The Alice Year in Review: Sorting Through the Software Patent Morass

====== 271 ======

Michael J. Gulliford Soryn IP Group

Introduction
Alice: A Refresh
Alice at the Federal Circuit in 2018
Alice in the District Courts
Alice at the Uspto
Takeaways and Predictions
Data Processing and Organization Is Almost Always Fatal
In a Search for Inventiveness, the Alice Test Has Collapsed in on Itself
The Federal Circuit Recognizes the Sad State of Affairs for Software Patents
Factual Issues Matter—Sometimes
Trade Secrets Matter
The New USPTO Guidelines Are Not Likely to Sway the Federal Judiciary
Conclusion

Introduction

Ever since the Supreme Court’s seminal decision in Alice Corp Proprietary Ltd. v. CLS Bank International1 (“Alice”), the law of subject matter eligibility for software patents has remained an enigma. While practitioners understand that abstract ideas, without more, are not patentable under 35 U.S.C. § 101, gleaning from relevant precedent whether a particular software patent will or will not pass muster under Alice remains a herculean task. The Federal Circuit has yet to develop a consistent body of precedent governing Alice determinations for ====== 272 ====== software patents; district court treatment of the issue remains dynamic; and the United States Patent and Trademark Office (USPTO) has tried to make sense of it all.

In the same vein, this article attempts to make sense of what is happening with software patents.2 Although the year 2018 began and ended with reason for hope, numerous developments have clouded the Alice picture. The Federal Circuit’s Alice test has become a search for inventiveness, factual issues matter (sometimes), and the USPTO may be charting its own course on the issue. This article thus provides an in-depth overview of recent Alice developments, ending with emerging trends that practitioners in the Alice arena need to know.

Alice: A Refresh

Section 101 of title 35 of the U.S. Code provides that “[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” Though the language of section 101 appears broad, courts have set forth several judicially created subject matter categories that cannot quality for patent protection—namely, “laws of nature,” “natural phenomenon,” and “abstract ideas.”3 Software patents largely implicate the “abstract idea” exception to patent subject matter eligibility.

Although the Supreme Court has dealt with section 101 subject matter issues in cases including Bilski, Myriad, and Mayo, its June 2014 Alice decision remains its most recent pronouncement on the issue. While some thought the Court may take the occasion to categorically rule on whether software is patentable, the Supreme Court instead applied its Mayo framework to software patent claims to determine if they pass the eligibility threshold of section 101.

The resulting Alice framework is as follows: Step 1: It must be determined whether the patent claim at issue is directed to a patent-ineligible concept, such as an abstract idea.4 If the answer is no, the inquiry ends and the patent claim is valid under section 101. If the answer is yes, Step 2 follows: the patent claim can only pass muster under section 101 if it contains an “inventive concept,” i.e., whether the elements of the claim, considered “both individually and ‘as an ordered combination,’” add enough to “‘transform the nature of the claim’ into a patent-eligible application.”5 According to the Supreme Court, an “inventive ====== 273 ====== concept” cannot result simply by implementing an abstract idea on a generic computer.6 An “inventive concept” could, however, result from a software patent claim that achieves a new result not previously attainable, requires novel computer operations to operate, or improves the functioning of the hardware itself.7

Not surprisingly, given the open-ended nature of the Alice decision, judicial application of the two-part subject matter eligibility test post-Alice has struggled for consistency. 2018, though bookended by pro-software patent decisions, was no different.

Alice at the Federal Circuit in 2018

Just as in preceding years, the Federal Circuit’s 2018 docket featured a steady stream of cases involving software patents with section 101 challenges, resulting in both precedential and non-precedential opinions (indicated in the list below by “NP”):8

