Patent Docs

ACLU (Predictably) Opposes Patent Subject Matter Eligibility Proposal

By Kevin E. Noonan --

It is perhaps not surprising that several medical groups, as well as other organizations with little regard for the patent system, and their legal accomplice, the American Civil Liberties Union, would oppose the recent efforts to amend the subject matter eligibility section of the statute (35 U.S.C. § 101) to correct the imbalances caused by recent U.S. Supreme Court jurisprudence on the matter.  After all, one of the pillars of the current standard for (in)eligibility was the Court's decision in AMP v. Myriad Genetics, championed by the ACLU beginning with the District Court case challenging "gene patenting" (an effort, not inconsequentially, that has taken the place of Nazis marching through the predominantly Jewish suburb of Skokie, IL in the group's fundraising efforts).  This opposition has taken the form of a letter to Senators Coons (D-DE) and Tillis (R-NC) as well as Representatives Collins, Johnson, and Stivers setting forth these groups' views.

Before getting into the substance of their allegations of the sky-falling effects of enactment of any revisions to the statutory status quo, two important realities need to be understood.  First, despite all the trumpeting and bally-hoo that ensued after the Supreme Court's Myriad decision was handed down, human genes remain patent-eligible.  Admittedly, the species of genes that can be patented has been limited, from genes isolated as they exist in the chromosome to a particular, processed form of the gene called "complementary DNA" or cDNA.  While this limitation can restrict the capacity for a small subset of human genes to be patented, the overwhelming majority of the ~30,000 genes present in the human genome remain patent eligible in the cDNA form.

The second important (overlooked) fact is that most human genes are not patentable.  The reason for the distinction is that patent-eligibility is a categorical criterion, while patentability depends on the circumstances of the invention in light of the prior art.  The genomic sequence of the totality of human genes (as well as the ~80% of the genome that does not encode proteins) has been publicly available since the turn of the 21st Century, due in large part to such luminaries as Sir John Shulston who were motivated precisely to prevent (or forestall or at least retard) patenting of human genes.  And for those human genes for which patent applications were filed at that time, the statutory limit of patent term as 20 years from filing ensures that there are very few such patents that have not expired (or been abandoned); Myriad's BRCA gene patents, for example, are almost all expired or will be in short order.

Thus, no matter what Congress may do, the historical fact is that the "gene age" is over and if there was ever a diminution of innovation, medical progress, or benefit to humanity occasioned by these patents, that time is truly past.

This is not to say that the Supreme Court's precedent has not made mischief with regard to patenting "natural products" (see "Sherry Knowles Addresses Real World Impact of Myriad-Mayo Guidance at BIO Symposium"); how the Court's Myriad precedent has been interpreted, by both the Patent Office and the lower courts is a source of concern that is blithely ignored by the ACLU and their clients.

Turning to the ACLU's letter, it is clear from the introductory sentence, stating that the signatories are "civil rights, medical, scientific, patient advocacy, and women's health organizations," that the ACLU turned its Rolodex to the groups it assembled for the Myriad case to once again raise an alarm over ephemeral consequences (and, sadly resulting in consequences these groups or at least their members would not have envisioned with approval; see "The ACLU, Working for the Man") that could result by enactment of the revisions suggested in the latest proposal.  The letter states that the proposed revisions to patent subject matter eligibility standards would "authorize patenting products and laws of nature, abstract ideas, and other general fields of knowledge" (they wouldn't, of course; they would just substitute per se, categorical standards to ones better suited to identifying that subject matter whose patenting would not "promote progress of the useful arts").

But the ACLU and friends have expanded the litany of their worries from the Myriad days -- the letter announces that they consider "[m]ost troubling[]" the prospect of "patenting of human genes and naturally-occurring associations between genes and diseases," which they claim "will prevent the discovery of novel treatments for diseases including cancer, muscular dystrophy, Alzheimer's disease, heart disease, and other rare and common diseases."  It would be understandable to think from this rhetoric that, before the Myriad decision no one ever discovered "novel treatments for diseases including cancer, muscular dystrophy, Alzheimer's disease, heart disease, and other rare and common diseases," when the truth of the matter is that, perhaps with the exception of Alzheimer's disease, the history of the past thirty years has been the discovery of treatments for such diseases, supported by the patent system to permit these treatments to come to market.  In addition, the letter claims, revising patent law as proposed would "create barriers to patients' access to potentially lifesaving genomic tests, eliminate access to confirmatory testing and dramatically increase the cost of tests that have benefited from innovation that led to reduced costs of DNA sequencing technology."  Sadly, of course, the true sequellae of the Myriad decision has been to permit corporate testing labs to expropriate the scientific advances which, as in Myriad, tend to come from academia and startup biotechnology companies; the even sadder reality is that access to medicine and diagnostic testing is thwarted by insufficient insurance coverage not patents.  Indeed, one of the reasons genetic diagnostic testing is (relatively) widely accepted (and reimbursed) is due to the success Myriad had in convincing skeptical insurance providers (public and private) in the late 1990's that something as frightening and serendipitous as cancer could be predicted with reliability at all (see "In Defense of Patenting").  And as for the letter's further allegation that the proposed revisions to statutory patent eligibility would "stymie competition for developing and improving diagnostic and medical tests, and increase the cost and hinder advancement of targeted therapeutics involving genomic markers" that would result in "higher costs for patients, payers, and the healthcare system overall," what will be stymied would be investment in such new technologies (except for those established businesses for whom innovation upsets their established channels of commerce and thus tend to avoid truly groundbreaking inventions).

The letter goes on to provide an encomium for recent patent eligibility jurisprudence, highlighting the signal victory for the ACLU in Myriad and particularly noting the unanimity of the Supreme Court's decisions (which paradoxically does not necessarily demonstrate their correctness, erudition, or deep and penetrating thought concerning the patent issues at bar).  More troubling is the unsupported allegations that follow, that these decisions "have created a legal foundation that is promoting innovation across numerous sectors."  (It is worth noting that the only support for the assertion that human gene patent ineligibility should lead to lower cost diagnostic tests cited in the letter is an article by a journalist, written the day the Supreme Court handed down its Myriad decision.  One would think that the experience, putatively represented by the co-signers of the letter, six years after the Myriad decision, would yield ample, real-world evidence of this speculation but it's nowhere to be found in the letter.)

In something of a factual (but not emotional or rhetorical) nonsequitur, the letter then recites the purported sins of Myriad, backed not by court findings but by allegations from an amicus brief from the American Medical Association and other medical groups.  (It is significant that plaintiffs and their ACLU counsel did not attempt to invalidate Myriad's patents for misuse or other misbehavior, but used allegations of misbehavior to drum up support for invalidating the patents on categorical grounds.)  Included in these allegations in the letter is the slander that "[t]he patents authorized Myriad to block all manner of scientific inquiry into the genes shutting down research at academic medical centers throughout the country," a statement belied by the more than 10,000 academic research papers that could be found in Medline and other databases having been published between 1997 (when the University of Utah or its licensee Myriad was granted the patents) and 2013 (when the Supreme Court invalidated a small subset of those patent claims).

This false litany leads to a reiteration of the ACLU's Myriad rhetoric:  that there is a "fundamental truth" that "genes and other naturally occurring matter and relationships should never be granted to anyone as intellectual property."  But the consequence of taking that "truth" to its logical extreme is that nothing in the natural world, no matter how changed by human intervention, could be patented.  It is nothing less than hubris (and like much hubris, arising from ignorance) to think that only that which arises solely without reliance on the natural world deserves patent protection.  And the further roll call of intellectual luminaries and medical, religious, and interest groups recited as supporting the Myriad decision just shows that excellence and achievement in one field does not lead to wisdom is another (see William Shockley and Peter Duesberg as illustrative examples).

As might have been expected, the ACLU's concern has been inflamed by language in the draft proposed legislation that the judicial exceptions (laws of nature, natural phenomena, and abstract ideas) and case law supporting them would be abrogated.  This tactic raises many more concerns that importuning the ACLU and its friends and supporters, the most worrisome of which being that the Supreme Court would, at best, decide that such abrogation was unconstitutional for being beyond the patenting powers granted to Congress in Article I and, at worst, give rise to even more stringent limitations on patent eligibility (no doubt applauded by the ACLU and their co-signers of this letter).  The reality is, of course, more measured and reasoned than that:  what is proposed is replacing the poorly defined, inconsistently applied, subjective, per se judicial (instead of statutory) "exceptions" with legislation, vetted through the political process and (with luck) capable of consistent, predictable application in ways that do not turn patenting into a lottery dependent on the whims of district court or appellate judges or, indeed, the Supreme Court.  (It is ironic that the letter casts the consequences of this legislation as creating uncertainty, when even the casual observer will find plainly evident that it has been the Supreme Court's recent decisions, and its unwillingness to revisit them, that has caused the greatest uncertainty that the legislation proposes to correct.)  The ACLU's letter castigates the proposed legislation for wiping out "one hundred and fifty years of case law" but of course that's the point; said more properly the legislation will remove the uncertainties created by this case law.

The letter ends with the disingenuous suggestion that "[t]o the extent that there are problems with the current application of the law that must be solved, narrower paths to addressing them are preferable to rewriting current 101 standards and overturning over a century of precedent." Not only does the letter contain no hint regarding what those "narrow paths" might be, it is unlikely that any such path would be acceptable to the ACLU and their supporters.

One thing is certain:  there are competing memes involved in the patent subject matter eligibility debate, and for the pro-patent proponents to prevail this time it will take more political savvy than was exhibited during the Myriad case.

Tangelo IP, LLC v. Tupperware Brands Corp. (D. Del. 2019)

By Donald Zuhn --

Last week, in Tangelo IP, LLC v. Tupperware Brands Corp., District Judge Richard G. Andrews of the U.S. District Court for the District of Delaware denied a motion for exceptional case filed by Defendant Tupperware Brands Corp., finding that Tupperware Brands had failed to establish that the case was exceptional under 35 U.S.C. § 285.  Plaintiff Tangelo IP, LLC had filed suit against Tupperware Brands, alleging infringement of U.S. Patent No. 8,429,005.  Tupperware Brands responded by filing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), arguing that the '005 patent was invalid under 35 U.S.C. § 101.  The District Court granted the motion, and Tupperware Brands then moved for a finding of exceptional case and requested attorneys' fees under § 285.

In determining that the case was not exceptional, the District Court noted that although it had found the '005 patent to be invalid under § 101, "that does not mean Plaintiff's contrary position was unreasonable."  In support, the Court cited SFA Sys., LLC v. Newegg Inc., 793 F.3d 1344, 1348 (Fed. Cir. 2015), for the proposition that "it is the substantive strength of the party's litigating position that is relevant to an exceptional case determination, not the correctness or eventual success of that position" (emphasis in opinion).

In response to Tupperware Brands' argument that Tangelo had "ignored substantial precedent dismissing analogous claims directed to concepts long-practiced in society," the Court noted that Tupperware Brands had "identifie[d] no precedent addressing claims analogous to those in the '005 patent, at least beyond the broad category of claims directed to 'concepts long-practiced in society.'"  Judge Andrews also noted that he had not identified any cases in which analogous claims had been found to be patent ineligible.

Judge Andrews concluded the opinion by distinguishing the instant case from his decision in Finnavations LLC v. Payoneer, Inc., 2019 WL 1236358 (D. Del. Mar. 18, 2019).  In Finnavations, Judge Andrews had granted motions for exceptional case and attorneys' fees based on claims that were "plainly directed at a patent ineligible concept," where there was "no question" that the patent at issue was invalid because the claims were analogous to those struck down in Alice.  Judge Andrews found the instant case to be "clearly a different situation," explaining that while he ultimately agreed with Tupperware Brands regarding the validity of the '005 patent, "there is room for argument."  Judge Andrews also pointed out that he was not aware of any precedent that leaves "no question" as to the validity of the '005 patent, "particularly in view of the somewhat opaque nature of § 101."  The Court therefore denied Tupperware Brands' motion for a finding of exceptional case.

Tangelo IP, LLC v. Tupperware Brands Corp. (D. Del. 2019)
Memorandum Order by District Judge Andrews

A Comparison of U.S. and Japanese Patent Subject Matter Eligibility

By James Korenchan, Michael Anderson, and Yukio Oishi --

Patent practitioners who focus their practice in the high-tech sector have most likely encountered Japanese patent law in one form or another.  More often than not, companies at the forefront of technological advancement make, use, and sell products in Japan, or have competitors who do the same.  This alone can make Japan an attractive place for obtaining patent protection in high-tech fields.  Additionally, Japan is often viewed as having a very pro-patent (and thus, pro-patentee) court system, especially over the last ten or more years.  In April of 2015, the Japan Patent Office (JPO) implemented a new opposition system to invalidate patents as part of the Japanese Patent Act of 2014.^[1]  This new system has greatly reduced the number of patents found invalid.  For instance, between 2008 and 2017 the number of Requests for Trial for Invalidation in Japan fell by 40%.^[2]  Moreover, between 2008 and 2017 the percentage of patents found to be invalid fell from 59% to 21%.^[3]

Despite a growing interest in pursuing Japanese patent protection, many U.S. practitioners have a limited understanding of Japanese patent law and limited interactions with Japanese firms.  While having an extensive knowledge of Japanese patent law is not always necessary for U.S. practitioners to provide sound legal counsel, an appreciation of the differences between U.S. and Japanese patent prosecution can improve the quality of representation that practitioners provide.  Of the various patent prosecution issues faced in the high-tech space, subject matter eligibility is a common hurdle.  Thus, the focus of this article is the differences in subject matter eligibility analysis in the U.S. and Japan as it pertains to high-tech patent applications, particularly for computer-implemented inventions involving software or business methods.

