, the USPTO states that "[t]he legal uncertainty surrounding Section 101 poses unique challenges for the USPTO, which must ensure that its more than 8500 patent examiners and administrative patent judges apply the Alice/Mayo test in a manner that produces reasonably consistent and predictable results across applications, art units and technology fields."

Top Stories of 2018: #6 to #10

By Donald Zuhn –-

After reflecting upon the events of the past twelve months, Patent Docs presents its 12th annual list of top patent stories.  For 2018, we identified fifteen stories that were covered on Patent Docs last year that we believe had (or are likely to have) a significant impact on patent practitioners and applicants.  Yesterday, we counted down stories #15 to #11, and today we count down stories #10 to #6 as we work our way towards the top five stories of 2018.  As with our other lists (2017, 2016, 2015, 2014, 2013, 2012, 2011, 2010, 2009, 2008, and 2007), links to our coverage of these stories (as well as a few links to articles on related topics) have been provided in case you missed the articles the first time around or wish to go back and have another look.  As always, we love to hear from Patent Docs readers, so if you think we left something off the list or disagree with anything we included, please let us know.  In addition, we will be offering a live webinar on the "Top Patent Law Stories of 2018" on January 16, 2019 from 10:00 am to 11:15 am (CT).  Details regarding the webinar, which will focus on a handful of the most important stories on this year's list, can be found here.

10.  Does Unsettled § 101 Jurisprudence Preclude Attorneys' Fees

In December, in SAP America, Inc. v. InvestPic, LLC, the Northern District of Texas awarded $679,420.46 in attorneys' fees to SAP America after the Federal Circuit affirmed an earlier decision of the District Court finding InvestPic's '291 patent invalid under 35 U.S.C. § 101.  SAP America was successful in its attempt to obtain attorney's fees based on a supposedly weak litigating position under § 101.  However, since Alice v. CLS Bank, just about any patent involving software or a business method can have its validity challenged under § 101.  Moreover, not even the federal courts have been able to crack the § 101 egg.  It is well-known that multiple federal judges have commented on the record that Alice was hard to apply in practice.  In addition, Judge Wu of the Central District of California criticized Alice for setting forth an "I know it when I see it" test.  Judge Pfaelzer, a colleague of Judge Wu, wrote that the Supreme Court's patent-eligibility cases "often confuse more than they clarify [and] appear to contradict each other on important issues."  In July, in Interval Licensing LLC v. AOL, Inc., the Federal Circuit's Judge Plager wrote that the post-Alice § 101 inquiry "renders it near impossible to know with any certainty whether the invention is or is not patent eligible."  And these are just a few examples of judicial confusion.  There are more.  For example, in September, in Gust, Inc. v. AlphaCap Ventures, LLC, the Federal Circuit ruled 2-1 that § 101 jurisprudence was too murky to be used as the basis of an attorney's fees award.  Writing in a concurring-in-part and dissenting-in-part opinion, Judge Plager concluded:

This emperor clearly has no clothes; we need not wait for our children to tell us this.  The legitimate expectations of the innovation community, as well as basic notions of fairness and due process, compel us to address this § 101 conundrum.

For information regarding this and other related topics, please see:

• "SAP America, Inc. v. InvestPic, LLC (N.D. Tex. 2018)," December 10, 2018
• "Gust, Inc. v. AlphaCap Ventures, LLC (Fed. Cir. 2018)," September 30, 2018
• "Interval Licensing LLC v. AOL, Inc. (Fed. Cir. 2018)," July 24, 2018
• "Cellspin Soft, Inc. v. Fitbit, Inc. (N.D. Cal. 2018)," July 12, 2018
• "SAP America, Inc. v. InvestPic, LLC (Fed. Cir. 2018)," May 20, 2018

9.  En Banc Federal Circuit: USPTO Not Entitled to Attorneys' Fees in § 145 Appeals

In July, the Federal Circuit handed down an en banc decision in NantKwest, Inc. v. Iancu, regarding the question of whether under 35 U.S.C. § 145 an applicant must pay the U.S. Patent and Trademark Office's attorneys' fees as part of the "expenses" the statute mandates, regardless of whether the applicant won or lost the case.  The District Court had rejected the Office's argument that it was entitled to recover attorneys' fees (and other expenses), and a divided panel of the Federal Circuit reversed the District Court's decision and ordered payment of the Office's fees.  The Federal Circuit chose to review the panel's decision sua sponte, and the en banc Federal Circuit affirmed the District Court's decision, over a spirited dissent, holding that the Office was not entitled to its attorneys' fees in appeals under § 145.

For information regarding this and other related topics, please see:

• "NantKwest, Inc. v. Iancu (Fed. Cir. 2018) (en banc)," July 29, 2018

8.  Supreme Court to Decide Whether Government Can File Petitions for Post-Grant Review

In October, the Supreme Court granted certiorari in Return Mail, Inc. v. U.S. Postal Service, in order to answer the question whether the government can bring post-grant review proceedings under the Leahy-Smith America Invents Act (AIA).  Specifically, the Supreme Court agreed to review whether the government is a "person" under the AIA, as is required to file a petition seeking the institution of AIA review proceedings.  The case began with Return Mail seeking to license its '548 patent, which claims methods, computer programs, and systems for processing undeliverable or returned mail, to the Postal Service.  Instead of licensing the '548 patent, however, the Postal Service filed a petition for ex parte reexamination with the U.S. Patent and Trademark Office.  The USPTO instituted the reexamination proceeding, but eventually confirmed the validity of the patent.  Return Mail then filed a complaint against the Postal Service in the Court of Federal Claims.  While that action was pending, the Postal Service filed a petition seeking the institution of covered business method (CBM) review of the '548 patent.  Return Mail opposed the institution of the CBM review​ on both substantive and procedural grounds, including that the Postal Service lacked standing to file a CBM petition.  Both the PTAB and a majority of the Federal Circuit panel hearing the appeal found that the Postal Service satisfied the requirement that it be a "person."  The Supreme Court granted certiorari on the issue of whether the government is a "person" in the context of the AIA's CBM proceeding.  Thus, by the middle of next year, we should know whether government agencies are "persons," permitted to bring AIA proceedings.

For information regarding this and other related topics, please see:

• "Supreme Court to Decide if Government Can Bring AIA Proceedings," October 29, 2018

7.  Supreme Court: PTAB Must Render Final Written Decision on All Challenged Claims

In April, the Supreme Court reversed the judgment of the Federal Circuit in SAS Institute Inc. v. Iancu, with Justice Gorsuch (joined by the Chief Justice and Justices Kennedy, Thomas, and Alito) providing a textual explication of the inter partes review (IPR) statute in deciding that the U.S. Patent and Trademark Office was compelled to render a Final Written Decision (FWD) on all claims challenged by a petitioner in its IPR petition.  This decision overruled the Patent Office's practice that the Director (through the Patent Trial and Appeal Board) could institute an IPR on less than all challenged claims and then limit the FWD to only the instituted claims.  Just two days after the Supreme Court's decision, the U.S. Patent and Trademark Office issued Guidance regarding how the PTAB will apply the Court's mandate in SAS Institute.  In particular, the Office noted that for all pending and future-filed petitions, the Board will institute on all challenged claims so long as the petitioner has shown a reasonable likelihood of invalidating at least one of the claims, and for cases where the Board has engaged the parties in partial institution proceedings, the Board "may" issue an order "supplementing the institution decision to institute on all challenges raised in the petition."

For information regarding this and other related topics, please see:

• "USPTO Issues Guidance on Supreme Court Ruling in SAS v. Iancu," April 26, 2018
• "SAS Institute Inc. v. Iancu (2018)," April 24, 2018

6.  Supreme Court to Decide Whether AIA Changed Application of On-sale Bar

In June, the Supreme Court granted certiorari on Helsinn Healthcare's petition to overturn the Federal Circuit's decision in Helsinn Healthcare v. Teva Pharmaceuticals that its patents were invalid by application of the on-sale bar under 35 U.S.C. 102(b).  The Question Presented in the petition was as follows:

Whether, under the Leahy-Smith America Invents Act, an inventor's sale of an invention to a third party that is obligated to keep the invention confidential qualifies as prior art for purposes of determining the patentability of the invention.

The issue is specifically related to the question of whether the AIA changed the application of the on-sale bar.  In December, the Supreme Court heard oral argument in this case.  The Supreme Court's decision will likely land this case on our Top Stories list again next year.

For information regarding this and other related topics, please see:

• "Supreme Court Hears Oral Argument in Helsinn v. Teva," December 6, 2018
• "Supreme Court Grants Certiorari in Helsinn Healthcare v. Teva Pharmaceuticals," June 26, 2018

Top Stories of 2018: #11 to #15

By Donald Zuhn –-

After reflecting upon the events of the past twelve months, Patent Docs presents its 12th annual list of top patent stories.  For 2018, we identified fifteen stories that were covered on Patent Docs last year that we believe had (or are likely to have) a significant impact on patent practitioners and applicants.  Today, we count down stories #15 to #11, and in the coming week, we will work our way towards the top stories of 2018.  As with our other lists (2017, 2016, 2015, 2014, 2013, 2012, 2011, 2010, 2009, 2008, and 2007), links to our coverage of these stories (as well as a few links to articles on related topics) have been provided in case you missed the articles the first time around or wish to go back and have another look.  As always, we love to hear from Patent Docs readers, so if you think we left something off the list or disagree with anything we included, please let us know.  In addition, we will be offering a live webinar on the "Top Patent Law Stories of 2018" on January 16, 2019 from 10:00 am to 11:15 am (CT).  Details regarding the webinar, which will focus on a handful of the most important stories on this year's list, can be found here.