•
Core Wireless Licensing SARL v. LG Electronics, Inc., 880 F.3d 1356 (Fed. Cir. 2018)
•
Move, Inc. v. Real Estate Alliance Ltd., 721 F. App’x (Fed. Cir. 2018) (No. 2017-1463)—NP
•
Berkheimer v. HP, Inc., 881 F.3d 1360 (Fed. Cir. 2018), petition for cert. docketed (U.S. Oct. 3, 2018) (No. 18-415)
•
Zuili v. Google LLC, 722 F. App’x 1027 (Fed. Cir. 2018) (Nos. 2017-2161, 2017-2258, 2017-2267)—NP
•
Aatrix Software, Inc. v. Green Shades Software, Inc., 882 F.3d 1121 (Fed. Cir. 2018)
•
Automated Tracking Solutions v. Coca-Cola Co., 723 F. App’x 989 (Fed. Cir. 2018) (No. 2017-1494)—NP
•
Intellectual Ventures I LLC v. Symantec Corp., 725 F. App’x 976 (Fed. Cir. 2018) (Nos. 2017-1814 and 2017-1858)—NP
•
Maxon, LLC v. Funai Corp., Inc., 726 F. App’x 797 (Fed. Cir. 2018) (No. 2017-2139)—NP
•
Voter Verified, Inc. v. Election Sys. & Software LLC, 887 F.3d 1376 (Fed. Cir. 2018) ====== 274 ======
•
In re Eberra, 730 F. App’x 916 (Fed. Cir. 2018) (No. 2017-2394)—NP
•
SAP America, Inc. v. Investpic, LLC, 898 F.3d 1161(Fed. Cir. 2018), petition for cert. docketed (U.S. Mar. 14, 2019) (No. 18-1199)
•
Burnett v. Panasonic Corp., 741 F. App’x 777 (Fed. Cir. 2018) (No. 2018-1234)—NP
•
Interval Licensing LLC v. AOL, Inc., 896 F.3d 1335 (Fed. Cir. 2018)
•
In re Wang, 737 F. App’x 534 (Fed. Cir. 2018) (No. 2017-1827)—NP
•
BSG Tech LLC v. Buyseasons, Inc., 899 F.3d 1281 (Fed. Cir. 2018)
•
In re Mario Villena, 745 F. App’x 374 (Fed. Cir. 2018) (No. 2017-2069), petition for cert. docketed (U.S. Mar. 20, 2019) (No. 18-1223)—NP
•
Data Engine Technologies LLC v. Google LLC, 906 F.3d 999 (Fed. Cir. 2018)
•
Ancora Technologies, Inc. v. HTC America, Inc., 908 F.3d 1343 (Fed. Cir. 2018)

All told, the Federal Circuit in 2018 issued eighteen written opinions dealing with section 101 issues in the software context. Nine such opinions were precedential, and all but one dealt with a lower court finding of invalidity for failure to satisfy section 101. In only three instances (Core Wireless, Data Engine, and Ancora) did the Federal Circuit find challenged patent claims not invalid under section 101 (all based on passing Step 1 of the Alice test). In two instances, the Federal Circuit vacated the district court’s finding of ineligibility under section 101 due to factual disputes at Step 2, and remanded for further proceedings (Berkheimer and Aatrix Software). The remainder of the Federal Circuit’s 2018 opinions resulted in the challenged claims being invalidated under section 101, often based on the lack of a technological advance sufficient to save the claim under Step 1 or 2 of the Alice/Mayo framework.

The following table summarizes all of the Federal Circuit’s 2018 precedential decisions. ====== 275 ======

====== 276 ======

====== 277 ======

Alice in the District Courts

In the end, it falls upon district courts to make sense of the Federal Circuit’s Alice jurisprudence. Although a full-scale survey of district court Alice decisions is beyond the scope of this article, the relevant data allows several interesting conclusions.

First, and perhaps reflecting a continued inability of patent holders to gain confidence in their section 101 position, infringement litigations featuring technology patents continue to decline:

Source: Docket Navigator

Second, district court section 101 motion grant rates continued their historical decline in 2018. Perhaps in response to the Federal Circuit’s first three decisions of 2018—Core Wireless, Berkheimer, and Aatrix Software—district court section 101 motion grant rates fell below 50% for the first time in Q2. Almost in parallel to the Federal Circuit’s treatment of the issue in subsequent cases, however, district court grant rates climbed steadily higher throughout the year: ====== 278 ======

Source: Docket Navigator

Third, despite the Federal Circuit’s Berkheimer and Aatrix Software decisions, district courts remain more than willing to dispose of section 101 Alice issue at the pleadings stage:

Source: Docket Navigator

====== 279 ======

Alice at the Uspto

Perhaps the most dramatic development on the Alice front came on January 3, 2019, when the USPTO announced the issuance of its “2019 Revised Patent Subject Matter Eligibility Guidance” (the “Guidelines”).9 By strictly interpreting the kinds of subject matter that fall within judicial exceptions to subject matter eligibility, the Guidelines are likely to significantly reduce the volume of section 101 rejections emanating from the USPTO.