By now, U.S. practitioners are all-too-familiar with the two-part Alice Corp. test for determining the patent eligibility of claims under 35 U.S.C. § 101.  In part one of this test, one must first determine whether the claimed subject matter as a whole is directed to a judicial exception.  Further, under Alice Corp. and its progeny, the judicial exception that high-tech claims typically face is whether the claims recite an "abstract idea."  If the claim is found to be directed to something other than a judicial exception, then the claim is patent-eligible.  But if the claim is found to be directed to a judicial exception, then part two of the test is applied.  In part two of the test, one must determine whether any element or combination of elements in the claim is sufficient to ensure that the claim recites "significantly more" than the judicial exception.

To call the recent history of patent eligibility in the U.S. tumultuous might be an understatement.  The U.S. Patent and Trademark Office (USPTO) and the courts have wrestled for years over how to guide examination of claims under § 101.  Court cases -- particularly, those from the Federal Circuit -- have provided differently-nuanced interpretations as to what constitutes an abstract idea and what elevates a claim to the realm of "significantly more."  The USPTO typically then follows suit by periodically updating its subject matter eligibility guidance.  However, in practice, the manner in which examiners apply the case law of the courts and the guidance issued by the USPTO can be a mixed bag, often to the chagrin of practitioners.

Under the most recent subject matter eligibility guidance issued by the USPTO on January 7, 2019, the USPTO attempted to clarify part two of the Alice Corp. test.^[4] According to the guidance, "a claim is not 'directed to' a judicial exception if the judicial exception is integrated into a practical application of that exception."  Thus, the guidance provides clarification to the previous test on step two of the Alice Corp. test as to what constitutes "significantly more" than the judicial exception.

The new guidance is based in part on the Federal Circuit decisions in BASCOM Glob. Internet Servs., Inc. v. AT&T Mobility LLC ^[5] and Arrhythmia Research Tech., Inc. v. Corazonix Corp.^[6]  In BASCOM, the Court concluded "that claims could be eligible if ordered combination of limitations 'transform the abstract idea . . . into a particular, practical application of that abstract idea.'"[7]  Additionally, in Arrhythmia, the claims were found patent eligible because "inventions that were implemented by the mathematically-directed performance of computers were viewed in the context of the practical application to which the computer-generated data were put."[8]

In practice, the new guidance is a powerful tool for patent practitioners.  For example, before the guidance, many software-based patent applications were faced with arguing there was "significantly more" than algorithms and computer hardware in the claims.  However, the new guidance obviates the previously opaque requirements.  Now, rather than advocate for "significantly more," practitioners can argue that their claim is a practical application of something that could be a judicial exception.  One manner to do this can be to argue that additional elements in the claims improve the functioning of a computer or provide an improvement to other technological areas.  Notably, the new guidance also does not involve a consideration as to whether such additional elements are merely conventional.  Thus, a claim with conventional elements can still be patent eligible as long as it integrates a judicial exception into a practical application.

While the new USPTO guidance attempts to bring some clarity and consistency to patent eligibility, the interplay between the courts and the patent office remains uncertain.  Thankfully for patentees seeking protection in Japan, the bar for patent eligibility appears to be lower and more clearly defined.  In contrast to the U.S., the hurdle for patent eligibility in Japan is lower.  For example, in Japan, an examiner must determine whether a claimed invention as a whole involves the "creation of a technical idea utilizing the laws of nature."^[9]  But similar to the U.S., examples of inventions typically deemed patent ineligible under this Japanese standard include those that are directed to economic laws, rules for playing a game, mental activities, mathematical formulas, or the mere presentation of information (e.g., image data taken with a digital camera).^[10]

When claims are deemed "software-related," the determination takes a slightly different form and involves a two-part inquiry.^[11]  First, the examiner evaluates the claimed invention from a non-software focused standpoint.  In other words, the patent eligibility of a software-related invention evaluated using this standpoint should not rest on the fact that the invention involves software.  Thus, the examiner first determines whether the invention stands on its own, and is patent eligible notwithstanding the software aspect.  But if the examiner is unable to make this first determination, the examiner then evaluates the invention with a heavier emphasis on the software aspects of the claim.

From a non-software focused standpoint, a software-related invention is likely to be found to be patent-eligible when it involves (i) "concretely performing control of an apparatus (e.g., an engine, a washing machine, a disk drive), or processing with respect to the control" or (ii) concretely performing information processing based on the technical properties of an object (e.g., physical, chemical, or electrical properties).^[12]  Interestingly, even claims that involve "software for causing a computer to execute a procedure of a method," or "a computer or system for executing such a procedure" are often found to be patent eligible in Japan without further inquiry.^[13]

From a software-focused standpoint, a software-related invention is likely to be found to be patent-eligible when "information processing by the software is concretely realized by using hardware resources."^[14] In other words, the cooperation of software and hardware resources can elevate a claim to a level of patent eligibility.  Examples of hardware resources include various "physical device[s] or physical element[s]" that are "used in processing, operation, or implementation of a function," such as a computer, CPU, memory, input device, output device, or a physical device connected to a computer.^[15]

The Japanese software-focused standard for patent eligibility is particularly notable for several reasons.  For one, it is in stark contrast with U.S. standards, in which merely implementing a process using software and hardware is almost always insufficient for patent eligibility.  Additionally, the lower hurdle before the JPO is undoubtedly a contributing factor to the higher level of allowed software-related claims and business method claims in Japan compared to that in the U.S.

For software-related claims, the Japanese standard as a whole, and particularly the software-focused standard, allows for a certain type of patent protection in Japan that is not currently available in the U.S.: program claims.  A "program claim" is distinct from a computer readable medium (CRM) claim and was introduced into Japan Patent Law in 2002 to address the issue that a CRM claim does not cover a situation where a software program is provided to a user, not by a CRM such as a CD-ROM, but rather by the user downloading the software program over a network.^[16]  In the JPO examination handbook, the JPO provides the following example forms that program claims can take, which U.S. practitioners will certainly note as being quite different from the scope of what is patent eligible in the U.S.^[17]

    Example 1: A program for causing a computer to execute a step A, a step B, a step C, …

    Example 2: A program for causing a computer to function as means A, means B, means C, …

    Example 3: A program for causing a computer to implement a function A, a function B, a function C, ...

Because program claims do not require an apparatus that stores the software code, program claims provide patent protection in an area that CRM claims do not, and are thus useful for at least that reason.

There are other types of claims that fall under the JPO's definition of a "program" and are often found to be patentable using the software-focused standard.  One example is a "trained model," such as "[a] trained model for causing a computer to function to output quantified values of reputations of accommodations based on text data on reputations of accommodations," where the model comprises multiple neural networks.^[18] Another example is a "data structure," such as "[a] data structure of dialogue scenarios utilized in a voice interactive system."  These types of claims can be more difficult to obtain in the U.S.^[19]

As for business method claims, between 2012 and 2017 in the U.S., the allowance rate for business method claims was 32.4% in 2013, dropped to 6.2% by 2016, and rose to 12.7% in 2017.^[20]  Over the same period of time in Japan, however, the allowance rate for such claims was consistently near 70%.^[21] The high allowance rate in Japan can be attributed to the low hurdle for software.  In particular, while business methods are not patent eligible on their own, software for implementing such methods are patent eligible as long as they meet the aforementioned requirements.  For example, claim 1 of Japanese Patent No. 5492261 is directed to "a system for determining executability of a loan transaction" and is recited as follows:

1.  A system for determining executability of a loan transaction comprising:
    means for receiving a loan application telegraphic message including an identifier of a loan application client, a loan execution date and a loan application amount from a terminal device;
    means for storing, for the loan application client, a loan limit amount, a total amount of loan balance and a future loan execution amount that has been scheduled to be loaned during a period of time up to the loan execution date; and
    means for determining that a loan transaction for the loan application telegraphic message is executable if a first total amount of the loan application amount, the total amount of loan balance and the future loan execution amount is less than or equal to the loan limit amount.

The key feature of this claim is not the presence of "a terminal device" (which is arguably the only concrete recitation of hardware in the claim) or another technical aspect, but rather a business process.  However, based on the JPO Examination Handbook, it would be clear to a person skilled in the art that, considering the claim as a whole, the underlying business process is "implemented by concrete means or procedures on which the software and hardware resources that a 'computer' usually comprises, such as a CPU, memory, storage means, input and output means, etc. cooperate."^[22]  Here, a "means for determining" implies a CPU, a "means for storing" implies memory, and a "means for receiving" implies an input or output means.  The business process is concretely realized by using hardware resources and is thus patentable.

A clear understanding of Japanese patent law in the areas of software and business methods can help practitioners avoid missteps and better represent companies who have or seek to have patent protection in Japan.  For example, even when U.S. patentees pursue software-related claims in Japan, they often attempt to do so with CRM-style claims and do not consider whether they should file program claims.  In fact, due to how unfavorably U.S. patent law is on business methods, and how risky U.S. patent law can be on software claims, U.S. patentees often forego pursuing patent protection in these areas altogether.  Thus, U.S. practitioners and patent applicants alike should be aware of all the particular advantages of Japanese patent law in these areas and reach out to a Japanese associate if any other advice is needed.  After all, it could be worthwhile for both parties.

^[1] Outline of the Partial Revision of the Patent Act, etc., Japan Patent Office (May 19, 2014), available at https://www.jpo.go.jp/e/system/laws/rule/hokaisei/document/tokkyohoutou_kaiei_2605 14/outline.pdf.

^[2] JPO Status Report 2019, Japan Patent Office, at 36 (March 2019), available at https://www.jpo.go.jp/e/resources/report/statusreport/2019/document/index/all.pdf.  

^[3] Overview of Trial for Invalidation and Opposition Systems in Japan, JPO Trial and Appeal Department at 6 (March 2017), http://www.ptabbar.org/wp-content/uploads/2018/03/Pre-Conference-Session-Comparing-the-PTAB-to-Other-Forums-Around-the-World-FINAL.pdf.  

^[4] 2019 Revised Patent Subject Matter Eligibility Guidance, Federal Register, 84 Fed. Reg 50 (Jan. 7, 2019).

^[5] 827 F.3d 1341, 1352 (Fed. Cir. 2016).

^[6] 958 F.2d 1053, 1056-57 (Fed. Cir. 1992).

[7] BASCOM Glob. Internet Servs., 827 F.3d at 1352.

[8] Arrhythmia Research Tech, 958 F.2d at 1057.

^[9] Examination Handbook for Patent and Utility Model in Japan, Japan Patent Office, Annex B, Chapter 1, Computer Software-Related Inventions, Section 2.1 and 2.1.1, available at https://www.jpo.go.jp/e/system/laws/rule/guideline/patent/handbook_shinsa/document/index/app_b1_e.pdf

^[10] Id.

^[11] Id. at Section 2.1.1.

^[12] Id. at Section 2.1.1.1.

^[13] Id.

^[14] Id. at Section 2.1.1.2.

^[15] Id.

^[16] News Release, JPO (April 2002)

https://www.jpo.go.jp/system/laws/rule/hokaisei/tokkyo/houkaisei_h140417/houkaisei_gaiyou.html.

^[17] Examination Handbook for Patent and Utility Model in Japan, Japan Patent Office, Annex B, Chapter 1, Computer Software-Related Inventions, Section 1.2.1.1.

^[18] Id. at Section 3, Case 2-14; see also Section 1.2.1.1.

^[19] Id. at Section 3, Case 2-13.

^[20] Business Methods Allowance Rate, USPTO, https://www.uspto.gov/patents-getting-started/patent-basics/types-patent-applications/utility-patent/business-methods-27 (last visited May 23, 2019).

^[21] See Nobuyuki Taniguchi, Recent Developments on Software-related Patents in Japan, Nakamura & Partners (Aug. 18, 2017), http://www.nakapat.gr.jp/en/legal_updates_eng/recent-developments-on-software-related-patents-in-japan/; Yukio Oishi, Protecting Fintech Business by Obtaining Patent Protection in Japan, Japan Patent and Trademark Update, TMI Associates (November 2017), available at https://www.tmi.gr.jp/wp-content/uploads/2017/11/jptu_issue_8.pdf.

^[22] See, e.g., Examination Handbook for Patent and Utility Model in Japan, Japan Patent Office, Annex B, Chapter 1, Computer Software-Related Inventions, Section 2.1.1.2, Example 4.

Hyper Search LLC v. Facebook Inc. (D. Del. 2018)

By Michael Borella --

In October 2017, Hyper Search brought a patent infringement action against Facebook in the District of Delaware, asserting U.S. Patent Nos. 6,085,219, 6,271,840, and 6,792,412.  Facebook sought to dismiss the complaint under Rule 12(b)(6), alleging that all asserted claims were invalid under 35 U.S.C. § 101.  While all three patents suffered a similar fate, the '412 patent and the Court's reasoning regarding this patent is of particular interest because the claims thereof specifically address machine learning.

Machine learning is a subset of artificial intelligence in which a data set -- usually a large one -- is used to train a computational model.  This model is then applied to new instances of data to provide a result in line with the training.  In this fashion, software can be used to classify and/or predict outcomes often with greater accuracy than can be expected from human performance or programs developed in a more traditional manner.  Notably, the exact algorithm and rules used by the model are not explicitly provided by the programmer -- instead, the process of training the model develops these rules from the training data.  Machine learning has been applied with success to various technological fields, such as speech recognition, image classification, supply chain management, drug efficacy, genetic similarity, and information technology services, just to name a few.

The patent eligibility of artificial intelligence, machine learning in particular, is an open issue.  There have been no substantive Supreme Court or Federal Circuit § 101 cases to date, and just a handful in the district courts.  But this handful has not been representative of how machine learning claims are now drafted (or should be drafted), and the machine learning content therein was often tangentially related to the actual claim language.  Thus, any proceeding that can provide insight on the nuances of how machine learning inventions are being viewed by the courts is potentially helpful.

Why is patent-eligibility an issue for machine learning inventions?  This is because the validity of software patents as a whole has been subject to an additional layer of scrutiny for the last five years.

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.

