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#AliceStorm

Patent Eligibility Forecast: Dark Skies Continue,

Possible Clearing in Distant, Uncertain Future

Robert Sachs Fenwick & West LLP

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#AliceStorm @Federal Courts

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Don’t Blink, you miss a court killing a patent. I prepared this slide on 5/13. By the time I presented it on 5/18, it was already out of date, with several new district court cases reported.

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Patent Eligibility Decisions Per Month Since Alice

Don’t Blink II: Except for March 2016, the number of Section 101 decisions invalidating patents exceeded those upholding them. But March 2016 was simply a result of the Delaware court releasing 4 opinions that it held back for several months. Not a trend.

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20 Federal Circuit Section 101 Scorecard EnfishDDR

Don’t Dissent: In 39 Section 101 opinions, there have been 127 votes. Not a SINGLE dissent against a patent being invalidated. This is below the court normal dissent rate. Even Newman, the most prolific dissenter is silent.

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State Street Bank (1998)

1998 marks the State Street decision (no prohibition on biz method patents). This is right as the Dotcom boom is occurring, so lots of patents filed. Then the Dotcoms go bust in 2000-01. They sell their business method patents, which are eventually bought up by patent trolls, and then litigated. That’s why we see these more biz method patent than others in Section 101 litigation.

#AliceStorm in the USPTO

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§101 Rejection Rates Before and After Alice Percent of Office Actions with Section 101 Rejection

<6/19/14 <12/14/14 <7/30/15 7/30/15-2/28/16

After Alice§101 rejection rates show modest increases or declines in most art units, except 3600 and 3600. Let’s dig deeper…

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Same data as before, but now aggregated by the technology type (Bio, Computer, Ecommerce, Other) and then the specific subject matter of the art units, particularly revealing what’s happen in Ecommerce vs the rest of TC 3600. Note the massive rise in 101 rejection rates there. The July Update made things worse not better. In 3700 Amusements/Education is the outlier: USPTO is taking position that games are per se not eligible.

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Final §101 Rejection Rates

“And That’s FINAL!”: A final rejection means that the examiner did not accept your arguments and amendments. In the Computers and Other technology areas the final rejection rates were essentially flat before and after Alice; in Biotech there was slight (4%) increase.

But in Ecommerce we see a significant rise from 33% to 53% then to 92%, and then a dip to 89%. That means Ecommerce examiners essentially ignore amendments and arguments in response to §101 rejection, and go final far more frequently than their peers.

USPTO’s Examiner Instructions on Section 101 Rejections

Good Progress, More Work Needed

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Examiner Instructions on Section 101 Rejections

Explains procedures for creating §101 rejection and responding to Amendments Discusses Step 2A (judicial exception) and Step 2B (inventive

concept) Provides new examples of eligible and ineligible claims for life

sciences (not discussed here). Overall good progress, but more work to be done. All underlining and bold are in the original

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Examiner Instructions—Review Every Claim “After determining what the applicant invented and establishing the

broadest reasonable interpretation of the claimed invention, the eligibility of each claim should be evaluated as a whole using the two-step analysis detailed in the Interim Eligibility Guidance.” “When making the rejection, the Office action must provide an explanation

as to why each claim is unpatentable, which must be sufficiently clear and specific to provide applicant sufficient notice of the reasons for ineligibility and enable the applicant to effectively respond. Takeaway: this should stop omnibus rejections of all of the claims

with a single cursory analysis. Suggestion to USPTO: Expressly state that omnibus 101 rejections

are prohibited.

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Examiner Instructions: Details Matter “Identify the judicial exception by referring to what is recited (i.e., set forth

or described) in the claim and explain why it is considered an exception;” “Identify any additional elements (specifically point to claim

features/limitations/steps) recited in the claim beyond the identified judicial exception;” and “Explain the reason(s) that the additional elements

taken individually, and also taken as a combination, do not result in the claim as a whole amounting to significantly more than the judicial exception.” Takeaway: emphasizes that the actual claims matter, and that the

claimed combination itself must be analyzed, not merely added up from the elements.

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Step 2A: Identify and Explain Judicial Exception “When the examiner has determined the claim recites an abstract idea, the rejection

should identify the abstract idea as it is recited (i.e., set forth or described) in the claim, and explain why it corresponds to a concept that the courts have identified as an abstract idea.”

“When the examiner has determined the claim recites a law of nature or a natural phenomenon, the rejection should identify the law of nature or natural phenomenon as it is recited (i.e., set forth or described) in the claim and explain using a reasoned rationale why it is considered a law of nature or natural phenomenon.”

“When the examiner has determined the claim recites a product of nature, the rejection should identify the exception as it is recited (i.e., set forth or described) in the claim, and explain using a reasoned rationale why the product does not have markedly different characteristics from its naturally occurring counterpart in its natural state.”