The Guidelines mandate a two-pronged approach to Alice issues. Under Prong One, an Examiner must determine whether a patent claim is directed to a judicial exception (law of nature, natural phenomenon or abstract idea). The Guidelines set forth the three categories that qualify as abstract ideas: “mathematical concepts,10 certain methods of organizing human activity,11 and mental processes.”12 Only if a given claim falls within one of these three abstract idea categories, or is directed to a law of nature or natural phenomenon, is it directed to a judicial exception.13 When a judicial exception is not present, the analysis ends and the patent passes muster under section 101. When a judicial exception is present, the examiner must proceed to Prong Two of the analysis.

Under Prong Two (Step 2A), the examiner must determine whether a claim, though directed to a judicial exception, is nonetheless “integrated into a practical application of the judicial exception.”14 “A claim that integrates a judicial exception into a practical application will apply, rely on, or use the judicial exception in a manner that imposes a meaningful limit on the judicial exception, such that the claim is more than a drafting effort designed to monopolize the judicial exception.”15 In delineating specific considerations that should guide this analysis, the USPTO leans on a number of Federal Circuit cases finding no abstract idea when the challenged claim sets forth technological improvements or other limitations that remove the claim from being abstract.16

Where no practical application has been found, an examiner must determine (Prong Two, Step 2B) whether the claim nonetheless sets forth an “inventive concept.”17 Only if an inventive concept is found will the claim survive under section 101. Tracking Federal Circuit precedent on the issue, the inventive concept inquiry examines considerations such as whether the claim sets forth a limitation or combination of limitations “that are not well-understood, routine, ====== 280 ====== conventional activity in the field.”18 If an inventive concept is found under Step 2B, the patent remains eligible under section 101. If no such inventive concept is found, the patent is not eligible.

Takeaways and Predictions

At a time when district courts are granting fewer Alice challenges and the USPTO is likely to reject far fewer patents under section 101, the Federal Circuit is struggling to consistently apply the Supreme Court’s two-part Alice/Mayo framework. In place of predictability, many of the Federal Circuit’s recent Alice decisions feature a subjective focus on “inventiveness” and a tool box of different analytical frameworks. Against this backdrop are several take-homes from recent Alice jurisprudence that practitioners should understand:

Data Processing and Organization Is Almost Always Fatal

Although predictability is not a centerpiece of the Federal Circuit’s 2018 Alice docket, one variety of patent claim so consistently fails that its ineligibility under section 101 should perhaps become a rule. These are claims directed to some combination of analyzing, organizing, and/or displaying data. If a patent claim is directed to analyzing data and displaying the results of that analysis on a general-purposes graphical interface—or can be generalized to encompass these activities—the Federal Circuit will likely invalidate it under Alice.

In 2018, the Federal Circuit invalidated data processing/display claims in a number of non-precedential decisions, as well as in precedential decisions such as Berkheimer, SAP America, Interval Licensing, and Data Engine Techs. As these cases demonstrate, traditional markers of non-abstractness since DDR Holding, such as technology rooted in the computer realm, will not save a data processing and display claim from being found abstract. The Federal Circuit confirmed as much in Berkheimer:

Limiting the invention to a technological environment does not make an abstract concept any less abstract under step one. That the parser transforms data from source to object code does not demonstrate non-abstractness without evidence that this transformation improves computer functionality in some way.19 ====== 281 ======

Not only has the activity of data processing/organizing/display become a hallmark of abstractness, no case in 2018 featured an “inventive concept” sufficient to save a data processing claim under Step 2 of the Alice framework. Barring a change in legal treatment or a legislative fix to 35 U.S.C. § 101, owners of such patents would be wise to tread lightly when asserting these patents.