Considering machine learning from one viewpoint, it is no more than abstract mathematics enabled by generic computing devices and applied to data; therefore, it is inherently ineligible under § 101.  From the other end of the spectrum, machine learning can be thought of as solving complex problems by creating new algorithms that in practice can only be used by computers; thus, it is inherently technical.  Most uses of machine learning lie between these two extremes.  Applying a vanilla model to any data -- even new data -- is probably not eligible and may even be obvious as well.  On the other hand, most practical uses of machine learning require at least some innovative model design, training techniques, data preparation, mapping of the prepared data to the model, and post-processing of model output.  Any of one or more of these latter mechanisms may be enough to lift a claim over the § 101 hurdle.

In any event, claim language and the problem being solved matters in the § 101 inquiry, as Hyper Search found out the hard way.  Claim 1 of the '412 patent recites:

A system for controlling information output based on user feedback about the information comprising:
    a plurality of information sources providing information;
    at least one neural network module that selects one or more of a plurality of objects to receive information from the plurality of information sources based at least in part on a plurality of inputs and a plurality of weight values;
    at least one server, associated with the neural network module, that provides one or more of the objects to one or more recipients;
    the recipients enabling for one or more users to generate feedback about the information; and
    wherein the neural network module generates a rating value for a plurality of the objects at the end of an epoch, redetermines the weight values using the rating values, and selects which objects to receive information during a subsequent epoch using the redetermined weight values and the inputs for that subsequent epoch.

In a nutshell, the invention uses a neural network (which is a type of machine learning model) to determine how to provide information from particular sources to particular output objects.  The neural network periodically re-evaluates the weights based on ratings from the objects.

Facebook contended that this claim "is directed to the abstract idea of providing information based on feedback from recipients."  Hyper Search countered that its invention is "an improvement in computer capability because the system controls information output based on user feedback about the information itself" and "that this is a specific process that is new, performed by a computer, iterative, and adaptive."

The Court appeared to adopt Facebook's interpretation of the claim, finding that "[c]laims directed to providing information based on feedback have previously been held patent-ineligible by this court" due to their being abstract.  The Court further asserted that the "claims of the '412 patent implement a generic computer system to obtain functional results of providing information based on feedback from recipients" and that "Hyper Search does not show how the system of claim 1 is an improvement in computer capability."  The Court further criticized the breadth and vagueness of the asserted claims, stating that this "sets the [them] apart from the claim language deemed sufficient to establish patent eligibility in the Federal Circuit's recent decisions, such as [Enfish v. Microsoft]."

Finding claim 1 abstract, the Court moved on to the second part of the Alice test.  The Court noted that the claim "recites generic computer functionality such as a 'neural network module' and a 'server.'"  Hyper Search's specification worked against it, as "[t]he specification states that neural networks were well-known in the art, and the inventors stated that the alleged invention is not limited to neural networks but rather to 'any artificial intelligence agent.'"

Hyper Search attempted to rely on BASCOM Glob. Internet Servs., Inc. v. AT&T Mobility LLC to establish that its claimed arrangement of elements provides a technical improvement.  But the Court was not convinced since "Hyper Search does not identify any such example in the specifications in the patents-in-suit, and does not show how any of the prior elements are particularly arranged in the claimed inventions such that they improve the performance of the computer itself."  Further, "Hyper Search does not identify any concrete improvements to specific computer functionality or solutions rooted in problems that only existed on computers, but instead generally asserts that each of the asserted claims is directed to solving a computer-related problem."

Consequently, the Court concluded that the asserted claims were invalid under § 101 and that the case should be dismissed.

Not unlike previous cases where the patent-eligibility of machine learning inventions was considered, the patentee here was hobbled by overly broad and non-specific claims that did not focus on exactly how the model operated or was trained.  Additionally, there was no particular detail in the claim of how this model's input or output was processed.  As a result, the facts of this case are so skewed against finding the claims eligible that it is a not a great data point.  Thus, it would be a mistake to conclude that the outcome here does anything more than reiterate that generic claims with sweeping language are likely to have difficulties under § 101.

Ways to avoid or at least mitigate patent-eligibility challenges for machine learning inventions have been discussed previously and still apply.  Until a claim written in accordance with these techniques is subject of a § 101 challenge, the eligibility landscape of machine learning inventions will remain largely unmapped.

Finnavations LLC v. Payoneer, Inc. (D. Del. 2019)

Court Grants Exceptional Case/Attorney Fees When Software Patent Has Invalid Claims under § 101

By Joseph Herndon --

In the U.S. District Court for the District of Delaware, motions for an exceptional case and attorneys' fees were granted on the basis that the patent owner brought suit with a software patent having claims so "ugly" that they had no chance to survive a challenge under 35 U.S.C. § 101.  The case is Finnavations LLC v. Payoneer, Inc. and Finnavations LLC v. Stitch Labs, Inc.  Here, Defendant Payoneer Inc. filed a Motion for Exceptional Case and Defendant Stitch Labs, Inc. filed a Motion for Attorneys' Fees after prevailing in the action by invalidating the asserted patent under § 101.  The District Court granted each of these motions and offered some strong opinions on the invalidity of the patent.  However, it's difficult to see, based on current standards, how the patent claim is as "ugly" as the Court stated.

Background

Plaintiff sued Defendants on March 23, 2018, alleging infringement of U.S. Patent No. 9,569,755 ('755 Patent).  Defendants filed Motions to Dismiss for Failure to State a Claim based on patent ineligibility of the '755 Patent under 35 U.S.C. § 101.  The Court granted the motions, and specifically found that the '755 Patent was directed to the patent ineligible abstract idea of bookkeeping and did not contain an inventive concept.

The '755 Patent

The '755 Patent is directed to a "Financial Managment System," and is described as a system designed to facilitate the record keeping associated with online transactions to increase the amount of transaction data relating to an online purchase of goods or services that is retained by a personal financial management system.

Claim 1 recites:

1.  A method for transferring payment information to a personal financial management program comprising:
    invoking a financial assistant operating on a network device upon a determination of a transmission of transaction data to a commercial web server configured to conduct online financial transactions;
    intercepting, by the financial assistant on the network device, the transaction data in a first data structure comprising a plurality of components of transaction data, the first data structure compatible with conducting an online transaction with the commercial web server;
    copying, by the financial assistant on the network device, each component of the transaction data into a second data structure compatible with the personal financial management program, wherein the second data structure differs from the first data structure;
    entering, by the financial assistant on the network device, additional transaction data not included in the transmitted transaction data into the second data structure including at least one of a category and remarks; and
    transmitting, by the network device, the copied transaction data and the additional transaction data to the personal financial management program.

Analysis

The Patent Act provides that "in exceptional cases [the court] may award reasonable attorney fees to the prevailing party."  35 U.S.C. § 285.  Under the statute, there are two basic requirements:  (1) that the case is "exceptional," and (2) that the party seeking fees is a "prevailing party."

The Supreme Court defines an "exceptional" case as "simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated."  Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 1756 (2014).

Here, the Defendants are prevailing parties.  Thus, the only issue is whether the cases are exceptional.

The Court had a strong opinion that there was "no question" that the '755 Patent is patent ineligible under the Federal Circuit's current precedent.  Even though the Court noted that since Alice, the law of patent eligibility has perhaps become unpredictable and unclear, the Court stated that patents that look like those at issue in Alice are ineligible.  The Court issued further strong statements, declaring that "I have rarely been more confident in the patent ineligibility of a set of claims or more confident in the unreasonableness of a Plaintiff's decision to sue on a patent."  It seems that the Court easily found this case to be "one that stands out from others" with regard to the substantive weakness of Plaintiff's litigation position.

Even though the Examiner allowed the '755 Patent despite four separate § 101 rejections, the Court still found that the USPTO's decision to grant the patent does not relieve the patent holder from making an independent evaluation of the strength of the patent prior to suing.  The Court stated that the "issuance of a patent cannot and should not be a license to sue with abandon."  The Court further noted that patent examiners are non-lawyers, and an Examiner's opinion on the legal question of patent eligibility does not relieve a patent attorney from his or her obligation to make an independent assessment based on an evaluation of the relevant law.

The Court issued yet another strong opinion:

I have resolved scores of Section 101 motions and seen a wide array of validity arguments.  Usually the quality of an argument falls somewhere between good and mediocre.  Infrequently, I have encountered arguments which I would classify as bad.  Plaintiff's defense of the validity of the '755 Patent was not just mediocre or bad; it was ugly.

Plaintiff argued that the law is unclear and that it made reasonable arguments in response to Defendants' motions.  But the Court disagreed and found that the claims of the '755 Patent are plainly directed at a patent ineligible concept and amount to no more than the underlying idea, and further that "[a]ny reasonable patent attorney with an understanding of Section 101 law could have predicted the outcome."

Thus, the Court found that Plaintiff should not have filed suit, asserting "the clearly patent ineligible claims of the '755 Patent."  The Court found that this decision was unreasonable under the law and Plaintiff's behavior should be deterred.  Thus, the Court granted Defendant Payoneer's Motion for Exceptional Case and Defendant Stitch Labs' Motion for Attorneys' Fees.

Commentary

At times, I believe I am a reasonable patent attorney with an understanding of § 101 law, and perhaps I could have predicted that the claims of the '755 Patent would face § 101 challenges, BUT, the claims at issue in this case are far from "ugly," and in view of the prosecution history, it would have been reasonable to consider the claims valid on their face.

The District Court made much of the claims looking like those at issue in Alice, which, if true, then of course they should be found invalid under § 101.  But the representative claim in Alice, shown below, appears far different, in my opinion, from the claims of the '755 Patent:

(Alice claim)   A method of exchanging obligations as between parties, each party holding a credit record and a debit record with an exchange institution, the credit records and debit records for exchange of predetermined obligations, the method comprising the steps of:
    (a) creating a shadow credit record and a shadow debit record for each stakeholder party to be held independently by a supervisory institution from the exchange institutions;
    (b) obtaining from each exchange institution a start-of-day balance for each shadow credit record and shadow debit record;
    (c) for every transaction resulting in an exchange obligation, the supervisory institution adjusting each respective party's shadow credit record or shadow debit record, allowing only these transactions that do not result in the value of the shadow debit record being less than the value of the shadow credit record at any time, each said adjustment taking place in chronological order, and
    (d) at the end-of-day, the supervisory institution instructing one of the exchange institutions to exchange credits or debits to the credit record and debit record of the respective parties in accordance with the adjustments of the said permitted transactions, the credits and debits being irrevocable, time invariant obligations placed on the exchange institutions.

In particular, the claims of the '755 Patent are grounded in computer technology, and include exchange of data between network components.  This is not to say that the claim at issue in this case should survive a § 101 challenge, as the '755 Patent appears to be void of description to support a factual analysis that the invention solves a technical problem with a technical solution.  However, the patent owner would appear to be on sufficiently solid ground asserting this patent, as the claims were heavily tested during prosecution, and the USPTO issued the patent after a long examination process.  Since the claims at issue in this case differ from Alice in this way, the granting of motions for an exceptional case by the District Court are hard to accept.

Finnavations LLC v. Payoneer, Inc. (D. Del. 2019)
Memorandum by District Judge Andrews

Bio-Rad Laboratories, Inc. v. 10X Genomics, Inc. (D. Del. 2019)

By Donald Zuhn --

Last month, in Bio-Rad Laboratories, Inc. v. 10X Genomics, Inc., District Judge Richard G. Andrews of the U.S. District Court for the District of Delaware denied a motion to dismiss and/or strike filed by Defendant 10X Genomics, finding that U.S. Patent Nos. 9,562,837 and 9,896,722 were not directed to patent-ineligible subject matter under 35 U.S.C. § 101.  The '837 and '722 patents, which are assigned to Plaintiff Bio-Rad Laboratories, are directed to assemblies and methods for handling samples in a way that reduces sample contamination and sample loss.  Asserted claim 1 of the '837 patent recites:

1.  An assembly, the assembly comprising:
    a microchannel in a horizontal plane;
    at least one droplet formation module comprising a sample inlet, an immiscible fluid inlet, and a junction, wherein the junction is located between the sample inlet and the microchannel and the droplet formation module is configured to produce droplets comprising the sample surrounded by the immiscible fluid; and
    at least one downstream separation chamber comprising a droplet receiving chamber inlet and at least one droplet receiving outlet, wherein the separation chamber is upright to the microchannel and out of the horizontal plane;
    wherein the droplet formation module and the separation chamber are in fluid communication with each other via the microchannel; and wherein the separation chamber has a wider cross-section than the microchannel cross-section to accumulate a plurality of droplets comprising the sample and is of a volume sufficient to separate the plurality of droplets comprising the sample from the immiscible fluid within the separation chamber.

Asserted claim 1 of the '722 patent recites:

1.  A method of reducing contamination associated with sample handling, comprising:
    providing an aqueous fluid comprising a sample through a sample inlet;
    providing an immiscible fluid flowing through a main channel that is in fluidic communication with the sample inlet, wherein the main channel is in a horizontal plane;
    partitioning the aqueous fluid with the immiscible fluid to form a plurality of droplets in the main channel, wherein at least one droplet comprises a sample;
    flowing the droplets toward a downstream separation chamber that is in fluidic communication with the main channel,
    wherein the separation chamber has a wider cross-section than the main channel cross-section and the separation chamber is disposed perpendicular to the main channel; and
    separating the plurality of droplets from the immiscible fluid in the separation chamber based on the different densities of the droplets and the immiscible fluid.

Bio-Rad initiated the dispute between the parties by filing a complaint against 10X Genomics for infringement of claim 1 of the '837 patent and claim 1 of the '722 patent.  10X Genomics responded by filing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for lack of patent eligibility under 35 U.S.C. § 101, or in the alternative, to dismiss and/or strike under Rules 12(b)(6) and/or 12(f) for failure to state a claim of induced, contributory, or willful infringement.