15.  USPTO Implements New Authentication System

In October, the U.S. Patent and Trademark Office announced the implementation of a new authentication method for signing into the EFS-Web and Private PAIR, which will replace the use of PKI certificates, and which constitutes a major change in the way stakeholders interact with the USPTO's Patent Electronic Business Center (EBC).  The Office has indicated that the new method will provide users with access to the EFS-Web and Private PAIR until the full release of Patent Center, which is scheduled to replace the EFS-Web and Private PAIR, in 2020.  When announcing the new authentication system, the Office cautioned practitioners that migration to link USPTO.gov accounts to PKI certificates should be completed by the end of October (using the Office's migration tool), sponsorship of support staff should be completed by the end of November (using the Office's sponsorship tool), and that PKI certificates would be phased out on December 31, 2018.  While implementation of the new authentication system has been a fairly straightforward process for many stakeholders, many others were happy to receive an early holiday gift from the USPTO on December 21, when the Office announced that it was delaying the date on which PKI certificates would be retired.  The Office's latest word on PKI certificate retirement is that "EFS-Web and Private PAIR users will no longer be able to authenticate using PKI certificates as of February 15."

For information regarding this and other related topics, please see:

• "USPTO Delays PKI Certificate Termination Date," December 23, 2018
• "USPTO Director Issues Notice on New Authentication System for EFS-Web and Private PAIR," December 3, 2018
• "USPTO News Briefs," October 25, 2018
• "USPTO Moving to New Authentication System for EFS-Web and Private PAIR," October 4, 2018

14.  Federal Circuit Affirms PTAB Decision Finding No Interference in CRISPR Dispute

CRISPR (an acronym for Clustered Regularly lnterspaced Short Palindromic Repeats), which is part of a system for altering chromosomal sequences in situ in a cell in combination with a bacterially derived protein called Cas9, was hailed as a "Breakthrough of the Year" for 2015.  CRISPR provides a mechanism for inserting or deleting specific DNA sequences using CRISPR-associate targeting RNAs and the Cas9 RNA-guided DNA endonuclease enzyme.  Given the commercial potential of this method, patenting was an obvious concern and, as it turned out, more than one group of inventors filed patent applications on the reagents, methods, and cells produced or used to produce CRISPR modifications.  Because these applications were filed prior to March 16, 2013, the dispute regarding who was the first to invent had to be resolved via an interference.  In 2016, the USPTO declared Interference No. 106,048, naming Feng Zhang and his colleagues, the named inventor of the Broad Institute/MIT's patents, as the Junior Party, and Jennifer Doudna and her colleagues at UC/Berkeley as Senior Party.  In February of 2017, the Patent Trial and Appeal Board handed down its decision, finding no interference-in-fact between several patents and patent applications owned by The Broad Institute and applications owned by the Regents of the University of California, Berkeley.  The decision ended the interference and allowed both parties to license (and assert) their patents to (or against) any third party.  The basis for the decision was that UC's claims would not anticipate Broad's claims-in-interference because all of Broad's claims contained the affirmative limitation that the CRISPR technology be operative in eukaryotic cells, and the UC's claims were devoid of any limitation regarding the context in which CRISPR was applied.  In September, the Federal Circuit affirmed the PTAB's decision that there is no interference-in-fact between the Broad's twelve patents and one application-in-interference and the University of California/Berkeley's pending application, thereby concluding the interference between the parties.  This marks the third consecutive appearance – and perhaps the last -- on our Top Stories list for the CRISPR dispute (the dispute was #19 in 2017 and #18 in 2016).

For information regarding this and other related topics, please see:

• "Whither CRISPR? University of California/Berkeley Granted Another CRISPR Patent," October 30, 2018
• "Regents of the University of California v. Broad Institute, Inc. (Fed. Cir. 2018)," September 10, 2018
• "The CRISPR Chronicles -- Broad Institute Wins One and Loses One," January 24, 2018

13.  Federal Circuit Defines Contours of Obviousness-type Double Patenting Doctrine

Four years after issuing decisions in AbbVie Inc. v. Mathilda & Terence Kennedy Institute of Rheumatology Trust and Gilead Sciences, Inc. v. Natco Pharma Ltd., the Federal Circuit again handed down opinions concerning the proper application of the judicially created doctrine of obviousness-type double patenting (OTDP).  In January, in In re Janssen Biotech, Inc., the Federal Circuit affirmed a rejection by the Patent Trial and Appeal Board of certain claims of U.S. Patent No. 6,284,471 for OTDP.  The co-assignees of the '471 patent argued on appeal that OTDP was not applicable because the safe-harbor provision of 35 U.S.C. § 121 protected the '471 patent claims.  The Federal Circuit determined, however, that the '471 patent was not entitled to safe-harbor protections because the '471 patent had issued from a CIP application (even though the co-assignees sought to re-designate the application as a divisional during a reexamination twelve years after the '471 patent issued).  In December, the Federal Circuit issued two more decisions that help define the contours of the OTDP doctrine.  In Novartis AG v. Ezra Ventures LLC, the Court addressed a narrow but important question regarding its OTDP jurisprudence:  whether a first patent filed earlier than a second patent, but that issued later, could be used to invalidate the second patent on OTDP grounds if the reason the later-expiring patent was later expiring was due to Patent Term Extension (PTE) awarded under 35 U.S.C. § 156.  The Federal Circuit affirmed the District Court's determination that OTDP does not invalidate an otherwise validly obtained PTE under § 156.  In Novartis Pharmaceuticals Corp. v. Breckenridge Pharmaceutical Inc., the Federal Circuit was provided with an opportunity to decide whether the operation of the OTDP doctrine was the same for (a) two patents granted after the Uruguay Round Agreements Act of 1994 (URAA) changed the term of U.S. patents from 17 years from the grant date to 20 years from the earliest claimed priority date, and (b) circumstances in which one patent is subject to the pre-URAA term and the other to the post-URAA term.  In reversing the District Court, the Federal Circuit determined that its decision in Gilead Sciences, Inc. v. Natco Pharma Ltd. did not control in this instance, because the difference between how the patents were related to one another with respect to their expiration dates made a difference in how the doctrine of OTDP should be applied.  The Court noted that "because a change in patent term law should not truncate the term statutorily assigned to the pre-URAA '772 patent," the '990 patent "cannot properly be used as an OTDP reference."

For information regarding this and other related topics, please see:

• "Novartis Pharmaceuticals Corp. v. Breckenridge Pharmaceutical Inc. (Fed. Cir. 2018)," December 11, 2018
• "Novartis AG v. Ezra Ventures LLC (Fed. Cir. 2018)," December 9, 2018
• "In re Janssen Biotech, Inc. (Fed. Cir. 2018)," January 29, 2018

12.  Federal Circuit Finds Method of Treatment Claims Patent Eligible

Although there were several interesting decisions issued in 2018 that addressed the issue of subject matter eligibility in the context of life sciences inventions (see list below), the most interesting of these decisions to most life sciences practitioners and applicants is likely one issued by the Federal Circuit in April.  In Vanda Pharmaceuticals Inc. v. West-Ward Pharmaceuticals, the Federal Circuit affirmed a District Court decision finding, inter alia, that the claims of U.S. Patent No. 8,586,610, which are directed to methods of treating a patient suffering from schizophrenia with iloperidone, were not invalid under 35 U.S.C. § 101.  Two months after that decision, the U.S. Patent and Trademark Office distributed a memorandum to the patent examining corps that addressed the impact of the Vanda decision.  The memorandum explains that in Vanda, the Federal Circuit determined that the claims at issue are "patent eligible under 35 U.S.C. § 101 because they are not 'directed to' a judicial exception" (emphasis in memorandum).  The memorandum also states that (with emphasis in memorandum):

The USPTO's current subject matter eligibility guidance and training examples are consistent with the Federal Circuit's decision in Vanda, with the understanding that: (1) "method of treatment" claims that practically apply natural relationships should be considered patent eligible under Step 2A of the USPTO's subject matter eligibility guidance; and (2) it is not necessary for "method of treatment" claims that practically apply natural relationships to include nonroutine or unconventional steps to be considered patent eligible under 35 U.S .C. § 101.  For example, claims 5 and 6 of USPTO Example 29 (Diagnosing and Treating Julitis) should be considered patent eligible under Step 2A of the USPTO's subject matter eligibility guidance in light of the Federal Circuit decision in Vanda.

Last week, Hikma Pharmaceuticals and West-Ward Pharmaceuticals filed a Petition for a Writ of Certiorari for Supreme Court review of the Federal Circuit's decision.