In a Search for Inventiveness, the Alice Test Has Collapsed in on Itself

Although the Supreme Court’s Alice/Mayo framework requires a two-part analysis, the Federal Circuit’s recent decisions confirm that in many respects the two-part test has been collapsed into a singular search for “inventiveness.” Often, the Federal Circuit shifts the Step 2 “inventive concept” analysis to the Step 1 “abstraction” analysis, resulting in a search for a sufficient technological advance.20 Thus, claims directed to the computer realm, once thought safe under Alice, will not get a patentee over the section 101 hump unless there is also a demonstrable and provable technological advance set forth in the claims.21

And given the overlap in considerations between Alice Step 2 and a Step 1 that focuses on a search for technological improvement, if a patentee cannot pass under Step 1, there is very little chance that success will come under Step 2. Proof in point: the Federal Circuit did not uphold the validity of a single patent under Step 2 in 2018.

The crucial question has thus become: what must a patentee do to convince the Federal Circuit that its claims possess enough of a technological improvement to not be abstract? Here, the Federal Circuit’s 2018 Alice cases provide some guidance.

The Claims Must, at a Minimum, Teach How

One common refrain from the Federal Circuit’s recent section 101 jurisprudence is that in order to pass Step 1 or 2 of the Alice test (assuming an overlap in analyses), the claim must set forth a purported technological advance and detail how the advance is accomplished:

The asserted claims in this case are directed to an improved user interface for computing devices, not to the abstract idea of an index, as argued by LG ====== 282 ====== on appeal. Although the generic idea of summarizing information certainly existed prior to the invention, these claims are directed to a particular manner of summarizing and presenting information in electronic devices.22

The Ancora opinion is also illustrative:

In short, claim 1 of the ’941 patent is directed to a solution to a computer-functionality problem: an improvement in computer functionality that has “the specificity required to transform a claim from one claiming only a result to one claiming a way of achieving it.”23

Claims directed to results that do not answer the “how” question will fall.

Furthermore, in light of the broad, result-oriented construction for “attention manager,” we agree with the district court that the claimed “attention manager” encompasses a patent-ineligible abstract concept rather than an arguably technical improvement to display devices, because the term as properly construed simply demands the production of a desired result (non-interfering display of two information sets) without any limitation on how to produce that result. Instead of claiming a solution for producing that result, the claim in effect encompasses all solutions.24

Thus, during Markman, practitioners would be well advised to seek constructions of critical claim terms that focus on how results are accomplished.

The Specification Must Confirm the Claimed Advance

In addition to the claims, the specification also now plays a critical role in the section 101 analysis. The specification is where the Federal Circuit first looks to confirm the technological advance of the claims. To do so, the specification must explain the particular problem that the patented technology solves and enable a conceptual link between alleged “inventive” claim limitations and the solution that the invention purports to solve. Here, Core Wireless is illustrative:

The specification confirms that these claims disclose an improved user interface for electronic devices, particularly those with small screens. It teaches that the prior art interfaces had many deficits relating to the efficient functioning of the computer, requiring a user “to scroll around and switch views many times to find the right data/functionality.”25 ====== 283 ======

The Federal Circuit went on to note that “this language clearly indicates that the claims are directed to an improvement in the functioning of computers, particularly those with small screens.”26

In contrast, where the patent specification does not support the inventiveness of a claim challenged under section 101, the Federal Circuit is more prone to look unfavorably upon such a claim:

To the extent that BSG Tech argues that this limitation constitutes an improvement in computer functionality similar to the self-referential table in Enfish, there is no support for such an assertion. The ’652 patent specification says nothing about how to construct a database structure that is not modified by the addition of new parameters. This suggests that this feature of the claimed system is not claim 9’s focus. Relatedly, nothing in the specification suggests that conventional databases required structural modifications to add new parameters, or explains how maintaining the same structure would improve database functionality relative to structures that change with the addition of new parameters.27

And from the court in Interval Licensing:

The instructions limitations Interval Licensing high-lights in its appeal as representing an improvement in computing devices are unavailing. For example, the specification admits the acquisition instructions are “generic,” and are, in any event, a necessary aspect of carrying out any conception of providing one set of information to be displayed next to another.28

In discussing why a technological advance set forth in the claims is an inventive step over the prior art, the specification can also go a long way toward creating the necessary factual issues to survive a challenge for lack of subject matter eligibility. In denying a motion for an en banc rehearing in Berkheimer, the Federal Circuit spelled out how the specification can help or haunt a software patent owner:

In a situation where the specification admits the additional claim elements are well-understood, routine, and conventional, it will be difficult, if not impossible, for a patentee to show a genuine dispute.