With respect to patent eligibility, Judge Andrews noted that the framework laid out in Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66 (2012), "for distinguishing patents that claim laws of nature, natural phenomena, and abstract ideas from those that claim patent-eligible applications of those concepts" was reaffirmed by the Supreme Court in Alice Corp. Pty. v. CLS Bank Int'l, 573 U.S. 208 (2014).  In describing that framework, Judge Andrews explained that:

First, the court must determine whether the claims are drawn to a patent-ineligible concept.  If the answer is yes, the court must look to "the elements of the claim both individually and as an 'ordered combination"' to see if there is an '"inventive concept'––i.e., an element or combination of elements that is 'sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself."' [citations omitted]

With respect to its motion to dismiss for lack of patent eligibility, 10X Genomics argued that the asserted patents are directed to "the natural phenomenon of allowing two different liquids of different densities to separate from each other."  Bio-Rad responded that the asserted patents are directed to the patent-eligible result of a method and apparatus to reduce sample contamination when handling samples.

Applying the Mayo/Alice framework to the asserted patents, Judge Andrews agreed with Bio-Rad, finding that "[t]he Asserted Patents claim methods and an assembly designed to reduce contamination when handling samples," and that 10X Genomics' argument that the claims are directed to the natural phenomenon of allowing two different liquids of different densities to separate from each other "improperly oversimplifies the claims by reducing them to a single claim element."  Judge Andrews explained that "[w]hile the claims certainly utilize the separation of liquids with different densities to effect the desired outcome, this is insufficient to determine that the claims are wholly directed to a patent ineligible concept," adding that "here, '[t]he end result of the [] claims is not simply an observation or detection of the ability' of liquids to separate by density" (quoting Rapid Lit. Mgmt. Ltd. v. CellzDirect, Inc., 827 F.3d 1042, 1048 (Fed. Cir. 2016)).  Judge Andrews noted that "[t]he Federal Circuit has continued to endorse this distinction in recent cases" citing as examples the Federal Circuit's decisions in Athena Diagnostics, Inc. v. Mayo Collaborative Servs., LLC and Endo Pharms., Inc. v. Teva Pharms. USA, Inc. Finding that the recited steps and assembly of the asserted claims achieve an improved way of handling samples that reduces the sample contamination that would otherwise occur, Judge Andrews determined that the asserted patents are not directed to patent-ineligible subject matter under 35 U.S.C. § 101.

Judge Andrews also denied 10X Genomics' motion to dismiss and/or strike portions of Bio-Rad's prayer for relief, finding that "Plaintiff's complaint merely preserves a broad range of potential remedies by requesting relief that could be granted, depending on the facts as ultimately proven."  Judge Andrews therefore denied 10X Genomics' motion to dismiss and/or strike.

Bio-Rad Laboratories, Inc. v. 10X Genomics, Inc. (D. Del. 2019)
Memorandum Order by District Judge Andrews

United Cannabis Corp. v. Pure Hemp Collective Inc. (D. Colo. 2019)

By Donald Zuhn --

Last week, in United Cannabis Corp. v. Pure Hemp Collective Inc., District Judge William J. Martinez of the U.S. District Court for the District of Colorado issued an order denying a motion for partial summary judgment filed by Defendant Pure Hemp Collective Inc., finding that Pure Hemp was not entitled to summary judgment on the record.  Pure Hemp had filed an Early Motion for Partial Summary Judgement, arguing that the asserted claims of U.S. Patent No. 9,730,911, which is owned by United Cannabis Corp. ("UCANN"), were invalid under 35 U.S.C. § 101 (claims 10, 12, 14, 20–22, 25, 27, 28, 31, and 33 of the '911 patent) or 35 U.S.C. § 112(e) (claim 31).

UCANN had initiated the dispute between the parties by filing a complaint against Pure Hemp for infringement of claims 10, 12, 14, 20–22, 25, 27, 28, 31, and 33 of the '911 patent.  Pure Hemp responded by filing its motion for partial summary judgment, contending that all of the asserted claims were invalid.

The '911 patent, which is entitled "Cannabis extracts and methods of preparing and using same," is directed to liquid cannabinoid formulations.  Claims 10, 20, and 25 (the independent claims asserted in UCANN's complaint) recite:

10.  A liquid cannabinoid formulation, wherein at least 95% of the total cannabinoids is cannabidiol (CBD).

20.  A liquid cannabinoid formulation, wherein at least 95% of the total cannabinoids are THC [tetrahydrocannabinol] and CBD.

25.  A liquid cannabinoid formulation, wherein at least 95% of the total cannabinoids are CBD, cannabinol (CBN) and THC.

Asserted claim 31 also recites:

31.  The formulation of any one of the proceeding claims, wherein the formulation is infused in a medium chain triglyceride (MCT).

Judge Martinez began his Order by describing the two-part patent eligibility inquiry set forth by the Supreme Court in Alice Corp. Pty. v. CLS Bank Int'l, 573 U.S. 208, 216 (2014):

"[D]istinguishing patents that claim laws of nature, natural phenomena, and abstract ideas from those that claim patent-eligible applications of those concepts" first requires a court to "determine whether the claims at issue are directed to one of those patent-ineligible concepts."  Id. at 217.  If the answer is no, the inquiry ends; but if the answer is yes, a court must then determine whether the claims in question nonetheless offer "an inventive concept—i.e., an element or combination of elements that is sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the ineligible concept itself."  Id. at 217–18 (internal quotation marks omitted; alterations incorporated).

Judge Martinez then "summarize[ed] certain Supreme Court and Federal Circuit decisions in which those courts have examined questions of patentability in roughly similar contexts," including Funk Brothers Seed Co. v. Kalo Inoculant Co., 333 U.S. 127 (1948); Diamond v. Chakrabarty, 447 U.S. 303 (1980); Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. 66 (2012); and Ariosa Diagnostics, Inc. v. Sequenom, Inc., 788 F.3d 1371 (Fed. Cir. 2015).  After providing summaries of the above cases, Judge Martinez offered his comments on the Alice test, stating that:

[T]he proper application of the Supreme Court's Alice standard is an evolving and sometimes hazy area of law.  Deciding whether a patent claim is "directed to" a law of nature is not as straightforward as the Supreme Court makes it sound in Alice itself.  Moreover, the Federal Circuit itself has remarked on the difficulty, at times, of distinguishing the first Alice inquiry from the second, see, e.g., Elec. Power Grp., LLC v. Alstom S.A., 830 F.3d 1350, 1353 (Fed. Cir. 2016); or distinguishing the two Alice inquiries (comprising a patentability analysis rooted in 35 U.S.C. § 101) from other common inquiries such as anticipation and obviousness (which are rooted in 35 U.S.C. §§ 102–03), see, e.g., Rapid Litig. Mgmt. Ltd. v. CellzDirect, Inc., 827 F.3d 1042, 1052 & n.2 (Fed. Cir. 2016).

However, after applying the Alice test to the asserted claims, Judge Martinez determined that "[d]espite the potential ambiguities [of the Alice test], the Court is convinced under the current state of the case law that the challenged claims of the 911 Patent are not directed at unpatentable subject matter."  With respect to the first Alice inquiry, Pure Hemp had argued that the asserted claims are "directed to" the patent ineligible natural phenomenon of the specified chemical compounds (cannabinoids, terpenes, and flavonoids).  UCANN had countered that "the claims are not directed to laws of nature or natural phenomena because they claim human-modified liquid formulations that require converting solid cannabinoids into a different state with markedly different physiological characteristics" (citation omitted).

The Court was persuaded by UCANN's argument that the claims are directed to human-modified liquid formulations, and did not feel the need to address the second part of UCANN's argument (i.e., that the claimed liquid formulations had been converted into a different state having markedly different physiological effects).  Judge Martinez explained that:

Pure Hemp has failed to establish beyond genuine dispute that a liquefied version of cannabinoids and related chemicals at the concentrations specified in the 911 Patent is anything like a natural phenomenon.  It may be true, as Pure Hemp insists, that cannabinoids in nature can take the form of a resin; that a resin can be highly viscous; that a highly viscous substance may at times be considered a liquid; and therefore it is logically possible that cannabinoids in nature might appear in a form that could, in some sense, be deemed a "liquid."  . . .  Even accepting as much, the 911 Patent specifies threshold concentrations of cannabinoids and related chemicals.  Pure Hemp nowhere claims that these precise concentrations, or anything close to them, occur in liquid form in nature.  Accordingly, UCANN's claims are not restatements of "the handiwork of nature," Funk Brothers, 333 U.S. at 131, "but [UCANN's] own [handiwork]," Chakrabarty, 447 U.S. at 310.

While noting that "the Court sees reason to question whether the 911 Patent claims anything novel, useful, or nonobvious," with respect to the Alice inquiry, the Court determined that "the 911 Patent is not 'directed to' an unpatentable law of nature, a natural phenomenon, or an abstract idea," but "is instead 'directed to' a non-naturally occurring delivery method of naturally occurring chemicals in (as far as the record reveals) non-naturally occurring proportions and concentrations."  Finding that the asserted claims did not fail at step one of the Alice inquiry, the Court determined that it did not need to address step two.

As for claim 31, Pure Hemp argued that this claim was invalid for depending from a multiple dependent claim when claim 31 is itself a multiple dependent claim (i.e., claim 31 depends from "any preceding claim" -- following UCANN's correction of the claim -- and claim 9 depends from claim 1 or 5, and claim 24 depends from claim 16 or 20).  Judge Martinez noted, however, that UCANN had disclaimed claim 9 and 24, and cited Guinn v. Kopf, 96 F.3d 1419, 1422 (Fed. Cir. 1996), for the proposition that "[a] statutory disclaimer under 35 U.S.C. § 253 has the effect of canceling the claims from the patent and the patent is viewed as though the disclaimed claims had never existed in the patent."  While noting that "[o]ne would expect that this would end the argument as to Claim 31," the Order points out that Pure Hemp insisted in its reply brief that the Court could still declare claim 31 to be invalid for depending from multiple dependent claims, even though those multiple dependent claims are now deemed to be nonexistent.  To support its argument, Pure Hemp relied on Rembrandt Wireless Technologies, LP v. Samsung Electronics Co., 853 F.3d 1370 (sFed. Cir. 2017), in which the patentee had disclaimed one of two claims in order to seek damages that would have been otherwise prohibited by a failure to mark its products.  Pure Hemp argued that the same public notice concerns raised in Rembrandt Wireless undergird the requirements of 35 U.S.C. § 112(e) with respect to multiple dependencies, and therefore contended that there must be "clear public notice" of invalidity.  Judge Martinez, however, noted that Pure Hemp's argument was circular, since "Claim 31 is not invalid anymore, at least not on account of the multiple dependency problem that existed before UCANN's disclaimer," finding that "there is neither a good reason nor a statutory basis to declare Claim 31 invalid, even though it previously depended on multiple dependent claims."

Rejecting both of Pure Hemp's invalidity arguments, the District Court denied Pure Hemp's Early Motion for Partial Summary Judgment.

United Cannabis Corp. v. Pure Hemp Collective Inc. (D. Colo. 2019)
Order Denying Defendant's Early Motion for Partial Summary Judgment by District Judge Martinez

Congress Releases Framework for Section 101 Reform

By Kevin E. Noonan --

Over the past six years, since the Supreme Court handed down its decision in Mayo Collaborative Services, Inc. v. Prometheus Laboratories, it has become more and more evident that correction of the path embarked upon by the USPTO, the district courts, and the Federal Circuit could only occur if Congress changed the law of patent subject matter eligibility.  Recently Senator Thom Tillis (R-NC), Chair of the Senate Judiciary Subcommittee on Intellectual Property, and Senator Chris Coons (D-DE), Ranking Member, have been holding meetings with stakeholders in an attempt to craft such revisions in a way that would garner sufficient political consensus for passage (what would happen if it crossed President Trump's desk is anyone's guess, but one challenge at a time).

Today these Senators, joined by Representative Doug Collins (R-GA-9), Ranking Member of the House Judiciary Committee, and Representatives Hank Johnson (D-GA-4), and Steve Stivers (R-OH-15), released a "bipartisan, bicameral framework on Section 101 patent reform."  The need is acute, according to Chairman Coons:

Today, U.S. patent law discourages innovation in some of the most critical areas of technology, including artificial intelligence, medical diagnostics, and personalized medicine.  That's why Senator Tillis and I launched this effort to improve U.S. patent law based on input from those impacted most.  I am grateful for the engagement of all stakeholders participating in our roundtables, as well as the bipartisan and collaborative efforts of colleagues in both the Senate and the House.  I look forward to continuing to receive feedback as we craft a legislative solution that encourages innovation.

The framework has the following provisions:

• Keep existing statutory categories of process, machine, manufacture, or composition of matter, or any useful improvement thereof.

• Eliminate, within the eligibility requirement, that any invention or discovery be both "new and useful."  Instead, simply require that the invention meet existing statutory utility requirements.

• Define, in a closed list, exclusive categories of statutory subject matter which alone should not be eligible for patent protection.  The sole list of exclusions might include the following categories, for example:

▪ Fundamental scientific principles;

▪ Products that exist solely and exclusively in nature;

▪ Pure mathematical formulas;

▪ Economic or commercial principles;

▪ Mental activities.

• Create a "practical application" test to ensure that the statutorily ineligible subject matter is construed narrowly.

• Ensure that simply reciting generic technical language or generic functional language does not salvage an otherwise ineligible claim.

• Statutorily abrogate judicially created exceptions to patent eligible subject matter in favor of exclusive statutory categories of ineligible subject matter.

• Make clear that eligibility is determined by considering each and every element of the claim as a whole and without regard to considerations properly addressed by 102, 103 and 112.