For information regarding this and other related topics, please see:

• "Illumina, Inc. v. Ariosa Diagnostics, Inc. (N.D. Cal. 2018)," December 27, 2018
• "A Glimmer of an Idea on an Experimental Use Exemption," November 7, 2018
• "Roche Molecular Systems, Inc. v. Cepheid (Fed. Cir. 2018)," October 10, 2018
• "Ex parte Galloway (PTAB 2018)," July 26, 2018
• "Illumina, Inc. v. Natera, Inc. (N.D. Cal. 2018)," July 11, 2018
• "USPTO Issues Memorandum on Vanda Pharmaceuticals v. West-Ward Pharmaceuticals," July 9, 2018
• "Supreme Court Denies Certiorari Again in Patent Eligibility and Safe Harbor Cases," June 20, 2018
• "Pernix Ireland Pain DAC v. Alvogen Malta Operations Ltd. (D. Del. 2018)," June 12, 2018
• "Genetic Veterinary Sciences, Inc. v. LABOklin GmbH (E.D. Va. 2018)," May 22, 2018
• "Exergen Corp. v. Kaz USA, Inc. (Fed. Cir. 2018)," March 11, 2018
• "Ex parte Kotanko (PTAB 2018)," February 12, 2018

11.  Supreme Court: Patentees Can Recover Lost Foreign Profits

In June, in WesternGeco LLC v. ION Geophysical Corp., the Supreme Court determined that, based on the "focus" of 35 U.S.C. § 284 of the Patent Act (the general damages provision) when read in light of domestic infringement under 35 U.S.C. § 271(f)(2) (barring exportation of components specifically adapted for a patented invention), a patent owner could recover lost foreign profits.  The decision overruled the Federal Circuit's general practice of interpreting damages under § 271(f)(2) in the same fashion as § 271(a) (the general infringement provision, which does not allow patent owners to recover lost foreign profits).  Justice Thomas, joined by Chief Justice Roberts and Justices Kennedy, Ginsburg, Alito, Sotomayor, and Kagan, determined that despite the "presumption against extraterritoriality" in the enforcement of federal statutes, foreign lost profits due to domestic acts of infringement under § 271(f)(2) should not be categorically barred.  The majority reiterated the facts presented and that "the focus of § 284, in a case involving infringement under § 271(f)(2), is on the act of exporting components from the United States."  In this context, because the infringing act happens domestically, any lost profits (foreign or otherwise) based on that domestic infringement were merely a domestic application of § 284.  The dissent (Justices Gorsuch and Breyer) takes issue with the majority's decision permitting a patentee to be sued for damages for the use abroad of a patented article infringed under the provisions of 35 U.S.C. § 271(f)(2), arguing that "[p]ermitting damages of this sort would effectively allow U. S. patent owners to use American courts to extend their monopolies to foreign markets," and that this "would invite other countries to use their own patent laws and courts to assert control over our economy."

For information regarding this and other related topics, please see:

• "WesternGeco LLC v. ION Geophysical Corp. (2018)," June 24, 2018

In re Marco Guldenaar Holding B.V. (Fed. Cir. 2018)

By Michael Borella --

One final 35 U.S.C. § 101 case inched across the finish line at the end of 2018.  And while this one is not particularly remarkable substantively, its concurrence from an opinionated judge may give it an unwelcome shelf life.

Background

Applicant Marco Guldenaar Holding B.V. filed U.S. Patent Application No. 13/078,196.  During prosecution, the Examiner rejected a number of its claims under § 101 as allegedly being directed to patent-ineligible subject matter (the claims were also rejected as being obvious under § 103).  Guldenaar appealed to the Patent Trial and Appeal Board, but the Board affirmed the Examiner.  Guldenaar then appealed to the Federal Circuit.

The claimed invention is related to "dice games intended to be played in gambling casinos, in which a participant attempts to achieve a particular winning combination of subsets of the dice."  Representative claim 1 recites:

1.  A method of playing a dice game comprising:
    providing a set of dice, the set of dice comprising a first die, a second die, and a third die, wherein only a single face of the first die has a first die marking, wherein only two faces of the second die have an identical second die marking, and wherein only three faces of the third die have an identical third die marking;
    placing at least one wager on at least one of the following: that the first die marking on the first die will appear face up, that the second die marking on the second die will appear face up, that the third die marking on the third die will appear face up, or any combination thereof;
    rolling the set of dice; and
    paying a payout amount if the at least one wager occurs.

In Alice Corp. v. CLS Bank Int'l, the Supreme Court set forth a two-part test to determine whether claims are directed to patent-eligible subject matter under § 101.  One must first decide 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 decide whether any element or combination of elements in the claim is sufficient to ensure that the claim amounts to significantly more than the judicial exclusion.  But elements that are well-understood, routine, and conventional will not lift the claim over the § 101 hurdle.

The Majority Opinion

In its analysis, the Court leaned heavily on its holding from 2016's In re Smith.  In that case, the Court found that claims directed to a method of playing a card game failed to meet the § 101 requirements.  The Court's rationale for this decision was that the claimed invention was a method of conducting a wagering game, and thus tantamount to the methods of exchanging financial obligations found ineligible in Alice and Bilski v. Kappos.

Guldenaar argued that the Board improperly categorized the invention as an abstract idea under an overly-broad label:  "methods of organizing human activities."  The Court sympathized with Guldenaar, even noting that "this phrase can be confusing and potentially misused, since, after all, a defined set of steps for combining particular ingredients to create a drug formulation could be categorized as a method of organizing human activity."  But the Court also observed that the Board further categorized the invention as being "rules for playing games" -- a more specific type of abstract idea.

Importantly, the Court did not hold that game rules are per se patent-ineligible.  Quoting Smith, the Court wrote that "[a]bstract ideas, including a set of rules for a game, may be patent-eligible if [the claims] contain an 'inventive concept' sufficient to 'transform' the claimed abstract idea into a patent-eligible application."  But this acknowledgment did not help Guldenaar as the Court also stated that "[t]he claims here recite the steps of placing a wager, rolling the dice, and paying a payout amount if at least one wagered outcome occurs—none of which Appellant on appeal disputes is conventional, either alone or in combination."  Thus, under the second step of Alice, "the claimed activities here are purely conventional and are insufficient to recite an inventive concept."

Guldenaar made a further argument, that "the specifically-claimed dice that have markings on one, two, or three die faces are not conventional and their recitation in the claims amounts to significantly more than the abstract idea."  Applying printed matter doctrine, the Court rejected this notion, stating that "the printed indicia on each die are not functionally related to the substrate of the dice."

In his final substantive argument, Guldenaar contended that "playing a dice game cannot be an abstract idea because it recites a physical game with physical steps."  The Court disagreed, noting that "the abstract idea exception does not turn solely on whether the claimed invention comprises physical versus mental steps" and that the ineligible inventions of Alice and Bilski both required actions in the physical world.  Still, the Court reiterated that "inventions in the gaming arts are not necessarily foreclosed from patent protection under § 101" while ultimately finding the claims unpatentable under § 101.

Guldenaar also made a procedural argument, that the Board improperly treated claim 1 as representative of all claims.  The Court, however, remarked that "Appellant's appeal brief to the Board included two claim group headings under its § 101 argument:  one under which all rejected claims were discussed generally, and another under which Appellant merely quoted claim elements in dependent claims 10, 18, 24, and 26."  Invoking Rule 41.37(c)(1)(iv), the Court explained that "for an applicant to receive separate consideration by the Board for each of its appealed claims, an applicant's appeal brief must contain substantive argument beyond a mere recitation of the claim elements."  Thus, the Court found that the Board reasonably grouped all claims together with claim 1 being representative.

Judge Mayer's Concurrence

Judge Mayer is no stranger to the incendiary § 101 concurrence -- look no further than Intellectual Ventures I v. Symantec Corp. or Ultramercial v. Hulu.  Here, once again, he pushed back against holdings of the Federal Circuit (i.e., the law) with his personal opinions about the patent-eligibility (or the lack thereof) of software.

His opening volley set the stage:

First, subject matter eligibility under 35 U.S.C. § 101 is a pure question of law, one that can, and should, be resolved at the earliest stages of litigation.  Second, claims directed to dice, card, and board games can never meet the section 101 threshold because they endeavor to influence human behavior rather than effect technological change.

There are three assertions masked as two in his statement, so let's take them apart.

Is subject matter eligibility a pure question of law?  As of today, the answer is a clear and resolute "no!"  And this is not just the opinion of a commentator, but that of the Federal Circuit in Berkheimer v. HP and a number of following decisions.  At this point, a majority of the Court's judges accept that, in practice, many § 101 inquiries require at least some baseline factual analysis.  The reason why the Court concluded so was to address the conundrum of having to determine whether elements of a claim were well-understood, routine, and conventional as a matter of law.  Making this determination almost always involves some amount of comparison of claim language to what would ordinarily be called "prior art."

Judge Mayer quoted a number of decisions for the premise that "[e]ligibility questions mostly involve general historical observations, the sort of findings routinely made by courts deciding legal questions."  And yet, the Berkheimer case itself involved a factual dispute that was far more than a matter of historical observation -- whether the claimed invention recites a combination of elements that improved the performance of a computer.  Even the Supreme Court's Bilski opinion referenced textbooks in order to establish that the claimed hedging procedure was a well-known economic practice.  It is without dispute that not all § 101 questions can be resolved by referring to mere historical facts worthy of judicial notice.  A deeper analysis is often necessary especially in the realm of complex software inventions.

Should subject matter eligibility issues be resolved at the earliest stages of litigation?  This is a more nuanced question, and the ultimate answer is "only in some cases."  Nevertheless, Judge Mayer reiterated his concurrence in Ultramercial, stating that "[r]esolving subject matter eligibility challenges early conserves scarce judicial resources, provides a bulwark against vexatious infringement suits, and protects the public by expeditiously removing the barriers to innovation created by vague and overbroad patents."  Ignoring the unsupported assertions in the second half of this claim, the notion that being able to easily invalidate issued patents (which are presumed to be valid) during the pleadings stage and before the claims are fully construed is problematic at best.

To make an admittedly hyperbolic analogy, if there were no Fourth Amendment right for the government to establish reasonable cause prior to arresting and charging individuals with crimes, more criminals would end up in prison.  But so would more innocent people, which is already a significant problem.  Analogously, the sharp knife of a reinvigorated § 101 has been able to eliminate, early in litigation, a number of patents that probably should not have been granted by the USPTO.  But the good patents are also taken down with the bad, and the value of many software patents has dropped due to the lingering unpredictability of the Alice test.  Given the importance of software innovation to the U.S. economy, being able to invalidate such patents based on a less than thorough application of a vague judge-made rule is a questionable practice.