* * * ====== 284 ======

The specification described the increases in efficiency and computer functionality that the invention, in claims 4-7, had over conventional digital asset management systems. It further stated that “known asset management systems” did not contain the one-to-many claim element and its advantages, and that redundant document images “are the convention” in “today’s digital asset management systems.” While assertions in the patent will not always be enough to create a genuine dispute of material fact, they did so here.29

Other Intrinsic and Extrinsic Evidence Can Help

In a potential positive development for patentees, in its search for “inventiveness” sufficient to carry the day under section 101, the Federal Circuit is willing to rely on a host of intrinsic and extrinsic evidence. In 2018, the Federal Circuit found the necessary evidentiary support to link a prior art problem with a claimed technological advance—or at least enough evidence to create a material issue of fact—not only in patent specifications, but also in the prosecution history,30 litigation complaints,31 and third-party articles attached as exhibits to a litigation complaint.32

Whether a Given Advance Is Sufficiently Technological Is Difficult to Predict

Although recent Federal Circuit precedent confirms the importance of the “technological advance” to passing Alice, deciphering the kinds of advances that qualify remains a challenge. One technology that the Federal Circuit blessed in two of its three decisions upholding patents under section 101 is the interface, so long as the relevant claims set forth sufficient specificity. In Core Wireless, the Federal Circuit upheld claims directed to application summary windows on mobile devices, where the claims set forth sufficient detail as to how the summary windows are implemented.33 Likewise, in Data Engine Technologies, the Federal Circuit upheld claims to a computer spreadsheet with tabs, again because the claims set forth enough specificity as to how the spreadsheets improved the user experience.34

Yet, it remains difficult to reconcile the types of technological advances that will satisfy the Federal Circuit. In BSG Technologies, for instance, the challenged claims related to a self-evolving generic index for organizing information stored ====== 285 ====== in a database. There, improving a user’s ability to use a database was not sufficient to impart subject matter eligibility under section 101. Rather, the Federal Circuit stressed that an improvement to the database itself would be required to pass Alice:

[T]he claimed invention allows users to quickly and efficiently access hundreds of thousands or even millions of records, and still find only those few records that are relevant. These benefits, however, are not improvements to database functionality. Instead, they are benefits that flow from performing an abstract idea in conjunction with a well-known database structure.35

In contrast, the Federal Circuit in Data Engine Techs. upheld a number of patents directed to improved electronic spreadsheets. There, the Federal Circuit relied on the fact that the patents enabled a user-friendly approach to navigating computer spreadsheets:

The Tab Patents solved this known technological problem in computers in a particular way—by providing a highly intuitive, user-friendly interface with familiar notebook tabs for navigating the three-dimensional worksheet environment.36

In Data Engine Technologies, there was no improvement to the computer itself, or to a database or to any other data structures within the computing environment, and the spreadsheet at issue could run on any generic computer. Yet, the increased ease of use that the challenged patents enabled carried the day. The holdings in BSG Technologies and Data Engine Technologies remain difficult to reconcile, and prove the panel-specific nature of the Federal Circuit’s Alice analysis.

The Federal Circuit Recognizes the Sad State of Affairs for Software Patents

The goal of any case law survey—this one being no exception—should be to synthesize a cohesive framework that will offer a modicum of predictability to practitioners. After all, more data points should offer more clarity with respect to how courts are likely to rule on a given issue—the issue here being section 101. But this clarity is difficult to attain with respect to the Federal Circuit’s treatment of software patents under Alice. As Step 2 of the Alice test has collapsed into Step 1, with subjective determinations predominating, understanding how the Federal Circuit will confront Alice issues remains a losing battle. ====== 286 ======

The Federal Circuit’s own judges profess as much. The most significant rebuke of the Alice test came from Judge Plager in his Interval Licensing concurring opinion. Judge Plager laments the “abstract idea” analysis, views the Step 2 of the Alice test as largely redundant in light of Step 1, and pleads with Congress to fix the section 101 issue.37 Similarly, in the Federal Circuit’s denial of an en banc rehearing in Berkheimer, Judge Lourie, joined by Judge Newman, wrote separately to address his concerns with the Alice framework and to express his hope for a “higher intervention” with respect to the Alice. In Judge Lourie’s opinion, a section 101 test that now routinely calls for section 102– and section 103–type analyses “require[s] attention beyond the power of the [Federal Circuit].”38

Whether the legislative fix will come remains an unanswered question heading into 2019.