While a "work in progress," the framework contains several of the provisions proposed by IPLAC, AIPLA, IPO, and the ABA-IPL section.  But this proposal provides for frank abrogation of the judicial exceptions, a stratagem within Congress's purview but perhaps one not particularly well advised.  The judicial exceptions (occasional effects not to the contrary) are not judicial whims: the Court firmly believes that they are necessary to prevent Congress from exceeding its Constitutional authority under Article I, Section 8, clause 8.  This is consistent with their role in our system of government, and at best the consequence of any such abrogation will be that it is ignored in practice, and at worst it could motivate the Court to recite even more stringent and strictly applied limitations on Congress's power to grant patents.  The Court's forays into patent policy making have been unfortunate to say the least; anything that encourages these tendencies is unlikely to end well for U.S. innovation.  Instead, it may be more productive to recognize, if not acknowledge, the basis for the judicial exceptions and try to introduce into the patent statute more circumscribed, exact, and defined recitations of these principles in ways that might cabin the Court's application to a greater extent than is possible under current law.

Invitation to Join Amicus Brief in Athena Diagnostics v. Mayo

By Sherry M. Knowles --

Athena Diagnostics filed a Petition for Rehearing of the CAFC decision in Athena Diagnostics v. Mayo on April 8, 2019.  Amicus Briefs are due April 22, 2019.  Patent Docs has reported on this decision, which continues to apply U.S. Supreme Court-created common law to the analysis of 35 U.S.C. § 101.

Knowles IP Strategies LLC (Sherry M. Knowles) and AddyHart (Meredith Addy) intend to file an Amicus Brief in support of neither party but requesting that the CAFC carry out its constitutional duty to apply strict statutory construction of the literal words of 35 U.S.C. § 101 to decide the case (see "Unconstitutional Application of 35 U.S.C. § 101 by the U.S. Supreme Court," 18 J. Marshall Rev. Intell. Prop. L. 144 (2018), which was discussed and can be accessed here).

As with other recent CAFC and U.S. Supreme Court cases on patent eligibility, the Athena decision omits an appropriate analysis of the wording of the statute it is applying ("Whoever invents or discovers"), and its opinion is inconsistent with the wording of the statute.  Instead, it applies judicial exceptions to the statute, which have been created by the U.S. Supreme Court as elaborated in its new common law on the subject.  However, as recently well stated by the U.S. Supreme Court in Henry Schein, Inc. v. Archer & White, Inc. (No. 17-1272; January 8, 2019):  "This Court may not engraft its own exceptions onto the statutory text".

If your institution or company or you are interested in joining this brief, please send a request to amicus@kipsllc.com by April 17, 2019.  The U.S. Constitution is not self-enforcing.  The people and institutions of the United States must demand it.

Cleveland Clinic Foundation v. True Health Diagnostics LLC (Fed. Cir. 2019)

By Donald Zuhn --

Last week, in Cleveland Clinic Foundation v. True Health Diagnostics LLC, the Federal Circuit affirmed a decision by the U.S. District Court for the Eastern District of Virginia holding claim 1 of U.S. Patent No. 9,575,065 and claims 1 and 2 of U.S. Patent No. 9,581,597 invalid under 35 U.S.C. § 101 as directed to an ineligible natural law.  Finding the asserted claims to be patent ineligible, the District Court had dismissed a complaint for patent infringement filed by Cleveland Clinic Foundation and Cleveland HeartLab, Inc. ("Cleveland Clinic") against True Health Diagnostics LLC under Rule 12(b)(6) (see "Cleveland Clinic Foundation v. True Health Diagnostics, LLC (E.D. Va. 2017)").  In affirming the District Court, the Federal Circuit determined that its precedent, and not the U.S. Patent and Trademark Office's guidance, must control.

The '065 and '597 patents disclose "diagnostic test[s] which can be used to determine whether an individual . . . is at a lower risk or higher risk of developing or having cardiovascular disease," which are "based on the discovery that patients with coronary artery disease (CAD) have significantly greater levels of leukocyte and blood myeloperoxidase (MPO) levels" ('065 patent, col. 1, ll. 21–25, and col. 2, ll. 36-39).  The sole claim of the '065 patent recites:

1.  A method of detecting elevated MPO mass in a patient sample comprising:
    a)  obtaining a plasma sample from a human patient having atherosclerotic cardiovascular disease (CVD); and
    b)  detecting elevated MPO mass in said plasma sample, as compared to a control MPO mass level from the general population or apparently healthy subjects, by contacting said plasma sample with anti-MPO antibodies and detecting binding between MPO in said plasma sample and said anti-MPO antibodies.

The only two claims of the '597 patent recite:

1.  A method for identifying an elevated myeloperoxidase (MPO) concentration in a plasma sample from a human subject with atherosclerotic cardiovascular disease comprising:
    a)  contacting a sample with an anti-MPO antibody, wherein said sample is a plasma sample from a human subject having atherosclerotic cardiovascular disease;
    b)  spectrophotometrically detecting MPO levels in said plasma sample;
    c)  comparing said MPO levels in said plasma sample to a standard curve generated with known amounts of MPO to determine the MPO concentration in said sample; and
    d)  comparing said MPO concentration in said plasma sample from said human subject to a control MPO concentration from apparently healthy human subjects, and identifying said MPO concentration in said plasma sample from said human subject as being elevated compared to said control MPO concentration.

2.  The method of claim 1, further comprising, prior to step a), centrifuging an anti-coagulated blood sample from said human subject to generate said plasma sample.

The opinion notes that the Federal Circuit had previously addressed the subject matter eligibility of a parent patent, U.S. Patent No. 7,223,552, in Cleveland Clinic Foundation v. True Health Diagnostics, LLC, 859 F.3d 1352 (Fed. Cir. 2017) ("Cleveland Clinic I"), in which the Court affirmed a motion to dismiss granted by the District Court for the Northern District of Ohio, which in turn found the asserted claims of four Cleveland Clinic patents, including the '552 patent, as being directed to patent-ineligible subject matter.  Claim 11 of the '552 patent, which the opinion notes is exemplary, recites:

11.  A method of assessing a test subject's risk of having atherosclerotic cardiovascular disease, comprising
    comparing levels of myeloperoxidase in a bodily sample from the test subject with levels of myeloperoxidase in comparable bodily samples from control subjects diagnosed as not having the disease, said bodily sample being blood, serum, plasma, blood leukocytes selected from the group consisting of neutrophils, monocytes, sub-populations of neutrophils, and sub-populations of monocytes, or any combination thereo[f];
    wherein the levels of myeloperoxidase in the bodily [samples] from the test subject relative to the levels of [m]yeloperoxidase in the comparable bodily samples from control subjects is indicative of the extent of the test subject's risk of having atherosclerotic cardiovascular disease.

The opinion also notes that In Cleveland Clinic I, the Court held the methods of the '552 patent invalid under § 101 as being "directed to the ineligible natural law that blood MPO levels correlate with atherosclerotic CVD," and also held that "because the patent did not purport to have invented any of the biological techniques used to detect MPO or the statistical methods used to compare a patient's MPO levels to the control group, the claims recited no further inventive concept sufficient to transform the nature of the claims into a patent-eligible application of the natural law."  According to the opinion, the asserted claims of the '065 and '597 patents recite methods of identifying and detecting MPO, in contrast to the method of assessing atherosclerotic CVD risk from blood MPO levels in the '552 patent.

On appeal, Cleveland Clinic argued that the claims are not directed to a natural law, but to the technique of using an immunoassay to measure the blood MPO levels of patients with atherosclerotic CVD, that the correlation between blood MPO levels and atherosclerotic CVD is not a natural law because it can only be detected using certain techniques (since prior art techniques were too invasive or failed to predict CVD risk), and that using an immunoassay to detect the correlation between blood MPO levels and atherosclerotic CVD supplies an inventive concept sufficient to transform the claims into patent-eligible subject matter.  True Health countered by arguing that the correlation between atherosclerotic CVD and blood MPO levels is a natural law because it exists in nature apart from human intervention and that using known techniques in a standard way to observe a natural law neither renders the claims directed to something other than the natural law nor supplies an additional inventive concept.

The Federal Circuit agreed with True Health, concluding as the Court did in Cleveland Clinic I that the claims are directed to the natural law that blood MPO levels correlate with atherosclerotic CVD.  In response to Cleveland Clinic's argument that the claims of the '552 patent, which were previously found to be invalid as patent-ineligible, could be distinguished from the claims of the '065 and '597 patents because the former are directed to methods of "assessing a test subject's risk of having atherosclerotic [CVD]" by comparing the subject's MPO levels to a control group, and the latter are directed to "techniques for detecting elevated levels of MPO in the blood of patients having CVD," the Federal Circuit found this distinction (quoting the District Court) to be "overly superficial."  The opinion explains that the asserted claims:

[A]re not directed to new techniques for performing an immunoassay to detect a patient's blood MPO levels.  They only recite applying known methods to detect MPO levels in plasma, comparing them to standard MPO levels, and reaching a conclusion:  that the patient's blood MPO levels are elevated in comparison to a control group.  This conclusion is simply another articulation of the natural law that blood MPO levels correlate with atherosclerotic CVD.  Thus, as we held in Cleveland Clinic I, the claims are directed to the patent-ineligible natural law that blood MPO levels correlate with risk of atherosclerotic CVD.

The Federal Circuit also disagreed with Cleveland Clinic's argument that the correlation of blood MPO levels with atherosclerotic CVD is not a natural law because blood MPO levels can only be observed using certain techniques, stating that "[i]nadequate measures of detection do not render a natural law any less natural."  The Court also found Cleveland Clinic's argument that the inventive concept was supplied by using an immunoassay to detect the correlation between blood MPO levels and atherosclerotic CVD to be unpersuasive, stating that the argument that "using a known technique in a standard way to observe a natural law can confer an inventive concept—has been consistently rejected by this court in circumstances nearly identical to this case" (citing Athena Diagnostics, Inc. v. Mayo Collaborative Servs., LLC, 915 F.3d 743, 747 (Fed. Cir. 2019), and Ariosa Diagnostics, Inc. v. Sequenom, Inc., 788 F.3d 1371 (Fed. Cir. 2015)).

On appeal, Cleveland Clinic also argued that the District Court failed to give the appropriate deference to the subject matter eligibility guidance published by the U.S. Patent and Trademark Office, as required by Skidmore v. Swift & Co., 323 U.S. 134 (1944), and also erred by not granting Skidmore deference to the Examiner's decision to allow the '065 and '597 patent applications in light that guidance.  As was noted by the District Court in its opinion, during prosecution of the application that issued as the '065 patent, the Examiner initially rejected the claims under 35 U.S.C. § 101 as being directed to an unpatentable abstract idea.  Cleveland Clinic overcame that rejection by citing Example 29 of the U.S. Patent and Trademark Office's "May 2016 Subject Matter Eligibility Update" (see "Subject Matter Eligibility Guidance -- Example on Diagnosing and Treating Julitis").  Example 29 sets forth seven claims directed to the detection of a hypothetical protein, JUL-1, and the diagnosis and/or treatment of a hypothetical autoimmune disease, julitis.  The first two claims of Example 29 recite:

1.  A method of detecting JUL-1 in a patient, said method comprising:
    a.  obtaining a plasma sample from a human patient; and
    b.  detecting whether JUL-1 is present in the plasma sample by contacting the plasma sample with an anti-JUL-1 antibody and detecting binding between JUL-1 and the antibody.

2.  A method of diagnosing julitis in a patient, said method comprising:
    a.  obtaining a plasma sample from a human patient;
    b.  detecting whether JUL-1 is present in the plasma sample by contacting the plasma sample with an anti-JUL-1 antibody and detecting binding between JUL-1 and the antibody; and
    c.  diagnosing the patient with julitis when the presence of JUL-1 in the plasma sample is detected.

According to Example 29, claim 1 is considered to be patent eligible and claim 2 is considered to be patent ineligible.  The Example explains that claim 1 is eligible because steps (a) and (b) of the claim "do not recite or describe any recognized exception."  As a result, the analysis of this claim ends with Step 2A of analytic framework set forth in the Interim Guidance (i.e., determining whether the claim is directed to a judicial exception), and the Example notes that there is no need to proceed with Step 2B of the analytic framework (i.e., determining 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).

In overcoming the § 101 rejection, Cleveland Clinic argued that the rejected claims more closely resembled claim 1 of Example 29 as opposed to exemplary claim 2 because the rejected claims were directed to a method of detecting myeloperoxidase rather than a method of diagnosing atherosclerotic cardiovascular disease.  The Examiner withdrew the rejection and the '065 patent proceeded to issuance.  As for the '597 patent, which was similarly rejected under § 101 as being directed to patent ineligible subject matter, Cleveland Clinic overcame the rejection by citing Example 29 and arguing that the claims amount to significantly more than the judicial exception.

On appeal, True Health countered that the USPTO guidance is neither persuasive nor relevant to the eligibility of the asserted claims, and that the District Court correctly found that claim 1 of Example 29 of the USPTO guidance is directed to a method of detecting a protein in a plasma sample without linking the results to a disease or other natural phenomenon.

With respect to Cleveland Clinic's argument that the District Court failed to give the appropriate deference to the USPTO's guidance, the Federal Circuit agreed with True Health that the District Court did not err in finding the asserted claims ineligible, stating that:

While we greatly respect the PTO's expertise on all matters relating to patentability, including patent eligibility, we are not bound by its guidance.  And, especially regarding the issue of patent eligibility and the efforts of the courts to determine the distinction between claims directed to natural laws and those directed to patent-eligible applications of those laws, we are mindful of the need for consistent application of our case law.

The Court also noted that claim 1 of Example 29 of the guidance "is strikingly similar to claim 1 of U.S. Patent 6,258,540 at issue in Ariosa."  Claim 1 of the '540 patent recites:

1.  A method for detecting a paternally inherited nucleic acid of fetal origin performed on a maternal serum or plasma sample from a pregnant female, which method comprises
    amplifying a paternally inherited nucleic acid from the serum or plasma sample and
    detecting the presence of a paternally inherited nucleic acid of fetal origin in the sample.