Takeaway: This can’t be more clear! In every category the examiner must BOTH IDENTIFY AND EXPLAIN why the claim is considered an “exception. If the examiner fails to explain, the rejection is defective.

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Step 2A: Stick to the Law

“Examiners should not go beyond those concepts that are similar to what the courts have identified as abstract ideas.”

“Examiners should be familiar with any cited decision relied upon in making or maintaining a rejection to ensure that the rejection is reasonably tied to the facts of the case and to avoid relying upon language taken out of context.”

“If the original rejection did not identify a Supreme Court or Federal Circuit decision in which a similar abstract idea was found and applicant challenges identification of the abstract idea, the examiner would need to point to a case in which a similar abstract idea was identified and explain why the abstract idea recited in the claim corresponds to the abstract idea identified in the case to maintain the rejection.”

Takeaway: Examiners are not to create new exceptions. They must stick to known categories. Nor can they read the cases “out of context” without considering their facts.

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SmartGene, Inc. v Advanced Biological Labs. (CAFC) Non-precedential CAFC decision:

• “[o]ur ruling is limited to the circumstances presented here, in which every step is a familiar part of the conscious process that doctors can and do perform in their heads.”

• “[w]hatever the boundaries of the ‘abstract ideas’ category, the claim at issue here involves a mental process excluded from section 101: the mental steps of comparing new and stored information and using rules to identify medical options. (emphasis added).

USPTO Interim Guidance • Abstract idea of “comparing new and stored information and using rules to

identify options.” Why “sticking to the facts” matters: Smartgene is expressly and substantive

limited to narrow facts. But examiners rely on an overly general and incorrect gloss in the Interim Guidance. Let’s see the consequences of that policy…

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Fuzzysharp Gametek Planet Bingo Bancorp Cyberfone Myriad* SmartGene Mayo* Alice*

Citations Since Jan. 24, 2014 in Office Actions

Precedential decision

Non-precedential decision

This is the number of citations to various CAFC cases in USPTO office actions between 1/24/14, the date of the Smartgene decision and 5/17/16. We expect Alice and Mayo to be the most frequently cited. We would not expect a non-precedential case limited to specific facts to come in third. In fact Smartgene’s gloss “comparing new and stored information…” has been cited more than 14,400 times! (i.e. over 5,000 times without attribution). And non-precedential Cyberfone has been cited more than precedential Bancorp. • Suggestion to USPTO: Instruct examiners that only precedential decisions can be cited. Remove

Smartgene, Planet Bingo, Cyberfone and other non-precedential cases from Interim Guidance.

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Step 2B: Inventive Concept—Combinations Count “It is important to remember that a new combination of steps in a process

may be patent eligible even though all the steps of the combination were individually well known and in common use before the combination was made (Diehr). Thus, it is particularly critical to address the combination of additional elements, because while individually-viewed elements may not appear to add significantly more, those additional elements when viewed in combination may amount to significantly more than the exception by meaningfully limiting the judicial exception.” Takeaway: “Critical” to address the overall combination of elements—

that means real analysis, not a hand wave. Why? Because almost all inventions are combinations of known, conventional elements. Every new machine is made up of existing parts. And Section 100(b) says a new process can use exclusively known parts and equipment.

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Step 2B: Lacking Novelty is not Enough to be “Conventional” “A prior art search should not be necessary to resolve whether the additional

element is a well-understood, routine, conventional activity because lack of novelty (i.e., finding the element in the prior art) does not necessarily show that an element is well-understood, routine, conventional activity previously engaged in by those in the relevant field.”

“mere knowledge of the particular laboratory technique or use of the particular laboratory technique by a few scientists is not sufficient to make the use of the particular laboratory technique routine or conventional in the relevant field”

Takeaway: Examiner cannot simply allege something is conventional because there is a reference. Mere knowledge of process does not make it conventional. And it’s the particular activity that must be conventional (i.e., what is claimed) not merely the “verb” at the beginning of the claim step.

Suggestion to USPTO: Require examiners to cite textbooks or similar to demonstrate “conventional” nature of elements.

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Step 2B: Generic Computers are OK. Who Knew? “[July Update listing] is not meant to imply that all computer functions are

well-understood, routine, conventional functions, or that a claim reciting a generic computer component performing a generic computer function is necessarily ineligible. Examiners should keep in mind that the courts have held computer-implemented processes to be significantly more than an abstract idea (and thus eligible), where generic computer components are able in combination to perform functions that are not merely generic (DDR).” Takeaways: 1) Using a generic computer is not evidence that a claim

is abstract. 2) All that is necessary is a non-generic “function” which is the “new use” in the statute.