Factual Issues Matter—Sometimes

Perhaps the most covered aspect of the Federal Circuit’s 2018 Alice jurisprudence is its decision in Berkheimer. There, the Federal Circuit made two potentially pro-patent pronouncements with respect to Alice. First, the Federal Circuit ruled that it is improper for a district court to base its entire Alice analysis on a single representative claim when other claims contain additional inventive limitations.39 Second, the court highlighted the important role that underlying issues of fact play in determining whether a given claim limitation is “routine and conventional” under Step 2 of the Alice analysis.40 In Berkheimer, due to genuine factual issues in light of the specification as to whether the alleged inventive concept of certain dependent claims was instead “well-understood, routine and conventional,” the Federal Circuit remanded the case back to the district court for further fact finding.41 In so doing, the court provided future patentees with a potential tool to defeat section 101 eligibility challenges.

On the heels of its Berkheimer decision, in Aatrix Software—another opinion authored by Judge Moore—the Federal Circuit went even further in addressing the fact finding that should occur before some section 101 challenges are ripe for resolution. The court highlighted the role that claim construction can and should sometimes play as a prerequisite to a district court’s section 101 analysis, particularly at the motion-to-dismiss stage.42 Like its predecessor decision in Berkheimer, the Federal Circuit in Aatrix Software vacated the district court’s section 101 determination and remanded the case for further fact finding. Of particular import ====== 287 ====== in Aatrix Software were the specific inventive concepts that the patentee alleged in a second amended complaint, and the factual issues those allegations created as to whether the challenged claims were “well-understood, routine and conventional” under Step 2 of the Alice test.43

While certainly good news for patent holders, Berkheimer and Aatrix Software have not proven to be the “get-out-of-a-motion-to-dismiss-free card” that some had hoped immediately following the decisions. Since those decisions, the Federal Circuit has not vacated any other district court section 101 finding based on factual issues and has affirmed many district court invalidations at the Rule 12 and summary judgment stage.44 And subsequent decisions have shown that where a patent claim can be generalized to long-standing human behavior, or focuses on pure data processing/organization/display, resolution upon a motion to dismiss will still be a course of action that the Federal Circuit will bless.45

Nor does the district court data discussed above demonstrate that Berkheimer has prevented district courts from granting section 101 challenges. While the decision may have had some immediate short-term effect, district court motion grant rates for software patent challenges rose throughout 2018:

Source: Docket Navigator ====== 288 ======

Trade Secrets Matter

Given the difficultly in drafting software claims that the Federal Circuit will reliably uphold, many technology companies would be well advised to introduce and maintain a robust trade secret program. Highly proprietary algorithms, for instance, if not likely to be reverse-engineered or discoverable in competitors’ software products, are often best left for the trade secret realm. This is particularly so when any benefits to disclosure and/or software patent protection are likely to be destroyed by a future court decision ruling the very same software patent claims invalid under section 101.

That some varieties of software technologies are better left for trade secret protection is nothing new; the Federal Circuit encouraging the trade secret route, to avoid the inevitable section 101 sword, is. And this is exactly what the Federal Circuit did in SAP America:

We may assume that the techniques claimed are “[g]roundbreaking, innovative, or even brilliant,” but that is not enough for eligibility.