Thus, the Court declared that:

We have considered Example 29 and the arguments relating to it, but to the extent that Example 29–Claim 1 is analogous to the claims at issue, Ariosa must control.  Accordingly, we decline to follow the PTO's Example 29–Claim 1 and conclude that the district court did not err in its consideration of the PTO's subject matter eligibility guidance.

Thus, the Court determined that the District Court correctly concluded that the asserted claims are directed to a natural law and recite no other inventive concept, and therefore affirmed the District Court's decision finding the claims to be patent ineligible and dismissing Cleveland Clinic's complaint.

Cleveland Clinic Foundation v. True Health Diagnostics LLC (Fed. Cir. 2019)
Nonprecedential disposition
Panel:  Circuit Judges Lourie, Moore, and Wallach
Opinion by Circuit Judge Lourie

Endo Pharmaceuticals Inc. v. Teva Pharmaceuticals USA, Inc. (Fed. Cir. 2019)

By Donald Zuhn --

Last week, in Endo Pharmaceuticals Inc. v. Teva Pharmaceuticals USA, Inc., the Federal Circuit reversed a decision by the U.S. District Court for the District of Delaware holding the claims of U.S. Patent No. 8,808,737 to be ineligible under 35 U.S.C. § 101.  In reversing the District Court, the Federal Circuit determined that the asserted claims of the '737 patent are legally indistinguishable from the claims at issue in Vanda Pharmaceuticals Inc. v. West-Ward Pharmaceuticals International Ltd.

The '737 patent, which is owned by Endo Pharmaceuticals Inc., relates to a method of using oxymorphone to treat pain in patients with impaired kidney function.  As the opinion notes, a patient's pain relief level can be impacted by the way the patient's body processes oxymorphone.  In patients with impaired kidney function (or renal impairment), waste products and drugs that are typically filtered by the kidneys can build up.  The inventor of the '737 patent studied the effect of renal impairment on the metabolism of oxymorphone and discovered that patients with moderately or severely impaired kidney function required less oxymorphone to achieve the same level of pain management achieved in patients without impaired kidney function.  Claim 1 of the '737 patent is representative (with emphasis in the opinion):

1.  A method of treating pain in a renally impaired patient, comprising the steps of:
    a.  providing a solid oral controlled release dosage form, comprising:
        i.  about 5 mg to about 80 mg of oxymorphone or a pharmaceutically acceptable salt thereof as the sole active ingredient; and
        ii.  a controlled release matrix;
    b.  measuring a creatinine clearance rate of the patient and determining it to be
        (a) less than about 30 m[L]/min,
        (b) about 30 mL/min to about 50 mL/min,
        (c) about 51 mL/min to about 80 mL/min, or
        (d) above about 80 mL/min; and
    c.  orally administering to said patient, in dependence on which creatinine clearance rate is found, a lower dosage of the dosage form to provide pain relief;
    wherein after said administration to said patient, the average AUC of oxymorphone over a 12-hour period is less than about 21 ng•hr/mL.

Endo and Mallinckrodt LLC filed suit against Actavis LLC, Actavis South Atlantic LLC, Actavis Pharma, Inc., Actavis Elizabeth LLC, Actavis Holdco U.S., Inc. ("Actavis") and Teva Pharmaceuticals USA, Inc. and Barr Laboratories, Inc. ("Teva") for infringement of claims 1-6 of the '737 patent.  Actavis moved to dismiss Endo's patent infringement claims, arguing that the asserted claims were patent ineligible under § 101.  The Magistrate Judge issued a Report and Recommendation, recommending that the District Court grant Actavis' motion.

In that Report, the Magistrate applied the two-step analysis set forth in Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012), and reiterated in Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 134 S. Ct. 2347 (2014).  With respect to step 1 of the Alice/Mayo test, the Magistrate determined that the claims are directed to the natural law that the bioavailability of oxymorphone is increased in people with severe renal impairment.  With respect to step 2, the Magistrate determined that claim 1 consists of three steps: (1) a "providing" step; (2) a "measuring/determining" step; (3) and an "administering" step.  The Magistrate concluded that the "providing" step is similar to the administering step in Mayo because it "merely identifies the specific drug for administration"; the "measuring/determining" step, as in Mayo, "just directs one to use a well-known method to measure creatinine levels to obtain the necessary information to apply a law of nature"; and the "administering step" is indistinguishable from Mayo because it "simply limits the relevant audience to patients and prescribing physicians, who treat chronic or acute pain with oxymorphone," by "merely instruct[ing] physicians to dispense oxymorphone for the treatment of pain in a well-know[n] manner, while utilizing the natural law to manage the dosage."  The Magistrate concluded that the patent was not directed to a patent-eligible application of a natural law.  Following the Magistrate's recommendation, the District Court granted Defendants' motion to dismiss.  Endo appealed the District Court's decision holding the claims of the '737 patent to be patent ineligible.

The Federal Circuit began by noting that while the Supreme Court has established a two-step framework to determine subject matter eligibility under § 101, "[i]f the claims are not directed to a patent-ineligible concept at step one, [the Court] need not address step two of the inquiry," citing Enfish, LLC v. Microsoft Corp.  The Court determined that this was the case here, explaining that the Court's analysis accordingly "focuse[d] solely on step one."  Citing Rapid Litig. Mgmt. Ltd. v. CellzDirect, Inc., the opinion notes that "at step one, 'it is not enough to merely identify a patent-ineligible concept underlying the claim; we must determine whether that patent-ineligible concept is what the claim is 'directed to.''"  And in the instant case, the Court concluded that the asserted claims are not directed to patent-ineligible subject matter, but rather "are directed to a patent-eligible method of using oxymorphone or a pharmaceutically acceptable salt thereof to treat pain in a renally impaired patient."

As in the Federal Circuit's recent decision in Natural Alternatives International, Inc. v. Creative Compounds, LLC, the Endo Court noted that the Federal Circuit held similar claims to be patent-eligible in Vanda Pharmaceuticals Inc. v. West-Ward Pharmaceuticals International Ltd., explaining that:

The claims at issue here are legally indistinguishable from the representative claim in Vanda.  Both claims recite a method for treating a patient.  The Vanda patent claims recite the steps of carrying out a dosage regimen based on the results of genetic testing.  . . .  Here, the claims similarly recite the steps of carrying out a dosage regimen, though the steps are based on the results of kidney function testing.  Additionally, the claims in both cases require specific treatment steps.  . . .  [And therefore, l]ike the claims in Vanda, the claims here "are directed to a specific method of treatment for specific patients using a specific compound at specific doses to achieve a specific outcome."  See Vanda, 887 F.3d at 1136.

The panel also noted that "like the claims in Vanda, the claims here differ from those in Mayo in material respects," pointing out that "[a]lthough the representative claim in Mayo recited administering a thiopurine drug to a patient, the claim as a whole was not directed to the application of a drug to treat a particular disease."  (In a footnote, the Court also acknowledged that when the District Court held the asserted claims of the '737 patent to be ineligible, it did not have the benefit of considering the Federal Circuit's decisions in Vanda or Natural Alternatives).

The panel next turned to Actavis' arguments that the Endo claims were similar to those at issue in Mayo and could be distinguished from the claims found to be patent eligible in Vanda.  With respect to Actavis' argument that unlike the claims in Vanda, the method steps in the Endo claims offer no "practical assurance that the process is more than a drafting effort designed to monopolize the law of nature itself," the Court disagreed, stating that "the '737 patent claims are very similar to those in Vanda and any differences in specificity are not of a sufficient degree to convince us to conclude that the claims here should be ineligible as compared to the claims in Vanda."  As for Actavis' argument that unlike the Vanda claims, the Endo claims do not require that a biological sample be obtained or assayed in any particular way to determine a patient's creatinine-clearance rate, the Court declared that "this is a distinction without a difference," since "[t]he court in Vanda reasoned that the claim was directed to 'specific patients,' without explicitly emphasizing the precise methods used to identify those specific patients."  The Court also disagreed with Actavis' argument that unlike the Vanda claims, the Endo claims "do not specify an amount or frequency of oxymorphone to be administered after patients are categorized by creatinine-clearance rate," noting that "the combination of the administering step and wherein clause claim language, taken together, . . . make the claims-at-issue as specific as those in Vanda such that the patent claims do not 'tie up the doctor’s subsequent treatment decision,'" citing Vanda, 887 F.3d at 1135 (quoting Mayo, 566 U.S. at 86).  The Court therefore concluded that:

[T]he '737 patent claims are like those in Vanda.  They are eligible because they are "directed to a specific method of treatment for specific patients using a specific compound at specific doses to achieve a specific outcome."  . . .  Our precedent leaves no room for a different outcome.

The opinion found further support for its decision in Rapid Litig. Mgmt. Ltd. v. CellzDirect, Inc., stating that:

We explained that "[t]he end result of the . . . claims is not simply an observation or detection of the ability of hepatocytes to survive multiple freeze-thaw cycles.  Rather, the claims [were] directed to a new and useful method of preserving hepatocyte cells."  We further emphasized that "the natural ability of the subject matter to undergo the process does not make the claim 'directed to' that natural ability."  Otherwise, claims directed to actually "treating cancer with chemotherapy" or "treating headaches with aspirin" would be patent ineligible.  Just like the claims in CellzDirect, the result of the claims here is not simply an observation or detection [citations omitted].

The Court concludes  the opinion by noting that neither Ariosa Diagnostics, Inc. v. Sequenom, Inc. nor Athena Diagnostics, Inc. v. Mayo Collaborative Servs., compel a different outcome, pointing out that "the claims here are directed to a treatment method, not a detection method," and adding that "[t]he '737 patent does not 'start[] and end[] with a naturally occurring phenomenon.'"  Thus, the Court determined that the '737 patent claims are not directed to patent-ineligible subject matter, and therefore reversed the District Court's decision finding the claims to be patent-ineligible.

Endo Pharmaceuticals Inc. v. Teva Pharmaceuticals USA, Inc. (Fed. Cir. 2019)
Panel:  Circuit Judges Wallach, Clevenger, and Stoll
Opinion by Circuit Judge Stoll

SRI International, Inc. v. Cisco Systems, Inc. (Fed. Cir. 2019)

Claims for Monitoring and Analyzing Suspicious Network Activity Found Patent Eligible

By James Korenchan --

In a precedential decision issued last week, the Federal Circuit affirmed the U.S. District Court for the District of Delaware's ruling that Plaintiff SRI International, Inc.'s ("SRI") claims related to network security are patent eligible.

Years ago, SRI sued Defendant Cisco Systems, Inc. ("Cisco") for infringement of U.S. Patent Nos. 6,711,615 (the '615 patent) and 6,484,203 (the '203 patent), after which Cisco unsuccessfully moved for summary judgement on various issues, including patent-ineligibility of the claims and whether one of SRI's papers on its own network security tool anticipates the claims.  Cisco then appealed the final judgement of the District Court with respect to these two issues, as well as issues relating to the District Court's construction of the claim term "network traffic data," denial of JMOL of no willful infringement, and grant of enhanced damages, attorneys' fees, and ongoing royalties.  This post addresses only the issue of patent eligibility, including a notable dissenting opinion by Judge Alan David Lourie.

The Majority Opinion

The majority opinion focuses on claim 1 of the '615 patent, which the Court adopted as representative.  The Court stated that claim 1 of the '615 patent and claim 1 of the '203 patent are "substantially similar" with differences that are not material to any issue on appeal.  The claimed invention is generally related to network surveillance for the purposes of security in an enterprise network.  For example, this can be accomplished by looking at packets that monitor data transfers, errors, or network connections, building statistical profiles based on packet measurements, using the profiles to determine whether there is suspicious activity, and notifying various hierarchically-related network monitors of the suspicious activity.

1.  A computer-automated method of hierarchical event monitoring and analysis within an enterprise network comprising:
    deploying a plurality of network monitors in the enterprise network; detecting, by the network monitors, suspicious network activity based on analysis of network traffic data selected from one or more of the following categories: {network packet data transfer commands, network packet data transfer errors, network packet data volume, network connection requests, network connection denials, error codes included in a network packet, network connection acknowledgements, and network packets indicative of well-known network-service protocols};
    generating, by the monitors, reports of said suspicious activity; and
    automatically receiving and integrating the reports of suspicious activity, by one or more hierarchical monitors.

In Alice Corp. v. CLS Bank Int'l, the Supreme Court set forth a two-step framework for determining whether claims are directed to patent-eligible subject matter under § 101.  First, it must be decided whether a claim is directed to a judicially-excluded law of nature, a natural phenomenon, or an abstract idea.  If so, then it must be decided whether any element or combination of elements in the claim is sufficient to transform the nature of the claim into a patent-eligible application.  To transform an abstract idea into a patent-eligible application, the claims must do more than simply state an abstract idea and broadly recite applying the abstract idea.

In addressing the issue of patent eligibility, Cisco asserted that the claims are simply directed to a known business process of analyzing data from multiple sources to detect suspicious activity.  But the District Court held that the claims are "more complex" than that.  The District Court concluded that the claims recite a specific process rooted in computer technology -- namely, using network monitors that each monitor and analyze specific types of network data, and integrating reports produced by those monitors -- in order to solve a specific problem arising in the realm of network computing -- namely, detecting hackers or other unwanted activity in a network.  The Federal Circuit agreed.  Citing Enfish, the Court affirmed that the "'focus of the claims is on the specific asserted improvement in computer capabilities'—that is, providing a network defense system that monitors network traffic in real-time to automatically detect large-scale attacks."  For at least this reason, the Court agreed with the District Court's conclusion that the claims are not directed to an abstract idea and are thus patent eligible.

The Court also pointed to the specification in support of their conclusion.  For example, the specification explains that, in conventional networks, "seemingly localized triggering events can have globally disastrous effects on widely distributed systems," and purports to solve those issues by providing "a framework for the recognition of more global threats to interdomain connectivity, including coordinated attempts to infiltrate or destroy connectivity across an entire network enterprise."