Should gaming inventions be patentable?  Like the issue of facts in the § 101 analysis, the Federal Circuit has answered this question in the positive, albeit for certain types of gaming inventions that are claimed properly.  Judge Mayer, however, opined that:

The fault line for patent eligibility generally runs along the divide between man and machine.  Simply put, while new machines and mechanized processes can potentially be patent eligible, ideas about how to improve or influence human thought and behavior fail to pass section 101 muster.  This is why claims telling people how to mitigate settlement risk, how to hedge against risk in consumer transactions, or how to play a game of cards, are directed to non-statutory subject matter.

This is not the law, and for good reason.  Trying to divide an invention into the technological and human parts is often an exercise in futility.  The patent-eligible invention of DDR Holdings v. Hotels.com was a hybrid web site meant to attract visitors with a familiar look and feel.  Is that a technological or business-oriented invention?  Depending how you look at it, either answer is possible.  The same could be said for self-driving car software that attempts to predict or influence the behavior of human drivers, as well as a neural-network-based machine learning system that makes photographs more pleasing to the human eye.

Trying to answer Judge Mayer's machine versus human inquiry is, in practice, as difficult as defining the term "abstract idea" and just as unworkable.  Under his rubric, inventions that require significant technical advances can be viewed as directed to "organizing human behavior," and therefore deemed ineligible just because the invention came about with the goal of changing such behavior.  In a more rational worldview, whether the goal or the outcome of an invention involves a human element should be completely irrelevant -- instead the question to ask is whether the invention involves a focused and significant advance over the state of the art.

In sum, Judge Mayer doesn't like software patents.  But his broad, sweeping language should not be mistaken for the current state of § 101 affairs, nor should it be used to influence our thought or behavior regarding such affairs.

In re Marco Guldenaar Holding B.V. (Fed. Cir. 2018)
Panel: Circuit Judges Chen, Mayer, and Bryson
Opinion by Circuit Judge Chen; concurring opinion by Circuit Judge Mayer

Illumina, Inc. v. Ariosa Diagnostics, Inc. (N.D. Cal. 2018)

By Kevin E. Noonan --

U.S. District Court Judge Susan Illston stuck again on Christmas Eve, giving the biotech patent community a rhetorical lump of coal in their stocking by invalidating on summary judgment claims directed to methods for isolating cell-free fetal DNA from maternal DNA on the grounds that they are not patent-eligible under 35 U.S.C. § 101.  The author of the Ariosa v. Sequenom decision a few years ago, Judge Illston has rarely seen a patent she likes (or is not willing to invalidate), and the Supreme Court and Federal Circuit's recent § 101 jurisprudence has given district court judges the judicial discretion to invalidate patents based on their subjective determination of their eligibility.

The patents at issue, U.S. Patent Nos. 9,580,751 and 9,738,931, recite the following representative independent claims:

The '751 patent:

1.  A method for preparing a deoxyribonucleic acid (DNA) fraction from a pregnant human female useful for analyzing a genetic locus involved in a fetal chromosomal aberration, comprising:
    (a) extracting DNA from a substantially cell-free sample of blood plasma or blood serum of a pregnant human female to obtain extracellular circulatory fetal and maternal DNA fragments;
    (b) producing a fraction of the DNA extracted in (a) by:
        (i) size discrimination of extracellular circulatory DNA fragments, and
        (ii) selectively removing the DNA fragments greater than approximately 500 base pairs,
        wherein the DNA fraction after (b) comprises a plurality of genetic loci of the extracellular circulatory fetal and maternal DNA; and
    (c) analyzing a genetic locus in the fraction of DNA produced in (b).

The '931 patent:

1.  A method, comprising:
    (a) extracting DNA comprising maternal and fetal DNA fragments from a substantially cell-free sample of blood plasma or blood serum of a pregnant human female;
    (b) producing a fraction of the DNA extracted in (a) by:
        (i) size discrimination of extracellular circulatory fetal and maternal DNA fragments, and
        (ii) selectively removing the DNA fragments greater than approximately 300 base pairs,
        wherein the DNA fraction after (b) comprises extracellular circulatory fetal and maternal DNA fragments of approximately 300 base pairs and less and a plurality of genetic loci of the extracellular circulatory fetal and maternal DNA fragments; and
    (c) analyzing DNA fragments in the fraction of DNA produced in (b).

Both patents were subjected to rejection under § 101 and allowed upon application of U.S. Patent and Trademark Office Guidance for applying Supreme Court and Federal Circuit law to the question of subject matter eligibility relating to natural phenomena and laws of nature.

The Court, as has become district courts' wont, rendered summary judgment without a Markman hearing construing the claims, and in its opinion characterized the claimed methods for both patents as being directed to prenatal detection, fairly based on steps (c) in each patent's claims.

After setting forth the legal standards the District Court addressed the two prongs of the Alice/Mayo analysis for patent eligibility:  whether the claims were "directed to" ineligible subject matter and whether they recite an inventive concept.  Regarding the first, "directed to" prong, the opinion says that these claims are analogous to the claims invalidated under Federal Circuit precedent in Genetic Techs Ltd. v. Merial and, of course, Ariosa v. Sequenom.  The opinion recites without contradiction Ariosa's contention that "the claimed method begins with a sample of cell-free DNA and ends with an analysis of it," which is not exactly true; in these claims the claim starts with a sample of cell-free maternal blood plasma containing cell-free fetal DNA and ends with an isolate of cell-free fetal DNA.  The opinion cites a declaration, and prosecution history challenging changes in purity with change in structure.  "Changing the ratio of two natural products in a mixture and analyzing one of those products does not impact whether an invention is directed towards a natural phenomenon," according to the Court's opinion.  Further, the opinion states that "[b]oth patents claim results from a test of naturally occurring fetal DNA and do not transform the naturally occurring product into something new."  Finally with regard to this prong, the Court rejected Illumina's assertion of the Federal Circuit's Rapid Litigation Management Ltd. v. Cellzdirect, Inc. decision, based on the distinction that frozen liver cells, the subject matter of the claims in Cellzdirect, do not occur in nature.

Regarding inventive concept, the Court relied on the recent Federal Circuit decision in Roche Molecular Systems v. Cepheid to distinguish the Cellzdirect precedent.  The Court found the claims not inventive, because the method steps (extraction, size production, selective removal), taken in the abstract, are routine, conventional, and well understood.  In doing so, the Court rejected the argument that applying these methods to previously unknown cell-free fetal DNA in maternal blood is not "routine, conventional, and well-understood," with some no doubt unintended irony relying on the statement from Diamond v. Diehr that "[t]he novelty of any element or steps in a process, or even the process itself, is of no relevance in determining whether the subject matter of a claim falls within the §101 categories of possibly patentable subject matter."  Of course, that statement is not entirely apposite to the situation before the Court, and was made before Justice Breyer and a unanimous Court endorsed mixing novelty and obviousness considerations into the subject matter eligibility calculus in Mayo.

There was a time when patent practitioners could take some solace that the Federal Circuit would apprehend the threats to innovation that decisions such as this one pose and would act to limit their scope if not apply appropriate correction.  That time, of course, is long past and it can only be hoped that recent chinks in the Federal Circuit's subject matter eligibility façade suggest members of the Court are receptive to reconsidering how Supreme Court subject matter eligibility decisions have been interpreted.  This remains, of course, a hot potato issue, and whether whatever panel of the Court hears the case hews to either the Court's Cellzdirect or its Cepheid precedent is frankly a matter of chance.  That biotech patenting has reached this point, particularly in view of the importance of innovation for the U.S. economy and its citizens' well-being, is disheartening.  As the kids would say on social media, SMH.

Illumina, Inc. v. Ariosa Diagnostics, Inc. (N.D. Cal. 2018)
Order Granting Defendants' Motion for Summary Judgment by District Judge Illston

Overcoming 35 U.S.C. § 101 Rejections Based on Electric Power Group

By Michael Borella --

Opening scene . . . our intrepid patent attorney arrives early at her office for a productive day at work.  With morning coffee sitting next to her monitor, she opens her email.  She finds a few messages from clients and colleagues, as well as a new office action from the USPTO.  Curious, she opens the Office action and scans through it, only to find that it contains yet another 35 U.S.C. § 101 rejection applying the dreaded Electric Power Group LLC v. Alstom S.A. decision.

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When it first came down from the Federal Circuit, many patent attorneys just shrugged about the case.  It was just another § 101 opinion that found claims patent-ineligible.  It didn't seem to break much in the way of new ground.  But in Electric Power Group, Judge Taranto wrote that the claimed invention was directed to an unpatentable abstract idea because it merely involved "a process of gathering and analyzing information of a specified content, then displaying the results."  A few short weeks later, USPTO examiners were using this language to contend that virtually any invention that involves input, processing, and output was similarly abstract.  And more than two years later, Electric Power Group remains the proverbial big hammer that makes software claims look like nails.

Why has Electric Power Group had such a large and lasting impact?  And how should our patent attorney craft her response in order to be well-positioned to overcome the rejection?