* * *

There is, in short, nothing “inventive” about any claim details, individually or in combination, that are not themselves in the realm of abstract ideas. In the absence of the required “inventive concept” in application, the claims here are legally equivalent to claims simply to the asserted advance in the realm of abstract ideas—an advance in mathematical techniques in finance. Under the principles developed in interpreting § 101, patent law does not protect such claims, without more, no matter how groundbreaking the advance. An innovator who makes such an advance lacks patent protection for the advance itself. If any such protection is to be found, the innovator must look outside patent law in search of it, such as in the law of trade secrets, whose core requirement is that the idea be kept secret from the public.46

Given the difficulty in enforcing software patents—the Federal Circuit found patents valid under section 101 in only three 2018 cases—practitioners would be well advised to seriously consider the trade secret route before disclosing client advances to the world. ====== 289 ======

The New USPTO Guidelines Are Not Likely to Sway the Federal Judiciary

The USPTO’s new section 101 guidelines are the most promising development for patent holders in a very long time. Without question, the guidelines have significantly changed the ways that examiners in various art units are approaching section 101 rejections. That trend is likely to continue. Perhaps the bigger question is the effect that the guidelines will have on the federal judiciary’s treatment of section 101 issues, both in district courts and the Federal Circuit. While obviously not binding precedent on article III courts, will the guidelines nevertheless prove persuasive?

In this author’s judgment, the answer is no. By strictly interpreting what can qualify as an abstract idea, the USPTO’s Guidelines save many patent claims that Federal Circuit jurisprudence likely would not. Unlike the USPTO, the Federal Circuit does not strictly interpret what can qualify as an abstract idea. The Federal Circuit will thus continue to invalidate patent claims under Step 1 of Alice that would not fall within the USPTO’s abstract idea definition. Given this lack of convergence, it remains unlikely that the Federal Circuit will lean on the USPTO’s guidance or that district courts will follow suit. Thus, while the USPTO has restarted its willingness to grant patent under section 101, judicial willingness to sanction the validity of these patents may become an issue.

Conclusion

Software is ubiquitous. But being able to predict whether a given U.S. software patent is directed to subject matter that even qualifies for patenting is beyond difficult. Fraught with subjectivity, and with a heavy focus on the amorphous concept of “inventiveness,” the outcomes of judicial Alice determinations appear clear only in hindsight and are often negative. In only three instances during 2018 did the Federal Circuit even issue opinions upholding software patents under section 101.

While the Federal Circuit’s Berkheimer and Aatrix Software decisions stole much of the attention in 2018, our focus should perhaps be elsewhere. Not only have the decisions not figured significantly in district court software patent treatment, they also did not result in valid software patents. Instead, our focus should be on the fact that the Alice framework appears unworkable. At least Judges ====== 290 ====== Plager, Lourie, and Newman publicly recognize as much. And more than anything, the financial, business, and legal communities deserve predictability with respect to the patentability of software innovations. Congress, are you listening?

______________________________________________________________________

Michael Gulliford is the Founder, General Counsel, and a Managing Principal of Soryn IP Group, a patent advisory and finance firm headquartered in New York City. Michael has repeatedly been named to the list of the Leading IP Strategists in the World and is regularly asked to speak and publish on the latest patent developments. Prior to founding Soryn, Michael was a partner in the Intellectual Property group at Kirkland & Ellis LLP. A version of this article has been published in the Course Handbook for PLI’s Patent Eligibility, Prior Art and Obviousness 2019: Current Trends in Sections 101, 102, and 103.