Cisco provided three main arguments for why the claims are an abstract idea, but the Court refuted each of them.  First, Cisco argued that the claims are analogous to those in Electric Power Group in that they are allegedly directed to generic steps for collecting and analyzing data.  But the Court distinguished these claims from those in Electric Power Group, instead analogizing them to those in DDR Holdings.  In particular, the Court noted that, while the Electric Power Group claims "were drawn to using computers as tools to solve a power grid problem," the claims here, like those in DDR Holdings, "prevent the normal, expected operation of a conventional computer network" -- namely, by detecting and reporting on suspicious network activity, as well as by receiving and integrating the reports using one or more hierarchical network monitors.

Cisco also argued that the claims do not improve computer functionality, per Enfish.  The Court noted how, in Alice, the Supreme Court advised that, even if a claim directed to an abstract idea uses a computer as a tool, the claim still does not pass step one muster.  Using the Supreme Court's notion as a counter to Cisco's argument, the Court stated that the claims are not automating a conventional idea on a computer, but rather recite a specific process that improves the functioning of computer networks in the realm of network security.

Lastly, Cisco cited a variety of Federal Circuit decisions, such as Intellectual Ventures I LLC v. Symantec Corp. and CyberSource Corp. v. Retail Decisions, Inc., in asserting that the claims are so general that they involve steps that could be performed in one's mind.  But the Court disagreed yet again, noting:

This is not the type of human activity that § 101 is meant to exclude.  Indeed, we tend to agree with SRI that the human mind is not equipped to detect suspicious activity by using network monitors and analyzing network packets as recited by the claims.

As such, the Court concluded that the claims are not directed to an abstract idea and are thus patent eligible.  It did not conduct an analysis under step two of the Alice framework.

Judge Lourie's Dissent

Judge Lourie wrote a dissent that relied entirely on Electric Power Group.  Practitioners on the tech side of the fence are all too familiar with what might be perceived as an over-reliance on Electric Power Group for § 101 and might view Judge Lourie's dissent with the same skepticism as they've viewed many patent-eligibility issues.

He first noted that the method recited in Electric Power Group recited "[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," with the method comprising eight steps, including "receiving data," "detecting and analyzing events in real time," "displaying the event analysis results and diagnoses of events," "accumulating and updating measurements," and "deriving a composite indicator of reliability."  He emphasized that, despite having eight steps, the Court held that the Electric Power Group claim was an abstract idea without significantly more.  The claim involved selecting information for collection, analysis, and display, was only broadly rooted in computer technology, and, although limited to the context of power-grid monitoring, was still deemed to be patent ineligible.

Judge Lourie stated that these claims are "hardly distinguishable' from those in Electric Power Group, do not provide enough specifics as to how its steps are performed, show no improvement to computer technology, and are thus directed to the abstract idea of monitoring network security.  In particular, he opined that:

The claims here recite nothing more than deploying network monitors, detecting suspicious network activity, and generating and handling reports.  The detecting of the suspicious activity is based on "analysis" of traffic data, but the claims add nothing concerning specific means for doing so.  The claims only recite the moving of information.  The computer is used as a tool, and no improvement in computer technology is shown or claimed.  There is no specific technique described for improving computer network security.

Proceeding to step two, Judge Lourie asserted that, although the claims recite different types of information and information sources, the selection of information does not provide any inventive concept, and the specification indicates that the claims only rely on generic, "customary" computer components.

Judge Lourie was also not a fan of the majority's partial reliance on the '615 patent's specification:

[T]he majority opinion quotes from and paraphrases language from the specification that only recites results, not means for accomplishing them.  The claims as written, however, do not recite a specific way of enabling a computer to monitor network activity.  As we noted in Electric Power Group, result-focused, functional claims that effectively cover any solution to an identified problem, like those at issue here, frequently run afoul of Alice.  (citation omitted)

For these reasons, Judge Lourie strongly opposed the majority's ruling and would have found the claims to be patent ineligible.

SRI International, Inc. v. Cisco Systems, Inc. (Fed. Cir. 2019)
Panel:  Circuit Judges Lourie, O'Malley, and Stoll
Opinion by Circuit Judge Stoll; dissenting opinion by Circuit Judge Lourie

Ex parte Smith (PTAB 2019)

Software Claims Survive Section 101 Challenge and Are Found to Be Directed to Patent-Eligible Subject Matter

By Joseph Herndon --

In the U.S. Patent and Trademark Office, the Patent Trial and Appeal Board (PTAB) recently designated its decision in Ex Parte Smith as an informative decision for its application of the revised guidance on the application of 35 U.S.C. § 101.  (Ex parte Eileen C. Smith, Anthony Montesano, Edward T. Tilly, Mark A. Esposito, Stuart J. Kipnes, and Anthony J. Carone, Appeal 2018-000064, Technology Center 3600).

Below, we analyze the decision, which is favorable for applicants, to illustrate that even when claims are found to be directed to a judicial exception (e.g., abstract idea), they will survive section 101 challenges if additional elements in the claim integrate the judicial exception into a practical application.

The decision reviewed a rejection of claims under 35 U.S.C. § 101 as being directed to patent-ineligible subject matter.  The claims are directed to a hybrid trading system for concurrently trading securities or derivatives through both electronic and open-outcry trading mechanisms.  Claim 1, reproduced below, is illustrative of the claimed subject matter:

1.  A method of trading derivatives in a hybrid exchange system comprising:
    collecting orders, via a communication network and order routing system, for derivatives and placing them in an electronic book database;
    identifying at an electronic trade engine a new quote from a first in-crowd market participant, wherein one of a bid or an offer price in the new quote matches a respective price in an order in the electronic book database from a public customer;
    removing at least a portion of the order in the electronic book database, delaying automatic execution of the new quote and the order, and starting a timer;
    reporting, via the communication network and an electronic reporting system, a market quote indicative of execution of the at least a portion of the order while delaying automatic execution;
    receiving at the electronic trade engine a second quote from a second in-crowd market participant after receiving the new quote from the first in-crowd market participant and before an expiration of the timer, wherein the second quote matches the respective price of the public customer order in the electronic book database; and
    allocating the order between the first and second in-crowd market participants at the electronic trade engine, wherein the order is not executed until expiration of the timer.

Standard for Patent Eligibility

The PTAB first noted the two-step test set forth by the Supreme Court in Alice, which includes first determining whether the claims at issue are directed to a patent-ineligible concept, and if so, secondly considering the elements of each claim both individually and as an ordered combination to determine whether the additional elements transform the nature of the claim into a patent-eligible application.

The USPTO recently published revised guidance on the application of § 101.  (USPTO's January 7, 2019 Memorandum, 2019 Revised Patent Subject Matter Eligibility Guidance).  Under that guidance, the USPTO indicated to first look to whether the claim recites:

(1) any judicial exceptions, including certain groupings of abstract ideas (i.e., mathematical concepts, certain methods of organizing human interactions such as a fundamental economic practice, or mental processes); and
(2) additional elements that integrate the judicial exception into a practical application. Only if a claim (1) recites a judicial exception and (2) does not integrate that exception into a practical application, do we then look to whether the claim:
(3) adds a specific limitation beyond the judicial exception that is not "well-understood, routine, conventional" in the field; or
(4) simply appends well-understood, routine, conventional activities previously known to the industry, specified at a high level of generality, to the judicial exception.

Examiner's Findings and Conclusion

In the first step of the Alice inquiry, the Examiner determined that the claims were directed to the abstract idea of comparing new and stored information and using rules to identify options because the claims recite steps such as collecting, identifying, and reporting.  The Examiner further determined the claims are directed to an abstract idea of trading derivatives in a hybrid exchange system which is a concept within the realm of "fundamental economic practices".

At Alice step 2, the Examiner determined that the claims do not recite elements sufficient to amount to significantly more than the abstract idea because the computer as recited is a generic computer component that performs functions which are generic computer functions.

Board's Review

Applying the guidance set forth in the new USPTO Memorandum, the PTAB reversed the decision of the Examiner.

Like the Examiner, the PTAB first found that the limitations of claim 1, under their broadest reasonable interpretation, recite the fundamental economic practice of derivative trading because the limitations all recite the operations that would ordinarily take place in a derivatives trading environment.  Thus, like the concept of intermediated settlement in Alice, and the concept of hedging in Bilski, the concept of trading derivatives recited in the claims was found to be a fundamental economic practice long prevalent in our system of commerce.  Thus, the claims were found to recite a judicial exception of a fundamental economic practice.

Having determined that the claims recite a judicial exception and satisfied step 1 of the USPTO memo, the PTAB turned to determining whether there are "additional elements that integrate the judicial exception into a practical application."  Claim 1 recites various computer-related limitations, but at a high level without any meaningful detail about their structure or configuration.  As such, the PTAB did not find the computer-related limitations themselves to be sufficient to integrate the judicial exception into a practical application.

However, unlike the Examiner, the PTAB found that claim 1 also recites additional limitations which focus on addressing problems arising in the context of a hybrid derivatives trading system in which trades are made both electronically and on a trading floor (i.e., "in the pits").  These limitations include:

• "delaying automatic execution of the new quote and the order, and starting a timer,"
• while "delaying automatic execution" of the order, and "before expiration of the timer," receiving a second matching quote "wherein the second quote matches the respective price of the public customer order," and
• "allocating the order between the first and second in-crowd market participants at the electronic trade engine, wherein the order is not executed until expiration of the timer."

The PTAB found these additional limitations did, in fact, integrate the recited judicial exception of derivative trading into a practical application.  In particular, these additional elements limit the conventional practice of automatically executing matching market orders by reciting a specific timing mechanism in which the execution of a matching order is delayed for a specific period of time.  The PTAB found that the Specification provided further context to conclude that the use of the claimed timing mechanisms and the associated temporary restraints on execution of trades provided a specific technological improvement over prior derivatives trading systems.

Because the PTAB determined that the claim is not directed to the recited judicial exception, the claim satisfied section 101 at step 1 of Alice.

Dissent

The Dissent disagreed with the conclusion that the additional elements recited in the claims actually integrate the judicial exception of derivative trading into a practical application.

Namely, the Dissent disagreed with the majority that the use of the claimed timing mechanisms and the associated temporary restraints on execution of trades provides a specific improvement over prior derivatives trading systems.  Instead, the Dissent maintained that the delay of matching market orders, whether 10 minutes, 10 seconds, or even 1 millisecond, is a necessary requirement for both the conventional trading practice or Appellants' derivative trading practice of automatically executing matching market orders, whether on a trading floor (i.e., "in the pits") or electronically.  It was suggested that such timing features themselves are not technical in nature and do not provide any "technical solution to a technical problem".

The Majority noted, however, that the claimed timing mechanisms are not so trivial.  In fact, the use of the recited "timer" does not occur with each and every trade.  Rather, it is implemented in specific circumstances in a specific trading environment, namely when a matching market order is received from an in-crowd market participant in a hybrid trading system.  Thus, Appellants' claims were found to overcome a problem specifically arising in the realm of computer networks.

Panel: Administrative Patent Judges Bui, Barry, and Bennett
Decision on Appeal by Administrative Patent Judge Bennett; dissent by Administrative Patent Judge Bui

Natural Alternatives International, Inc. v. Creative Compounds, LLC (Fed. Cir. 2019)

By Donald Zuhn --

Last week, in Natural Alternatives International, Inc. v. Creative Compounds, LLC, the Federal Circuit reversed and remanded a decision by the U.S. District Court for the Southern District of California granting a motion for judgment on the pleadings filed by Creative Compounds, LLC that the asserted claims of U.S. Patent Nos. 5,965,596, 7,825,084, 7,504,376, 8,993,610, 8,470,865, and RE45,947 are not patent eligible.  In reversing the District Court, the Federal Circuit found that Creative Compounds had failed to demonstrate that the asserted claims were not patent eligible in view of Natural Alternatives' proposed claim constructions.

The patents at issue, which are owned by Natural Alternatives International, Inc., relate to dietary supplements containing beta-alanine.  Beta-alanine is an amino acid, which together with the amino acid histidine, can form dipeptides that are found in muscles, which in turn are involved in the regulation of intracellular pH during muscle contraction and development of fatigue.  Variations in dipeptide concentrations affect the anaerobic work capacity of individual athletes.  The asserted claims relate to the use of beta-alanine in a dietary supplement to increase the anaerobic working capacity of muscle and other tissue.

Natural Alternatives has asserted the patents at issue in multiple suits in the Southern District, including against Creative Compounds.  Creative Compounds responded by moving for judgment on the pleadings, which the District Court granted.  The District Court determined that all of the asserted claims were directed to patent ineligible subject matter under 35 U.S.C. § 101 and lacked an inventive concept sufficient to render the claims patent eligible.  Although the District Court indicated that it had accepted Natural Alternatives' proposed claim constructions in performing its eligibility analysis, the Federal Circuit, applying those same proposed claim constructions, determined that "the complaint's factual allegations, together with all reasonable inferences, plausibly establish the eligibility of the representative claims."

The majority opinion, authored by Judge Moore and joined by Judge Wallach, addresses three types of asserted claims:  (1) methods of treatment using beta-alanine ("the Method Claims"), (2) dietary supplements ("the Product Claims"), and (3) uses of beta-alanine in manufacturing a human dietary supplement ("the Manufacturing Claims").  Regarding the Method Claims, the opinion notes that claim 1 of the '596 patent and claim 1 of the '865 patent are representative (emphasis in the opinion):

Claim 1 of the '596 patent recites:

1.  A method of regulating hydronium ion concentrations in a human tissue comprising:
    providing an amount of beta-alanine to blood or blood plasma effective to increase beta-alanylhistidine dipeptide synthesis in the human tissue; and
    exposing the tissue to the blood or blood plasma, whereby the concentration of beta-alanylhistidine is increased in the human tissue.