Starting with the former question, let's look at the representative claim that was under dispute in that case:

A method of detecting events on an interconnected electric power grid in real time over a wide area and automatically analyzing the events on the interconnected electric power grid, the method comprising:
    receiving a plurality of data streams, each of the data streams comprising sub-second, time stamped synchronized phasor measurements wherein the measurements in each stream are collected in real time at geographically distinct points over the wide area of the interconnected electric power grid, the wide area comprising at least two elements from among control areas, transmission companies, utilities, regional reliability coordinators, and reliability jurisdictions;
    receiving data from other power system data sources, the other power system data sources comprising at least one of transmission maps, power plant locations, EMS/SCADA systems;
    receiving data from a plurality of non-grid data sources;
    detecting and analyzing events in real-time from the plurality of data streams from the wide area based on at least one of limits, sensitivities and rates of change for one or more measurements from the data streams and dynamic stability metrics derived from analysis of the measurements from the data streams including at least one of frequency instability, voltages, power flows, phase angles, damping, and oscillation modes, derived from the phasor measurements and the other power system data sources in which the metrics are indicative of events, grid stress, and/or grid instability, over the wide area;
    displaying the event analysis results and diagnoses of events and associated ones of the metrics from different categories of data and the derived metrics in visuals, tables, charts, or combinations thereof, the data comprising at least one of monitoring data, tracking data, historical data, prediction data,  and summary data;
    displaying concurrent visualization of measurements from the data streams and the dynamic stability metrics directed to the wide area of the interconnected electric power grid;
    accumulating and updating the measurements from the data streams and the dynamic stability metrics, grid data, and non-grid data in real time as to wide area and local area portions of the interconnected electric power grid; and
    deriving a composite indicator of reliability that is an indicator of power grid vulnerability and is derived from a combination of one or more real time measurements or computations of measurements from the data streams and the dynamic stability metrics covering the wide area as well as non-power grid data received from the non-grid data source.

Though lengthy, this claim is broader than it initially appears due to its use of the disjunctive at several points.  Nonetheless, it looks narrow at first blush.

As alluded to above, Judge Taranto characterized the claims as focused on "collecting information, analyzing it, and displaying certain results of the collection and analysis."  For each of these three steps, he cited to precedent that found similar claim elements to be abstract.  He further determined that there was nothing non-abstract in the combination thereof.

This particular choice of language is problematic for software-based inventions.  All a computer can do is receive input, process data, and provide output.  Thus, if the thrust of an invention is on a particularly innovative way of doing such receiving, processing, and outputting, it is all too easy for the USPTO to make an analogy to Electric Power Group in order to contend that the associated claims are nothing more than an abstract idea.  And examiners have taken an expansive view of the case.

Nonetheless, hope is not lost for our patent attorney or for the rest of us.  A careful reading of Electric Power Group itself suggests how one should rebut such a rejection.

The claims in Electric Power Group were found to be ineligible under § 101 for two main reasons:  (i) the claims were focused entirely on the gathering, processing, and displaying information with no technical improvement thereof, and (ii) the claims were not limited to a specific solution to a problem but instead claimed the result.

In particular, Judge Taranto wrote:

Here, the claims are clearly focused on the combination of those abstract-idea processes.  The advance they purport to make is a process of gathering and analyzing information of a specified content, then displaying the results, and not any particular assertedly inventive technology for performing those functions.  They are therefore directed to an abstract idea.

Agreeing with the opinion of the District Court that had initially invalidated the claims, he added:

[T]he court reasoned, "there is a critical difference between patenting a particular concrete solution to a problem and attempting to patent the abstract idea of a solution to the problem in general."  Electric Power Group's asserted claims, the court observed, do the latter:  rather than claiming "some specific way of enabling a computer to monitor data from multiple sources across an electric power grid," some "particular implementation," they "purport to monopolize every potential solution to the problem"—any way of effectively monitoring multiple sources on a power grid.  Whereas patenting a particular solution "would incentivize further innovation in the form of alternative methods for achieving the same result," the court concluded, allowing claims like Electric Power Group's claims here would "inhibit innovation by prohibiting other inventors from developing their own solutions to the problem without first licensing the abstract idea.

These observations provide the roadmap for a response.  To the extent possible, which will vary based on the claims at hand, one should argue that one's claims suffer from neither of the enumerated deficiencies.  It is particularly beneficial to be able to assert that the claims under consideration involve a highly-specific set of operations that provide a clear technical benefit (e.g., faster processing, less memory utilization, the ability to carry out tasks that were previously unworkable, etc.).  Thus, one can state that the claims go well beyond merely gathering, processing, and displaying information and instead involve a particularly inventive technical improvement to a specific device or field.

It is also helpful to be able to state that the claims do not recite just an aspirational goal or a desired outcome.  Instead, the claims should be focused on solving a particular technical problem and recite discrete steps that can be taken to obtain this solution.

But beyond these two points, both of which can be used to rebut an Electric Power Group rejection, it is important to know that claims that are directed to receiving input, processing, and providing output are not per se ineligible under § 101.  Notably, just a few weeks after Electric Power Group the Federal Circuit also decided McRO, Inc. v. Bandai Namco Games America Inc.

In McRO, the disputed invention was directed to generating animations of facial expressions that match a given sequence of phonemes.  This was accomplished through the application of morph weights to points on an animated face based on the timing of phoneme sub-sequences.  The invention of McRO was carried out entirely in software operating on a general-purpose computer -- and essentially consisted of receiving, processing and displaying data.

The Federal Circuit found that the claims were not abstract because they represented a technical improvement and there was "no evidence that the process previously used by animators is the same as the process required by the claims."  Thus, the McRO claims were distinguished from the patent-ineligible claims of Alice Corp. v. CLS Bank Int'l, Parker v. Flook, and Bilski v. Kappos, cases in which the invention being claimed was performed by computer in the same way it had previously been carried out.  Notably, the rule-based claims of McRO could be carried out manually.  And yet, the Court found the claims eligible because they recited an unconventional procedure that had not previously been carried out manually.

Clearly, the McRO panel was aware of Electric Power Group -- Judge Taranto joined the unanimous opinion of McRO.  Thus, McRO stands for the principle that inventions involving nothing more than software operating on a general purpose computer can be patent-eligible.  This goes a long way toward de-clawing and reducing the scope of Electric Power Group.

Thus, one should argue that the claimed invention is analogous to the eligible claims of McRO -- a software-based improvement that is limited to the practical application of a specific set of operations that require computer implementation.  Any presence of data gathering processing, and output in the claims is not dispositive.  Instead, the USPTO must consider the advance provided by the invention as a whole.  And it is particularly compelling if there is nothing in the record that even suggests that the invention was previously performed manually.

---

Our patent attorney rolls her eyes and smiles, knowing what arguments and claim amendments can effectively rebut the dreaded Electric Power Group rejection.  She dockets the response for handling and goes on to enjoy her coffee, secure in the knowledge that she's got this one.

Guest Post -- Not Yet Evolved? Where Is 35 U.S.C. § 101 Going?

By Brittany Knight* and Anthony Sabatelli** --

Software is a generic term to refer to a collection of data or executing code used by a computer to implement arithmetic operations or logical operations.  Back in 1936, Allen Turing, in his landmark paper On Computable Numbers proposed the capable use of instructions (i.e., software) to execute functions through his Turing Machine, an early precursor of the general purpose computer[1].  Today the modern computer is instrumental for complex computations, data analytics, high-powered graphing, simulations, and so on.  Although, the development and use of software for these computer functions has become mainstream, determining the patent eligibility of software inventions under 35 U.S.C. § 101 has been less intuitive.

In the wake of the now famous Mayo and Alice decisions, patent subject eligibility is determined through a 2-step inquiry.  The first step asks whether, the patent claim is directed to a natural phenomenon, biological process, or abstract idea.  Software is generally categorized as being "abstract" because it does not fulfill the more concrete criteria for being a "thing":  i.e., a process, machine, manufacture, or composition of matter.  Because software claims often fail the first step of the Mayo/Alice inquiry, the inquiry is next directed to the second part, which determines whether the patent claims add "significantly more" to bring them back within the fold of eligibility.  However, meeting this second step has proven challenging in the court of law when it comes to determining patent eligibility of modern computational tools.

The recent Federal Circuit case of BSG Tech LLC v. BuySeasons, Inc. reiterates these challenges, but also what is needed to overcome them.  BSG Tech sued BuySeasons for infringement on claims for the use of "self-evolving generic indexing of information" (U.S. Patent Nos. 6,035,294, 6,243,699, and 6,195,652).  Indexing software is used to organize and search information based on various parameters and values.  The problem, BSG Tech points out in their '294 patent is that current indexing methods are incapable of sorting through the enormous amount of information available on the internet in an efficient and accurate way.  For instance, if one wants to search for a specific website one most likely would need to know part of the URL unless the subject for the webpage is otherwise included in the web address.  Otherwise, one may choose to search by keywords.  However, keyword searching can restrict the search to subjects indexed by that keyword (e.g., searching for "red" car would provide only cars that were identified as "red" and not magenta or crimson cars).  Additionally, a search for red Mercedes™ might also retrieve irrelevant information such as "a story about a woman named Mercedes wearing a red dress."  To combat this issue of specificity, online stores often use hierarchal indexing to narrow searches based subject themed drop-down menu selection (e.g., All, Books, History, Military, strategy, The Art of War by Sun Tzu).  And yet, applying these current "generic" indexing to large databases or searching the internet would require a substantial amount of effort and cost not to mention, a massive list of search parameters since search criteria can vary greatly by subject matter (i.e., make and model are more appropriate for vehicle searches rather than houses or history books).

Therefore, BSG Tech's '294 patent proposes a "self-evolving generic indexing of information" that would permit users to access search parameters based on what other users may have previously conducted.  BSG argues this method allows users of varying degrees of knowledge to improve search parameters for the benefit of everyone across the network.  As an example, users may access historical usage which would provide the frequency of parameters and values used previously by other users to index different subjects.  BSG asserts that their new software provides a significant improvement over current prior art databases.  However, the Court concluded that these improvements lacked novelty and did not actually add "significant more."  Although, the definition of "significantly more" is technically a "question of law," the idea is that the claims provide more than conventional or routine standard.