______________________________________________________________________

1.
Alice Corp. Proprietary Ltd. v. CLS Bank Int’l, 573 U.S. 208 (2014).
2.
At the time of this article’s drafting, no 2019 Federal Circuit decisions concerning Alice had been issued.
3.
See Bilski v. Kappos, 561 U.S. 593, 601 (2010).
4.
Alice, 573 U.S. at 217.
5.
Id.
6.
Id. at 223.
7.
Id. at 218–26.
8.
In addition to the substantive opinions that the Federal Circuit issued in 2018, the Federal Circuit also issued several Rule 36 affirmances. Those decisions are outside the scope of this article.
9.
U.S. Patent & Trademark Office, 2019 Revised Patent Subject Matter Eligibility Guidance, Docket No. PTO-P-2018-0053 (Jan. 7, 2019) [hereinafter Guidelines], https://s3.amazonaws.com/public-inspection.federalregister.gov/2018-28282.pdf; see also 84 Fed. Reg. 50 (Jan. 7, 2019).
10.
The Guidelines define “mathematical concepts” as “mathematical relationships, mathematical formulas or equations, mathematical calculations.” Guidelines, supra note 9, at 9.
11.
The Guidelines define “certain methods of organizing human activity” as “fundamental economic principles or practices (including hedging, insurance, mitigating risk); commercial or legal interactions (including agreements in the form of contracts; legal obligations; advertising, marketing or sales activities or behaviors; business relations); managing personal behavior or relationships or interactions between people (including social activities, teaching, and following rules or instructions). Id. at 10.
12.
Id. at 1. The Guidelines define “mental processes” as “concepts performed in the human mind (including an observation, evaluation, judgment, opinion).” Id. at 11.
13.
Id. at 1.
14.
Id. at 1–2.
15.
Id. at 18.
16.
Id. at 19.
17.
Id. at 22–24.
18.
Id. at 23.
19.
Berkheimer, 881 F.3d at 1367 (internal quotations and citations omitted).
20.
See, e.g., Ancora Techs., 908 F.3d at 1349 (“[w]e do note . . . overlaps between some step one and step two considerations. . . .”); see also BSG Tech., 899 F.3d at 1288 (searching for inventiveness under Step 1).
21.
Berkheimer, 881 F.3d at 1367 (internal quotations and citations omitted).
22.
Core Wireless, 880 F.3d at 1363; see also Ancora Techs., 908 F.3d at 1348 (upholding claims under section 101 because the patent “rel[ies] on specific and unique characteristics of certain aspects of the BIOS that . . . were not previously used in the way now claimed”).
23.
Ancora Techs., 908 F.3d at 1349 (quoting SAP America, 898 F.3d at 1167).
24.
Interval Licensing, 896 F.3d at 1345; see also BSG Tech., 899 F.3d at 1288 (“[h]ere, the focus of BSG Tech’s claims is unrelated to how databases function . . . . The claims do not recite any improvement to the way in which such databases store or organize information.”).
25.
Core Wireless, 880 F.3d 1363.
26.
Id.
27.
BSG Tech., 899 F.3d at 1289.
28.
Interval Licensing, 896 F.3d at 1346 (internal citations omitted).
29.
Berkheimer v. HP, Inc., 890 F.3d 1369, 1371 (Fed. Cir. 2018) (internal citations omitted).
30.
See Ancora Tech., 908 F.3d at 1349.
31.
See Aatrix Software, 882 F.3d at 1127.
32.
See Data Engine Techs., 906 F.3d at 1008.
33.
Wireless, 880 F.3d at 1359.
34.
Data Engine Techs., 906 F.3d at 1008.
35.
BSG Techs., 899 F.3d at 1288 (internal quotations and citations omitted).
36.
Id. at 1008.
37.
Interval Licensing, 896 F.3d at 1350–56.
38.
Berkheimer v. HP Inc., 890 F.3d 1369, 1371, 1374–76 (Fed. Cir. 2018).
39.
Berkheimer, 881 F.3d at 1365–66.
40.
Id. at 1369–70.
41.
Id.
42.
Aatrix Software, 882 F.3d at 1125.
43.
Id. at 1128.
44.
See., e.g., SAP Am., Inc. v. InvestPic LLC, 890 F.3d 1016, 1023–24 (Fed. Cir. 2018) (holding claims ineligible at Rule 12(c) stage); Voter Verified, Inc. v. Election Sys. & Software LLC, 887 F.3d 1376, 1385–86 (Fed. Cir. 2018) (same at Rule 12(b)(6) stage); Maxon, LLC v. Funai Corp., 726 F. App’x 797, 2018 WL 1719101, at *2 (Fed. Cir. 2018) (same); Intellectual Ventures I LLC v. Symantec Corp., 725 F. App’x 976, 2018 WL 1324863, at *1 (Fed. Cir. 2018) (same at summary judgment); Automated Tracking Sols., LLC v. Coca-Cola Co., 723 F. App’x 989, 2018 WL 935455, at *5–6 (Fed. Cir. 2018) (same at Rule 12(c) stage).
45.
See, e.g., Voter Verified, 887 F.3d at 1384 (invalidating voting technology claims with parallels to long-standing human behavior); SAP America, 898 F.3d at 1167 (invalidating financial analysis data processing claims).
46.
SAP America, 898 F.3d at 1163, 1170.