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Examiners Cannot Rely on Claim Examples

“Therefore, the examples should not be used as a basis for a subject matter eligibility rejection. Additionally, while it would be acceptable for applicants to cite an example in support of an argument for finding eligibility in an appropriate factual situation, applicants should not be required to model their claims or responses after the examples to attain eligibility.” Takeaway: The claim examples can help the applicant, but

cannot be used against the applicant. That’s HUGE.

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How Examiners Should Respond to Amendment

“When evaluating a response, examiners must carefully consider all of applicant's arguments and evidence rebutting the subject matter eligibility rejection. “ “If applicant's claim amendment(s) and/or argument(s)

persuasively establish that the claim is not directed to a judicial exception or is directed to significantly more than a judicial exception, the rejection should be withdrawn.” Takeaway: Persuasive means more likely than not (see MPEP 2106.III). Suggestion to USPTO: Instruct examiners towithdraw if applicant

provides sound, rational argument that fully addresses either Step 2A or 2B or both.

Section 101 at Federal Circuit

One Step Forward, Two Steps Back

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Enfish v. Microsoft

Only second CAFC decision finding claims eligible • Tough panel: Moore, Taranto, Hughes • This is first time any of these judges have found patent eligible subject

matter. Wow! No mention of DDR. Claims directed to database schema/data structure of a “self

referential table” • Implicitly overrules Warmerdam (data structures not eligible)

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Enfish v. Microsoft

Enfish: the table is “self-referential.” Entries in one row reference other rows in same table to link records

Prior Art: Relational Model. Entries in one table reference rows in another table to link records

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Enfish v. Microsoft 31. A method for storing and retrieving data in a computer memory, comprising the

steps of: configuring said memory according to a logical table, said logical table including:a

plurality of logical rows, each said logical row including an object identification number (OID) to identify each said logical row, each said logical row corresponding to a record of information;

a plurality of logical columns intersecting said plurality of logical rows to define a plurality of logical cells, each said logical column including an OID to identify each said logical column; and wherein

at least one of said logical rows has an OID equal to the OID to a corresponding one of said logical columns, and at least one of said logical rows includes logical column information defining each of said logical columns.

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Enfish v. Microsoft: Consider Improvement in Step 1 “We do not read Alice to broadly hold that all improvements in computer-related

technology are inherently abstract and, therefore, must be considered at step two…Nor do we think that claims directed to software, as opposed to hardware, are inherently abstract and therefore only properly analyzed at the second step of the Alice analysis.…We thus see no reason to conclude that all claims directed to improvements in computer-related technology, including those directed to software, are abstract and necessarily analyzed at the second step of Alice, nor do we believe that Alice so directs. Therefore, we find it relevant to ask whether the claims are directed to an improvement to computer functionality versus being directed to an abstract idea, even at the first step of the Alice analysis.”

Takeaway: The improvement in “functionality” is direct evidence in Step 1 that the claim is not abstract. Functionality is broader than mere “operation”: a new function is eligible, not just a faster or better etc. one.

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Enfish v. Microsoft: Claim Language Matters “The district court concluded that the claims were directed to the abstract

idea of “storing, organizing, and retrieving memory in a logical table” or, more simply, “the concept of organizing information using tabular formats.” Likewise, Microsoft urges the court to view the claims as being directed to “the concepts of organizing data into a logical table with identified columns and rows where one or more rows are used to store an index or information defining columns.” However, describing the claims at such a high level of abstraction and untethered from the language of the claims all but ensures that the exceptions to § 101 swallow the rule.” Takeaway: Stick to the claim language, not some overgeneralization.

Why? Because that is what the applicant invented!

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Enfish v. Microsoft: Read the Specification “Here, the claims are not simply directed to any form of storing tabular data, but

instead are specifically directed to a self-referential table for a computer database. The necessity of describing the claims in such a way is underscored by the specification’s emphasis that “the present invention comprises a flexible, self-referential table that stores data.” (“The present invention improves upon prior art information search and retrieval systems by employing a flexible, self referential table to store data.”). The specification also teaches that the self-referential table functions differently than conventional database structures. According to the specification, traditional databases, such as “those that follow the relational model and those that follow the object oriented model,” ’604 patent, col. 1 ll. 37–40, are inferior to the claimed invention.”

Takeaway: The specification matters! Who knew??! The Summary of Invention points out what the applicant considers their invention. We used to shy away from “present invention.” Now it’s going make a comeback.

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Enfish v. Microsoft: What did the Applicant Invent?

“The specification’s disparagement of conventional data structures, combined with language describing the “present invention” as including the features that make up a self-referential table, confirm that our characterization of the “invention” for purposes of the § 101 analysis has not been deceived by the “draftsman’s art.” Takeaway: Careful! Watch out for those tricky patent

attorneys trying to ‘deceive’ the courts and examiners! IIRC, the courts made the rules that led to how we draft claims. We don’t draft this way because we want to, but because we have to.