Although BSG described the use of "summary comparison" or "relative historical" as guiding parameters in their indexing software, the Court viewed "increasingly narrowing classifications" as inadequate grounds for inventive concept or as a significant improvement upon the current standard.  In the past, other cases have had more success arguing the validity of their "abstract idea."  In Enfish LLC vs. Microsoft Corp., the Court overturned the District Court's decision that Enfish LLC's claims for a "self-referential table" was patent ineligible (U.S. Patent Nos. 6,151,604 and 6,163,775).  For background, Enfish established a logical model that allowed users to create data tables based on a "self-referential" system where by all individual data pieces could be referenced to each other within the same table.  In the conventional relational database each entry was referenced individually by type and not as a collective whole.  The difference with this case was that Enfish made an effective argument that their claims made significant improvements over the generic method which required individual tables for each comparison of data.  Instead, their method allowed users to (1) create one table to input and reference data which (2) increased the efficacy for data storage and (3) data retrieval.  It was later determined, with the overturn of the District Court's decision, that the claims instead described an inventive strategy for indexing information that improved upon the current functionality of computers and is therefore, not directed to an abstract idea.

Determining the eligibility of patents is not as strong and fast a rule when it comes to abstract lines crossing into concrete means.  With the case of software programs, improving upon a computational machine to facilitate a function may revolutionize an industry, manufacturing of a substance, or provide the ability to accurately measure simultaneous variables at once to execute a process.  With BSG, if their product has significant utility like presented in Enfish, their invention of "self-evolving generic indexing of information" may have had a shot at being perceived as more than just an abstract entity and instead, a marketable way for multiple users, across a network, to augment a reference database.  However, the claims were seen as an insignificant improvement on conventional indexing standards and denied patent eligibility.  Perhaps the speed to which software has been incorporated into our daily lives surpasses our current ability to conceptualize the validity of abstract inventions unless they are presented with concrete strategies.  The Mayo/Alice test is clearly not fully evolved.

[1] Turing, A. M. (1937), On Computable Numbers, with an Application to the Entscheidungsproblem. Proceedings of the London Mathematical Society, s2-42: 230-265. doi:10.1112/plms/s2-42.1.230

* Brittany Knight is a Ph.D. Candidate in the Biomedical Sciences Ph.D. Program in the Neuroscience Department at the University of Connecticut.  Prior to attending the University of Connecticut, Brittany obtained her B.S. in Psychology and a minor in Biology with Global Honors with Distinction from Lock Haven University of Pennsylvania.
** Dr. Sabatelli is a Partner with Dilworth IP

SAP America, Inc. v. InvestPic, LLC (N.D. Tex. 2018)

By Michael Borella --

We wrote about this case six months ago, regarding InvestPic's appeal to the Federal Circuit over having its patent invalided under 35 U.S.C. § 101 in the Northern District of Texas.  InvestPic did not get the outcome it was looking for.  Here, the case is back in the District Court to consider SAP's motion for recovery of attorney's fees.  As we will see, InvestPic ended up not only with its patent invalidated, but also owing a large chunk of money to SAP.

SAP was originally granted attorney's fees in 2017, after the District Court ruled, on the pleadings, that InvestPic's U.S. Patent No. 6,349,291 was invalid under § 101.  As noted above, InvestPic appealed and lost.

The 2017 Proceedings

In the 2017 ruling, the District Court wrote:

A district court may find that a patent case is exceptional and award attorney fees to a prevailing party.  35 U.S.C. § 285.  A case is exceptional if it stands out from other cases with respect to the substantive strength of a party's litigating position considering both the governing law and the facts of the case or if the case stands out in the unreasonable manner in which the case was litigated.

Notably, district courts have discretion when determining whether a case is exceptional and are to consider the totality of the circumstances rather than any bright-line rule.

Regarding InvestPic's litigation position, the District Court observed that the patent was duly issued by the USPTO and therefore presumed valid.  The District Court read into Judge Mayer's concurrence in the Ultramercial v. Hulu case to note that this presumption of validity might not apply to a patent that is challenged under § 101.  But it went on to state that "a patent owner should be entitled to rely on the fact that the claims were reviewed and approved by the USPTO and should be allowed to attempt to enforce his or her patent whether this is done by demand for licensing or by enforcement of patent rights in a court."  Thus, in the District Court's view, just because claims were found lacking under § 101 does not automatically make a case exceptional.

But in this case, "Investpic was specifically warned by the USPTO, in an opinion issued in connection with a post grant review, that it looked very unlikely that these claims were directed toward patentable subject matter and very likely that the claims were invalid."  Despite the fact that the USPTO did not actually address the § 101 issue and only invited InvestPic to submit the patent for such a review, the District Court concluded that this "created a serious cloud on the . . . claims."

Thus, the District Court concluded that the USPTO's warning, in combination with InvestPic's not taking any action on it and continuing to assert the patent, resulted in a weak litigating position.

Regarding the manner in which InvestPic litigated the patent, the District Court took a dim view toward the owners of InvestPic using a front company to engage with SAP salespeople and to learn about the allegedly infringing products.  Notably, "[the owners] held themselves out to be only employees of Regulus and failed to disclose their relationship with InvestPic and their interest in the outcome of this lawsuit."  This, according to the District Court, amounted to conducting "self help discovery under a pretense," and also rose to the level of unreasonable litigation conduct.

Accordingly, the District Court granted SAP's motion for attorney's fees.

The 2018 Proceedings

This proceeding, however, was put on hold by the Federal Circuit appeal.  Now back in the District Court, an order granting much of what SAP requested was issued on December 4, 2018.

SAP requested a total of $939,306.61, which did not include any time from attorneys and staff that worked less than 10 hours on the case.  But this amount included time that SAP's attorney spent on a petition for covered business method review which was never filed.  The District Court declined to award fees for the petition.

Also, the District Court found that the rates charged by SAP's attorneys ("$745.00 – $1,175.00 per hour for partners to $405.00 – $650.00 per hour for associates") were excessive.  In particular, the majority of the partner's rates were above the 90th percentile for Texas, and the District Court found no evidence to justify the rates being so high.  Accordingly, the District Court reduced all partner rates by 35% and all associate rates by 15%.  Based on these adjustments, the total amount actually awarded was $679,420.46.

Analysis

Focusing just on the patent-eligibility issues for the moment, here we have a successful attempt to obtain attorney's fees based on a supposedly weak litigating position under § 101.  Sure, InvestPic's owners engaged in shady practices.  That may have been enough to award attorney's fees alone.

But the District Court's reliance on a USPTO warning (not an actual USPTO decision or rejection, but just a warning) may be extreme.  Since Alice v. CLS Bank, just about any patent involving software or a business method can have its validity challenged under § 101.  Further, the USPTO is not a final or a consistent arbiter of what is or is not patent-eligible.  If anything, the USPTO applies the law in a markedly erratic fashion, with much discretion granted to the personal opinions of primary examiners and PTAB judges.  Thus, relying on an unofficial or provisional observation of the USPTO to find a case exceptional is a rather unusual step.

To further drive home this point, not even the federal courts have been able to crack the § 101 egg.  It is well-known that multiple federal judges have commented on the record that Alice was hard to apply in practice.  Judge Wu of the United States District Court for the Central District of California criticized Alice for setting forth an "I know it when I see it" test.  Judge Pfaelzer, a colleague of Judge Wu, wrote that the Supreme Court's patent-eligibility cases "often confuse more than they clarify [and] appear to contradict each other on important issues."  More recently, the Federal Circuit's Judge Plager, wrote that the post-Alice §101 inquiry "renders it near impossible to know with any certainty whether the invention is or is not patent eligible."  And these are just a few examples of judicial confusion.  There are more.

Just a few months ago, the Federal Circuit ruled 2-1 that § 101 jurisprudence was too murky to be used as the basis of an attorney's fees award.  While the facts between that case and this one differ, the law does not.

How to Draft Patent Claims for Machine Learning Inventions

By Michael Borella --

Introduction

It seems like everyone is talking about artificial intelligence, especially the subset thereof referred to as machine learning.  While some of the discussion is cast in terms of politically-stirred angst about human jobs being replaced by robots or algorithms, a more informed and rational dialog would also set forth machine learning as a platform for the next great breakthroughs in science, technology, medicine, and lifestyle.  Regardless of rhetorical positioning, machine learning represents a fundamental shift in how problems are solved across industries and lines of business.  In the near future, a machine learning library may become a standard part of all computers, just like networking and database technologies have in the past.

For the majority of the existence of computers, programmers wrote functions that were designed to take some input and produce a desired output.  Machine learning inverts this paradigm.  A data set (which in practice usually needs to be quite extensive) of mappings between inputs and their respective desired outputs is obtained.  This data set is fed into a machine learning algorithm (e.g., a neural network, decision tree, support vector machine, etc.) which trains a model to "learn" a function that produces the mappings with a reasonably high accuracy.  In other words, if you give the computer a large enough set of inputs and outputs, it finds the function for you.  And this function may even be able to produce the correct output for input that it has not seen during training.  The programmer (who has now earned the snazzy title of "data scientist") prepares the mappings, selects and tunes the machine learning algorithm, and evaluates the resulting model's performance.  Once the model is sufficiently accurate on test data, it can be deployed for production use.

Such models are already in use today -- they suggest what products you might want to purchase, and movies and music that you might find interesting.  They also silently improve the quality of photos taken from your digital camera, help security screeners at airports and sports stadiums, detect financial fraud, and improve your online search results.  And the real-world applicability of machine learning has yet to peak.