Claim 1 of the '865 patent recites:

1.  A method of increasing anaerobic working capacity in a human subject, the method comprising:
    a)  providing to the human subject an amount of an amino acid to blood or blood plasma effective to increase beta-alanylhistidine dipeptide synthesis in the tissue, wherein said amino acid is at least one of:
        i)  beta-alanine that is not part of a dipeptide, polypeptide or oligopeptide;
        ii)  an ester of beta-alanine that is not part of a dipeptide, polypeptide or oligopeptide; or
        iii)  an amide of beta-alanine that is not part of a dipeptide, polypeptide or oligopeptide; and
    b)  exposing the tissue to the blood or blood plasma, whereby the concentration of beta-alanylhistidine is increased in the tissue,
    wherein the amino acid is provided through a dietary supplement.

The opinion also notes that Natural Alternatives proposed the following constructions:
• "effective" means to "elevate[] beta-alanine above natural levels to cause an increase in the synthesis of beta-alanyl-histidine dipeptide in the tissue";
• "dietary supplement" means "an addition to the human diet, which is not a natural or conventional food, which effectively increases athletic performance when administered to the human over a period of time"; and
• "increasing anaerobic working capacity" means "increasing the amount of work performed by a muscle under lactate producing conditions".

The District Court determined that claim 1 of the '596 patent and claim 1 of the '865 patent are directed to natural laws, finding that these claims are directed to the natural laws that "ingesting certain levels of beta-alanine, a natural substance, will increase the carnosine [a dipeptide] concentration in human tissue and, thereby, increase the anaerobic working capacity in a human," or "thereby, aid in regulating hydronium ion concentration in the tissue."  The panel majority, however, did not agree with the District Court, explaining that:

Administering certain quantities of beta-alanine to a human subject alters that subject's natural state.  Specifically, homeostasis is overcome, and the subject's body will produce greater levels of creatine.  This, in turn, results in specific physiological benefits for athletes engaged in certain intensive exercise.  The claims not only embody this discovery, they require that an infringer actually administer the dosage form claimed in the manner claimed, altering the athlete's physiology to provide the described benefits.  These are treatment claims and as such they are patent eligible [citations omitted].

In support of its determination that the Method Claims are patent eligible treatment claims, the panel majority cited to the Court's decision in Vanda Pharmaceuticals Inc. v. West-Ward Pharmaceuticals International Ltd., 887 F.3d 1117 (Fed. Cir. 2018), noting that Vanda stands for the proposition that claims directed to particular methods of treatment are patent eligible.  In summarizing the Court's decision in Vanda, the panel majority explains that:

The claims in Vanda involved a method of treating patients with schizophrenia that first required performing a genetic test to determine if a patient was a CYPD2D6 performer.  Based on the results of that test, a particular dose of iloperidone was selected and internally administered.  As a result, the risk of QTc prolongation, a dangerous side effect, was decreased.  We held that the claims were not directed to a natural relationship between iloperidone, CYP2D6 metabolism, and QTc prolongation.  While we acknowledged that the inventors had recognized the underlying relationships, we explained that those were not what was claimed.  Instead, the claims were directed to a patent-eligible method of using iloperidone to treat schizophrenia, "a specific method of treatment for specific patients using a specific compound at specific doses to achieve a specific outcome" [citations omitted].

In distinguishing Vanda from the Supreme Court's decision in Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66 (2012), the majority opinion notes that "[u]nlike the claims held ineligible in Mayo, which required only the observation of a natural law, the Vanda claims required a doctor to affirmatively administer a drug to alter a patient's condition from their natural state," adding that the claims in Mayo "did not . . . require any actual action be taken based on the measured level of metabolite," and thus, were not treatment claims.  The opinion also notes that "[t]his was expressly recognized in Mayo, which distinguished the Mayo claim from 'a typical patent on a new drug or a new way of using an existing drug,' because the Mayo claim did not 'confine [its] reach to particular applications' of the natural laws relied upon."  And according to the panel majority, "[t]he fact that the human body responds to the treatment through biochemical processes does not convert the claim into an ineligible one."

With respect to the Method Claims, the opinion notes that these claims "are directed to patent eligible new ways of using an existing product, beta-alanine," and therefore, "fall[] clearly within the scope of § 101, which allows for patents on 'any new and useful process,' including 'a new use of a known . . . composition of matter, or material.'"  Moreover, "[w]hile the Method Claims have similarities to the claims found ineligible in Mayo, as they utilize an underlying natural law, this is not sufficient to establish that they are directed to that law."  According to the panel majority, "[u]nlike the claims in Mayo, the Method Claims at issue are treatment claims," and "[l]ike the claims in Vanda, the Method Claims contain specific elements that clearly establish they are doing more than simply reciting a natural law."  In particular, the opinion notes that the Method Claims specify a patient population to be treated, particular results to be obtained by practicing the method, a compound to be administered to achieve the claimed result, and the dosages of the compound to be administered (via the "effective" limitation in the Method Claims).  Thus, the Method Claims "go[] far beyond merely stating a law of nature, and instead set[] forth a particular method of treatment."  The panel majority therefore concludes that "[t]he Method Claims at issue are treatment claims," which "cover using a natural product in unnatural quantities to alter a patient's natural state, to treat a patient with specific dosages outlined in the patents," and as such, these claims are not directed to ineligible subject matter.

Regarding step two of the Alice/Mayo analytic framework for assessing subject matter eligibility, the panel majority indicates that Creative Compounds' citation to disclosure in the asserted patents in support of its argument that placing a natural substance into a dietary supplement for administration to a human, in order to increase the function of tissues is a conventional, well-known activity, "does not establish that the dietary supplement in the claims, which provides a dose well in excess of the normal levels of beta-alanine, would have been well-understood, routine, and conventional."  (In a footnote, the opinion notes that "the record contains an expert declaration stating that 'one 3.2 gram daily supplement of beta-alanine is the equivalent to eating at least 109 Big Macs per day.'")  The opinion also explains that:

While a fact-finder may ultimately determine that the dietary supplement limitation was well-understood, routine, and conventional, absent a clear statement to that effect in the specification, complaint, or other material properly before the court, when disputed such a determination may not be made on a motion for judgment on the pleadings.

Notwithstanding the panel majority's step two analysis, the opinion concludes that "[u]nder Natural Alternatives' proposed claim constructions, the Method Claims are not directed to an exception to § 101 under the first step of the Alice test," and "[t]herefore, judgment on the pleadings was inappropriate."

Turning to the Product Claims, the opinion notes that the District Court treated claim 6 of the '376 patent (which depends from claims 1 and 5) and claim 1 of the '084 patent as representative of the Product Claims in the asserted patents.  Claims 1, 5, and 6 of the '376 patent recite (emphasis in the opinion):

1.  A composition, comprising:
    glycine; and
    a) an amino acid selected from the group consisting of a beta-alanine, an ester of a beta-alanine, and an amide of a beta-alanine, or
    b) a di-peptide selected from the group consisting of a beta-alanine di-peptide and a beta-alanylhistidine di-peptide.

5.  The composition of claim 1, wherein the composition is a dietary supplement or a sports drink.

6.  The composition of claim 5, wherein the dietary supplement or sports drink is a supplement for humans.

Claim 1 of the '084 patent recites:

1.  A human dietary supplement, comprising a beta-alanine in a unit dosage of between about 0.4 grams to 16 grams, wherein the supplement provides a unit dosage of beta-alanine.

The opinion also notes that Natural Alternatives proposed the following construction:
• "dietary supplement" and "human dietary supplement" mean "an addition to the human diet, which is not a natural or conventional food, which effectively increases athletic performance and is manufactured to be used over a period of time."

The District Court determined that claim 6 of the '376 patent and claim 1 of the '084 patent are directed to ineligible subject matter, finding that these claims are directed to "the natural phenomena of beta-alanine and glycine" and "the natural phenomenon of beta-alanine."  As with the Method Claims, however, the panel majority again did not agree with the District Court, explaining that:

Although beta-alanine is a natural product, the Product Claims are not directed to beta-alanine.  A claim to a manufacture or composition of matter made from a natural product is not directed to the natural product where it has different characteristics and "the potential for significant utility."  See Diamond v. Chakrabarty, 447 U.S. 303, 310 (1980).  Just as the Method Claims are directed to specific methods of treatment that employ a natural law, the Product Claims are directed to specific treatment formulations that incorporate natural products, but they have different characteristics and can be used in a manner that beta-alanine as it appears in nature cannot.

With respect to those "different characteristics," the panel majority notes that "[u]nder Natural Alternatives' claim constructions, the quantity of beta-alanine must be sufficient to 'effectively increase[] athletic performance.'"  The opinion concludes that "[a]t this stage in the litigation, it has been sufficiently alleged that these characteristics provide significant utility, as the claimed dosage forms can be used to increase athletic performance in a way that naturally occurring beta-alanine cannot," and therefore, finds that the Product Claims are not directed to ineligible subject matter.  The opinion also notes that even if the Product Claims were directed to ineligible subject matter, judgment on the pleadings would still have been inappropriate under step two of the Alice/Mayo analytic framework because the Product Claims, like certain Method Claims, contain a dietary supplement limitation, and "the specification does not contain language supporting the idea that this limitation was well-understood, routine, and conventional."

Turning to the Manufacturing Claims, the opinion notes that the District Court treated claim 1 of the '610 patent as representative of the Manufacturing Claims in the asserted patents.  Claim 1 of the '610 patent recites (emphasis in the opinion):

1.  Use of beta-alanine in manufacturing a human dietary supplement for oral consumption;
    supplying the beta-alanine, which is not part of a dipeptide, polypeptide or oligopeptide, as a single ingredient in a manufacturing step of the human dietary supplement or
    mixing the beta-alanine, which is not part of a di-peptide, polypeptide or oligopeptide, in combination with at least one other ingredient for the manufacture of the human dietary supplement,
    whereby the manufactured human dietary supplement is for oral consumption of the human dietary supplement in doses over a period of time increases beta-alanyl histidine levels in muscle tissue sufficient to delay the onset of fatigue in the human.

The opinion also notes that Natural Alternatives proposed the following constructions:
• "[u]se of beta-alanine in manufacturing a human dietary supplement" means "making an addition to the human diet using beta-alanine, which is not a natural or conventional food, to be administered over a period of time and that effectively increases athletic performance."
• "supplying the beta-alanine, which is not part of a dipeptide, polypeptide or oligopeptide, as a single ingredient in a manufacturing step of the human dietary supplement" means "providing the free amino acid beta-alanine, an ester of beta-alanine or an amide of beta-alanine in a step of making an addition to the human diet using beta-alanine as the only active ingredient, which is not a natural or conventional food, which effectively increases athletic performance when administered to a human over a period of time."
• "mixing the beta-alanine, which is not part of a dipeptide, polypeptide or oligopeptide, in combination with at least one other ingredient for the manufacture of the human dietary supplement" means "making an addition to the human diet, which is not a natural or conventional food, and which effectively increases athletic performance when administered to a human over a period of time, using the free amino acid beta-alanine, an ester of beta-alanine or an amide of beta-alanine and at least one other ingredient."

The District Court determined that claim 1 of the '610 patent is directed to ineligible subject matter, finding that this claim is directed to "the natural phenomenon beta alanine and the natural law that ingesting certain levels of beta-alanine will increase the carnosine concentration in human tissue."  As with the Method Claims and Product Claims, however, the panel majority again did not agree with the District Court, explaining that:

The Manufacturing Claims are not directed to the natural law or product of nature, but instead are an application of the law and new use of that product.  Claim 1 of the ’610 patent is even further removed from the natural law and product of nature at issue in the Method Claims and Product Claims, respectively.  It is directed to the manufacture of a human dietary supplement with certain characteristics.  The supplement is not a product of nature and the use of the supplement to achieve a given result is not directed to a law of nature.  We do not see, therefore, how a claim to the manufacture of a non-natural supplement would be directed to the law of nature or natural product.

Finding that the asserted claims are not directed to ineligible subject matter under step one of the Alice test, the Federal Circuit reversed the District Court's decision that these claims are directed to ineligible subject matter and remanded for further proceedings.  The panel majority concludes by noting that "[w]e live in the natural world, and all inventions are constrained by the laws of nature," adding that "[a]s the Supreme Court has warned, we must be careful not to overly abstract claims when performing the Alice analysis."

In an opinion concurring-in-part and dissenting-in-part, Judge Reyna explained that he was dissenting from the majority's "broad stroke of eligibility, primarily because I conclude that the majority's § 101 analysis relies on an erroneous claim construction," but was concurring in the result reached by the majority to remand for further proceedings because he expected that this would permit the District Court to revisit the § 101 question under a proper claim construction.  In the instant case, Judge Reyna believed that "the ordinary meaning 'may be readily apparent even to lay judges, and claim construction in such cases involves little more than the application of the widely accepted meaning of commonly understood words,'" citing Phillips v. AWH Corp., 415 F.3d 1303, 1314 (Fed. Cir. 2005) (en banc).  Moreover, Judge Reyna indciated that he is concerned with the majority's analysis because "it relies on a claim construction that improperly imports limitations into the claims and is contradicted by the written description."

Aside from this concern, Judge Reyna suggested that on remand the District Court "could include a formal claim construction and a potential revisit of the § 101 issue," and therefore inquired as to "whether anything meaningful has been achieved in these circumstances."  He concluded his opinion by declaring that "[t]his case, and the general development of the law concerning § 101 analysis at the pleading stage, causes me to ask whether the time has come for this court to reconsider whether a Rule 12(c) motion based on § 101 should be decided before claim construction."

Natural Alternatives International, Inc. v. Creative Compounds, LLC (Fed. Cir. 2019)
Panel: Circuit Judges Moore, Reyna, and Wallach
Opinion by Circuit Judge Moore; opinion concurring-in-part and dissenting-in-part by Circuit Judge Reyna