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Enfish v. Microsoft: Using a Computer is OK “Moreover, we are not persuaded that the invention’s ability to run on a

general-purpose computer dooms the claims.” Similarly, that the improvement is not defined by reference to “physical”

components does not doom the claims. To hold otherwise risks resurrecting a bright-line machine- or-transformation test, cf. Bilski v. Kappos, (“The machine-or-transformation test is not the sole test for deciding whether an invention is a patent-eligible ‘process.’”), or creating a categorical ban on software patents.” Takeaway: Using a conventional machine to perform a new function

is ok! Who knew??!! Congress did: See Section 100(b). • “The term “process” means process, art or method, and includes a new use of a known

process, machine, manufacture, composition of matter, or material.”

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In re Smith (CAFC, March, 2016) Held: method of playing a card game with new rules but with conventional cards is ineligible. Warning: The USPTO is pursuing an explicit attack on games—a field that has been

patented for over 100 years. • COURT: “[i]t has been my impression that the PTO has sort of adopted the position that

games are in general not going to be patent eligible post Bilski, is that a correct position? Games as a whole, any kind of card games … none of those would be allowed now?” USPTO: “[t]hat’s correct your honor. In fact, the Government argued in Bilski that things like card games should not be eligible.”

• Oral Argument at 13:33 In Re Smith, No. 2015-1664 (Dec. 10, 2015) • “That is not to say that all inventions in the gaming arts would be foreclosed from patent

protection under§ 101. We could envisage, for example, claims directed to conducting a game using a new or original deck of cards potentially surviving step two of Alice. The Government acknowledged as much during oral argument.”

Suggestion to USPTO: If this is a “rule” that is being applied to reject gaming claims,

then it should be published in Fed. Reg. for notice and comment. 5 U.S. Code §553

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This just in: TLI Communications v AV Automotive (CAFC) 17. A method for recording and administering digital images, comprising the steps

of: recording images using a digital pick up unit in a telephone unit, storing the images recorded by the digital pick up unit in a digital form as digital

images, transmitting data including at least the digital images and classification information

to a server, wherein said classification information is prescribable by a user of the telephone unit for allocation to the digital images,

receiving the data by the server, extracting classification information which characterizes the digital images from the

received data, and storing the digital images in the server, said step of storing taking into consideration

the classification information.

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TLI v. AV Automotive: Ineligible Claim “We recently clarified that a relevant inquiry at step one is “to ask whether

the claims are directed to an improvement to computer functionality versus being directed to an abstract idea.” See Enfish, LLC v. Microsoft Corp.” “the claims here are not directed to a specific improvement to computer

functionality. Rather, they are directed to the use of conventional or generic technology in a nascent but well-known environment” “The specification does not describe a new telephone, a new server, or a

new physical combination of the two.” Takeway: conflicts with Enfish and the law regardless of what the

panel says. Section 100(b) does not require any new hardware or new combination in a process claim.

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A method for alleviating congestion in a communication network, the communication network enabling the flow of data to and from a plurality of end user devices that are connected to the network through a plurality of communication devices, the method comprising the steps of:

monitoring data flows to and from the plurality of end user devices for indications of congestion; and

controlling the data rate of at least one end user device in response to the congestion indications.

A method for reducing startup latency associated with a data transmission system having a first device configured to communicate with a second device over a communication channel, the method comprising the steps of:

establishing a call between the first device and the second device;

determining whether a characteristic of the communication channel is similar to a corresponding characteristic associated with a previously established communication channel; and

if the characteristic is similar to the corresponding characteristic, initializing at least one of the first and second devices using a number of stored parameters associated with the previously established communication channel

Quiz: Which is Eligible?

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A method for alleviating congestion in a communication network, the communication network enabling the flow of data to and from a plurality of end user devices that are connected to the network through a plurality of communication devices, the method comprising the steps of:

monitoring data flows to and from the plurality of end user devices for indications of congestion; and

controlling the data rate of at least one end user device in response to the congestion indications.

A method for reducing startup latency associated with a data transmission system having a first device configured to communicate with a second device over a communication channel, the method comprising the steps of:

establishing a call between the first device and the second device;

determining whether a characteristic of the communication channel is similar to a corresponding characteristic associated with a previously established communication channel; and

if the characteristic is similar to the corresponding characteristic, initializing at least one of the first and second devices using a number of stored parameters associated with the previously established communication channel

Quiz: Which is Eligible?

ELIGIBLE! INELIGIBLE!

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No Progress in Three Decades

“the cases considering the patentability of program-related inventions do not establish rules that enable a conscientious patent lawyer to determine with a fair degree of accuracy which, if any, program-related inventions will be patentable.” Justice Stevens, dissenting in Diamond v. Diehr (1980)