Naturally, innovators in machine learning, like innovators in any other industry sector, seek to protect their work with patents.  Indeed, the number of patent application filings related to artificial intelligence and machine learning has been growing dramatically in the past several years, especially in the U.S.  Nonetheless, inventors, applicants, and even patent attorneys have often struggled to adopt a claiming strategy for inventions incorporating machine learning.

Not surprisingly, the strategy to be taken when drafting such claims depends on the character of the invention and how machine learning is incorporated therein.  Thus, there is no one particular "silver bullet" approach.  Use of just a small number of guidelines, however, can help you focus your claim drafting approach in a direction that may bear the most fruit for your clients.

In short, these guidelines involve looking to several areas where innovation is most likely to occur in machine learning inventions:  (i) the structure of the model, (ii) the training process, (iii) input data preparation, (iv) input data mapping to the model, and (v) post-processing and interpretation of output data from the model.  Along with these five "positive" rules are two "negative" rules of what not to do:  (i) do not mix the training phase and the execution phase in the same claim, and (ii) be careful with inventions that are no more than just conventionally applying an existing model to existing data.

Each will be addressed in turn.  But throughout this discussion, it is important to remember that details matter.  Like claims to most inventions, claims to a machine learning process must specify enough detail for the reviewer (e.g., patent examiner or judge) to be able to determine that the invention as claimed is substantial enough for patenting.  High-level or vague claims are unlikely to meet the requirements of novelty and non-obviousness, much less subject-matter eligibility.

Claim the structure of the model

When the invention involves a new or unusual model structure, this aspect may be a candidate for claiming.  For example, is a neural network with a particular pattern of layers or number of neurons per layer key to providing a desirable result?  Or are multiple neural networks used in parallel or tandem?  Taking this point one step further, the best known solutions for some problems involve ensembles of two or more models.  If your problem is well-addressed by an ensemble, and the structure of the ensemble is new, that might be the starting point of a claim.

Claim the training process

Especially when an unconventional model is used, the training of this model may be unconventional as well.  This provides another avenue for claiming.  For instance, are parts of the model trained with specific subsets of the input data?  Or is the model trained in phases?  Does the training employ a clever form of parallel processing in order to reduce training time?  Regardless, if the execution of the trained model (i.e., its application to input data) is carried out in an orthodox manner, the training might be more easily protected and should be carefully considered.  On the other hand, detecting an infringing training phase might be difficult once the training is complete and the model is commercially deployed.

Claim the input data preparation

Data scientists spend a surprising amount of time preparing their data for introduction to a model.  Real-world data is messy and often needs to be normalized, transformed, have outliers removed, or otherwise processed so that its characteristics can help the model produce quality results.  Often, this is a trial-and-error procedure, with the data scientist attempting several approaches before finding one that is satisfactory.  For instance, some natural language processing models might be utilize word counts, but common words such as "and", "the", "it", and so on may be removed from these counts in order to force the model to focus of the words with a contextual meaning closer to that of the problem being addressed.

Claim the input mapping to the model

Once you have chosen your model and prepared your data, you have to map the input data to the model's input.  This is frequently an inherent process, as the model and input data preparation are selected to work together.  Nonetheless, this mapping can be of interest.  For example, a neural network that classifies sections of black and white images might have 64 inputs, one for each pixel in an 8x8 patch of an image.  The individual inputs may be numbers representing the intensity (brightness) of the respective pixels.  To the extent that such a mapping is innovative, it is fodder for a claim.

Claim the post-processing and interpretation of the output data

Just because a model provides a result, even a desirable result, that does not mean that the overall machine learning pipeline is over.  In some cases, the raw output of a model has to be transformed, normalized, or run through another algorithm to provide useful output data.  In other cases, and as hinted at above, the output of one model may be used (with or without intermediate processing) as input to another model.  For certain classes of models, part of the model itself is the output -- perhaps a particular layer of a neural network that encodes a semantic meaning of the input.

Do not mix the training phase and the execution phase in the same claim

A machine learning model is first trained and then deployed for production use.  Thus, it is likely that the entity performing the training and the entity executing the model are different.  Accordingly, combining steps or elements directed to both training and execution in a claim can result in divided infringement of the claim by these entities.  Instead, draft separate independent claims for the training and execution phases.  In cases where the execution phase does not seem to have enough substance to stand alone, the details of the training phase can be provided in passive clauses (e.g., "wherein the model was trained by comparing random pixel inputs to ground-truth image classifications . . .").

Don't claim conventionally applying an existing model to existing data

As with any type of technology, some solutions are less patentable than others.  If the invention at hand applies an off-the-shelf model to a known data set in a non-specific manner, and none of the above "positive" rules are pertinent, then the machine learning aspects might not be where to focus your claiming efforts.  While machine learning is new, the general concept of applying any generic model to a data set is likely to be considered obvious, at least.  Instead, look to other aspects of the invention for protectable innovation.

Conclusion

While machine learning will almost certainly remain an active area of patenting in the coming years, the path to obtaining meaningful protection for machine learning inventions is scattered with pitfalls.  While the above guidelines are not exhaustive, following them will avoid most of the elementary traps.

And finally, a note to patent agents and attorneys attempting to break into machine learning -- do your homework.  Do not treat machine learning as a black box technique that can be added to claims as an afterthought.  Instead, educate yourself in how and why machine learning works.  Read papers and books, watch videos, take a course, do some programming -- use whatever means are available.  Doing so will dramatically enhance your ability to draft meaningful claims (and other parts of patent applications) that employ these technologies.

Ancora Technologies, Inc. v. HTC America, Inc. (Fed. Cir. 2018)

By Michael Borella --

Ancora sued HTC in the Western District of Washington alleging infringement of U.S. Patent No. 6,411,941.  HTC moved to dismiss the case, contending that the claims of the patent were ineligible under 35 U.S.C. § 101.  The District Court granted HTC's motion.  Ancora appealed to the Federal Circuit.

The '941 patent is directed to mechanisms for preventing a computer from running unlicensed software.  While using license keys to control software was well-known at the time of the patent's earliest priority date (1998), the patent purports to do so in a rather unusual fashion (for that time).

Particularly, a key that uniquely identifies the computer that the software is installed upon is stored in read-only memory (ROM) of the computer's basic input / output system (BIOS).  Thus, the key cannot be modified, removed, or hacked by users or applications without significant effort.  Further, a record that is associated with the licensed software contains the names of the software, its vendor, and a number of licenses thereof.  The record is stored in volatile BIOS memory, encrypted by the key.  The software contains an unencrypted copy of the license record.

When the software is run, it is loaded into main memory, obtains a copy of the key, and performs encryption of its copy of the license record.  If this matches the encrypted license record stored in the BIOS, the program is permitted to continue executing.  Otherwise, the program is considered "unlicensed" and is either halted or run with reduced functionality.

This technique is different from how software licensing was previously enforced.  Software-based licensing required storing licensing information on the computer's main non-volatile storage device (e.g., a hard drive).  But this device was easily accessed and susceptible to hacking.  Hardware-based licensing required use of a pluggable dongle, which was poorly suited to software that was downloaded rather than sold in stores.

Further, BIOS memory was typically used to store low-level bootstrapping code that assisted startup of the hardware and initiation of the operating system, not license verification data.  Thus, the use of BIOS is unusual.

Claim 1 of the '941 patent was considered representative.  It recites:

1.  A method of restricting software operation within a license for use with a computer including an erasable, non-volatile memory area of a BIOS of the computer, and a volatile memory area; the method comprising the steps of:
    selecting a program residing in the volatile memory,
    using an agent to set up a verification structure in the erasable, non-volatile memory of the BIOS, the verification structure accommodating data that includes at least one license record,
    verifying the program using at least the verification structure from the erasable non-volatile memory of the BIOS, and
    acting on the program according to the verification.

In Alice Corp. v. CLS Bank Int'l, the Supreme Court set forth a two-part test to determine whether claims are directed to patent-eligible subject matter under § 101.  One must first decide 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 decide whether any element or combination of elements in the claim is sufficient to ensure that the claim amounts to significantly more than the judicial exclusion.  But generic computer implementation of an otherwise abstract process does not qualify as "significantly more," nor will elements that are well-understood, routine, and conventional lift the claim over the § 101 hurdle.

The District Court viewed the claim as focused on "the abstract concept of selecting a program, verifying whether the program is licensed, and acting on the program according to the verification."  The District Court was led to this conclusion because of the claim's breadth and that it did not recite "how usage of the BIOS to store the verification structure leads to an improvement in computer security."  With part one of Alice complete, the District Court found the claim lacking under part two as well, writing: "specifying that the BIOS be used to house the verification structure [calls for nothing more than] storing data in the memory of a computer component that generally stores data."  Since the District Court found the claim abstract and without an inventive concept, it entered judgment in favor of HTC.

On appeal, the Federal Circuit rapidly answered the patent-eligibility question in the positive.  Relying on recent precedent, such as Finjan, Inc. v. Blue Coat System, Inc., the Court stated that "[i]mproving security—here, against a computer's unauthorized use of a program—can be a non-abstract computer-functionality improvement if done by a specific technique that departs from earlier approaches to solve a specific computer problem."

The Court went on to disagree with the District Court, noting that the claim does recite storing the verification structure in a section of BIOS with certain beneficial characteristics, which was asserted to be an unexpected technique at the time of invention.  Thus, in the view of the Federal Circuit, the claim does not recite a mere desired outcome, but how to achieve this outcome.  Further, the claim addressed a technological problem associated with computers -- software license verification -- rather than a business, mathematical, or financial problem.

Oddly, while still considering the claim under the first part of Alice, the Court made an analogy to BASCOM Global Internet Services v. AT&T Mobility.  The latter case stands for the principle that an unconventional combination of well-known additional elements can make a claim patent-eligible under part two of the test.  The Court seemed to do so in order to support its conclusion that the claim was directed to a technical improvement in computer functionality.

With claim 1 found to be non-abstract, the Court did not need to explicitly move on to part two.  Thus, the Federal Circuit reversed the District Court, and found that the '941 patent met the requirements of § 101.

Ancora Technologies, Inc. v. HTC America, Inc. (Fed. Cir. 2018)
Panel:  Circuit Judges Dyk, Wallach, and Taranto
Opinion by Ciurcuit Judge Taranto

CyWee Group Ltd. v. Samsung Electronics Co. (E.D. Tex. 2018)

Claims for Determining an Orientation of a 3D Pointing Device Using Sensor Data Found to be Patent-Eligible

By James Korenchan --

Plaintiff CyWee Group Ltd. ("CyWee") sued Defendants Samsung Electronics Co., Ltd. and Samsung Electronics America, Inc. (collectively, "Samsung"), asserting various claims of U.S. Patent No. 8,441,438 (the '438 patent) and U.S. Patent No. 8,552,978 (the '978 patent) (a child of the '438 patent).  Samsung responded with a motion for summary judgment of invalidity of all asserted claims under 35 U.S.C. § 101.  Last week, Circuit Judge William C. Bryson (sitting by designation in the Eastern District of Texas) denied the motion.

The claims of the asserted patents generally involve using a particular combination of sensors of a "3D pointing device" to gather raw data points representative of a position of the device, and then inputting those data points into a mathematical formula to determine an orientation of the device in a spatial reference frame.  As an example, a 3D pointing device can be a mouse or other controller used to play video games such that, when a user moves the device, a pointer on the screen moves along with the orientation of the device.

Claim 1 of the '438 patent is representative of the four asserted apparatus claims of the '438 patent:

1.  A three-dimensional (3D) pointing device subject to movements and rotations in dynamic environments, comprising:
    a housing associated with said movements and rotations of the 3D pointing device in a spatial pointer reference frame;
    a printed circuit board (PCB) enclosed by the housing;
    a six-axis motion sensor module attached to the PCB, comprising a rotation sensor for detecting and generating a first signal set comprising angular velocities ω_x, ω_y, ω_z associated with said movements and rotations of the 3D pointing device in the spatial pointer reference frame, an accelerometer for detecting and generating a second signal set comprising axial accelerations Ax, Ay, Az associated with said movements and rotations of the 3D pointing device in the spatial pointer reference frame; and
    a processing and transmitting module, comprising a data transmitting unit electrically connected to the six-axis motion sensor module for transmitting said first and second signal sets thereof and a computing processor for receiving and calculating said first and second signal sets from the data transmitting unit, communicating with the six-axis motion sensor module to calculate a resulting deviation comprising resultant angles in said spatial pointer reference frame by utilizing a comparison to compare the first signal set with the second signal set whereby said resultant angles in the spatial pointer reference frame of the resulting deviation of the six-axis motion sensor module of the 3D pointing device are obtained under said dynamic environments, wherein the comparison utilized by the processing and transmitting module further comprises an update program to obtain an updated state based on a previous state associated with said first signal set and a measured state associated with said second signal set; wherein the measured state includes a measurement of said second signal set and a predicted measurement obtained based on the first signal set without using any derivatives of the first signal set.

Claim 14 of the '438 patent is representative of the five asserted method claims of the '438 patent:

14.  A method for obtaining a resulting deviation including resultant angles in a spatial pointer reference frame of a three-dimensional (3D) pointing device utilizing a six-axis motion sensor module therein and subject to movements and rotations in dynamic environments in said spatial pointer reference frame, comprising the steps of:
    obtaining a previous state of the six-axis motion sensor module; wherein the previous state includes an initial-value set associated with previous angular velocities gained from the motion sensor signals of the six-axis motion sensor module at a previous time T−1;
    obtaining a current state of the six-axis motion sensor module by obtaining measured angular velocities ω_x, ω_y, ω_z gained from the motion sensor signals of the six-axis motion sensor module at a current time T;
    obtaining a measured state of the six-axis motion sensor module by obtaining measured axial accelerations Ax, Ay, Az gained from the motion sensor signals of the six-axis motion sensor module at the current time T and calculating predicted axial accelerations Ax′, Ay′, Az′ based on the measured angular velocities ω_x, ω_y, ω_z of the current state of the six-axis motion sensor module without using any derivatives of the measured angular velocities ωx, ωy, ωz; said current state of the six-axis motion sensor module is a second quaternion with respect to said current time T; comparing the second quaternion in relation to the measured angular velocities ω_x, ω_y, ω_z of the current state at current time T with the measured axial accelerations Ax, Ay, Az and the predicted axial accelerations Ax′, Ay′, Az′ also at current time T;
    obtaining an updated state of the six-axis motion sensor module by comparing the current state with the measured state of the six-axis motion sensor module; and
    calculating and converting the updated state of the six axis motion sensor module to said resulting deviation comprising said resultant angles in said spatial pointer reference frame of the 3D pointing device.

And claim 10 of the '978 patent is representative of the two asserted method claims of the '978 patent:

10.  A method for compensating rotations of a 3D pointing device, comprising:
    generating an orientation output associated with an orientation of the 3D pointing device associated with three coordinate axes of a global reference frame associated with Earth;
    generating a first signal set comprising axial accelerations associated with movements and rotations of the 3D pointing device in the spatial reference frame;
    generating a second signal set associated with Earth's magnetism; generating the orientation output based on the first signal set, the second signal set and the rotation output or based on the first signal set and the second signal set;
    generating a rotation output associated with a rotation of the 3D pointing device associated with three coordinate axes of a spatial reference frame associated with the 3D pointing device; and
    using the orientation output and the rotation output to generate a transformed output associated with a fixed reference frame associated with a display device, wherein the orientation output and the rotation output is generated by a nine-axis motion sensor module; obtaining one or more resultant deviation including a plurality of deviation angles using a plurality of measured magnetisms Mx, My, Mz and a plurality of predicted magnetism Mx′, My′ and Mz′ for the second signal set.

Samsung contended that these claims are directed to a mathematical formula and thus patent-ineligible.  In doing so, Samsung attempted to analogize these claims to those in Parker v. Flook and Digitech, and to distinguish these claims to those in Thales Visionix.  In Flook, the Supreme Court found that claims for merely providing an equation into which selected temperature values were inserted were patent-ineligible.  In Digitech, the Federal Circuit found that claims "recit[ing] a process of taking two data sets and combining them into a single data set" were directed to an abstract idea and thus patent-ineligible.  And in Thales, the Federal Circuit found that the claims at issue, despite involving a mathematical equation, were "directed to systems and methods that use inertial sensors in a non-conventional manner to reduce errors in measuring the relative position and orientation of a moving object on a moving reference frame" and were thus patent-eligible.

Addressing step one of the Alice test, the Court began its analysis by opining on the importance and patentability of mathematical formulas:

Mathematical formulas, operations, or algorithms are at the heart of countless inventions; the application of mathematical principles has been the key to advancements in any number of fields.  Just considering fields akin to the orientation - sensing devices and methods at issue in this case, mathematical algorithms are at the heart of such inventions as driverless vehicles, drone navigation, and the remote orientation of satellites and scientific instrumentation in space.  The mathematical processes used in the operation of such devices have consequences in the physical world that make those devices precisely the kinds of inventions that the patent system was designed to protect and encourage.  Moreover, improvements in such devices are patentable even when the improvements in the devices are the product of improvements in the sophistication of the algorithms that drive the product's performance.  For example, autonomous emergency braking systems in automobiles have evolved through the use of more and more sophisticated algorithms, even when the brakes themselves and the sensors used to detect collisions may not have evolved significantly.  An improved system for autonomous emergency braking could hardly be deemed unpatentable if it used an algorithm that was more sophisticated than its predecessors, even though the mechanical components were themselves known in the art.

The Court also stressed that mathematical equations involved in claims should be viewed in conjunction with all other claim elements.

With this in mind, the Court found that the '438 patent and '978 patent claims "entail more than simply performing a calculation or organizing information through mathematical correlations, as in Flook and Digitech."  In particular, the Court highlighted the 3D pointing device and the computations performed by the processing/transmitting module based on the signal sets from the six-axis motion sensor module from the apparatus claims of the '438 patent, concluding that those claims are "directed to a particular device that performs a specific, useful function in the physical world" and "recite tangible, physical results from the receipt and assessment of information."  As for the method claims recited in both patents, the Court concluded that the claims "do not simply describe a mathematical calculation" and are rather "directed to a means of using the inputs from six-axis and nine-axis sensors to track the orientation status of the 3D pointing device and correct errors associated with conventional motion detectors."

Lastly, the Court specifically addressed Samsung's argument that, unlike the inertial sensors in Thales, the present claims involve sensors being used in a conventional manner and are thus patent-ineligible.  The Court refuted this argument, stating that the Thales Court did not view the unconventional use of the inertial sensors to be critical to the patentability of the subject matter.  Rather, the Court asserted that the Thales court viewed this unconventional use merely as "additional evidence that the claims were not directed to an abstraction in the form of a pure mathematical formula, but instead to a new and useful technique that simply relied heavily on an algorithm for its effectiveness."

Thus, the Court found the claims of both the '438 patent and the '978 patent to be patent-eligible.

CyWee Group Ltd. v. Samsung Electronics Co. (E.D. Tex. 2018)
Memorandum Opinion and Order by Circuit Judge Bryson