by Alessandro Steinfl and Brian J. Cash

On January 7, 2019, the USPTO introduced a 2019 Revised Patent Subject Matter Eligibility Guidance in the Federal Register.

There have been a number of resources put out by the USPTO in helping practitioners understand the changes, but we thought it would be useful to offer some advice of our own along with a flowchart from the practitioner’s point of view, particularly the point of view of a practitioner who has received a rejection from an examiner.

The first step is, of course, a consideration of a step 1 rejection: that is, the examiner is rejecting the claims not on an Alice-based factor, but on a traditional “is the claim in a statutory category” basis.

If the examiner includes rejections based on Alice (i.e. step 2A and step 2B), then you have a few questions to answer. For the first half of 2A, you have to see if the claim recites anything that can be a judicial exception falls in one of the appropriate categories.The next step would be to address if the claim is integrating the abstract idea into a practical application.

Then there are the 2B (“something significantly more”) arguments to make, though there are several post-Alice guidance changes to keep in mind.

For a breakdown of those changes and a primer on how to approach them successfully, read the full article on Law360 by Steinfl+Bruno partner Alessandro Steinfl and patent attorney Brian J. Cash.

Bioinformatics has become an increasingly important tool in understanding biological processes and promoting and supporting progresses in molecular biology and many other areas of biology.

The related software involves massively complex calculations that predict the actions – folding, bonding, membrane translocation – of molecules. These software products are incredibly important in the biotech field – for example, drug design or protein folding.

And yet, in the wake of the Alice decision, we are observing a constant barrage of rejections from the USPTO under 35 USC 101 claiming that since bioinformatics methods are computational in nature and do not “improve the computer”, they are not eligible for patentability even if they are novel and non-obvious. A common point made in these 35 USC 101 rejections is that the software does not “improve the computer or computer technology.” However, it is important to remember that Alice also notes that method steps that “effect an improvement in any other technology or technical field” can satisfy the “significantly more” criteria for patentable subject matter. There is no apparent basis in Alice or other court decisions that would support a conclusion that if a method does not improve the computer” is not eligible for patent protection if it provides “an improvement in other technology or technical field”. Clearly, bioinformatics software improves the technical field of molecular biology.

Still, rejections of bioinformatics might be due to the way claims are written (of course) as well as due to the uncertainty or a narrow reading of what “effect and improvement in any other technology or technical field” means. Does it require a hardware component, like the thermocouple of Diamond v. Diehr? This seems unlikely, because the court in Alice didn’t say “effect an improvement in a machine of any other technology”. And wouldn’t an improvement to a “technological field” be broader than that?

Therefore, we draft claims in which the steps of an inventive biosoftware method are characterized by transformative technical features so that the steps and related combination are tailored to the specific features of the biological environment that is simulated, such as molecule modeling, changes in the related residues or moieties in view of environmental conditions, molecule interactions and the like.

However, what we sadly observe is that some Examiners of the USPTO look at bioinformatics software and can’t view the claims as being anything more than being “directed to” computations, data manipulations, and math – no matter how the claims are written.

The Examiner dismisses technical features such as representation of spatial locations of a biomolecule in a biological environment or representation of changes in such location due to molecule interactions with the environment, and just interprets those claims as processing information and converting one form of numerical representation into another by organizing information through “mathematical concepts such as mathematical algorithms, mathematical relationships, mathematical formulas, and calculations.

Such an approach de facto ignores looking at the claims “as a whole” and misses seeing the technical features of the claims – method steps that detail bioinformatics computations that specifically produce a result useful only to predicting the behavior of molecules – that lead the claim to actually being directed to an improvement to a technical field.

Additionally, the USPTO puts this software claims into a catch-22 scenario whereby the technical features included in the steps of the method claims are ignored and adding steps of using the results of the software (such as drug production) is dismissed as merely stating “apply it” to method, and the omission of such a step is pointed out as lacking some sort of “transformation” in the technical field.

If only the USPTO examiners would take a step back and look at how integrated claims written as indicated above and considered as a whole, are in the technical fields of bioinformatics and molecular biology, then they would agree that this type of software should be observed as satisfying the two-part test of Alice. Even if the Examiners still disagree, they need to point to the court cases that support their position, since the USPTO does not have the power to create new forms of judicial exception to patent eligibility.

Thankfully, there has been a recent indication that the USPTO might be going in this direction. In late November of 2017, there was a USPTO PTAB appeal decision (2017-003914; for application 13/822,231) where the Board stated that the examiners “”must be careful to avoid oversimplifying the claims” by looking at them generally and failing to account for the specific requirements of the claims” (quoting McRO). They also pointed out that the bioinformatics software claims were “focused on a specific articulated improvement in protein modeling” and were “distinguishable from those in Alice and related cases, in which the computer-implemented method was responsible for merely “organizing [existing] information into a new form” or carrying out a previously-known and fundamental economic practice.” Hopefully, this type of analysis will extend to other applications as well.

The IP portfolio of an entire sector of industry and R/D is being wiped out for no valid reason other than the grey morass that was left in the wake of Alice.

As USPTO Director Andre Iancu wrote in his paper “Machines and Transformations: The Past, Present, and Future Patentability of Software” (concerning the Bilski case), “Whatever the merits of various arguments regarding the patentability of business methods, the patentability of software processes, which are at the heart of innovation in our Information Age, at least deserves separate consideration.” And, likewise, we hope that the exclusion of economics-based software in Alice does not impede the patentability of technologically based software methods.

The Supreme Court will decide two patent cases on the merits in the October 2016 term of the Court. These cases are:
1. Samsung Electronics Co. v. Apple, Inc., ___ U.S. ___, 136 S. Ct. 1453, 194 L. Ed. 2d 549 (March 21, 2016) (granting petition for certiorari “limited to Question 2 presented by the petition”); and
2. SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, ___ U.S. ___, 136 S. Ct. 1824, 194 L. Ed. 2d 829 (May 2, 2016) (granting petition for certiorari).
The Court heard oral argument in the Samsung case on October 11, 2016. The official transcript of the argument is available here. The question presented for review is “[w]here a patented design is applied only to a component of a product, should an award of infringer’s profits be limited to profits attributable to that component?” This is the case in which Samsung’s entire profits from selling its accused smartphones were awarded to Apple for infringing Apple’s design patents for the front face of the iPhone and its graphical user interface. We published a news item, about the case when the Supreme Court decided to grant review earlier in 2016. We published an earlier news item, about the billion-dollar jury verdict in favor of Apple.

The SCA Hygiene case is set for oral argument on November 1, 2016. The question presented for review is “[w]hether and to what extent the defense of laches may bar a claim for patent infringement brought within the Patent Act’s six-year statutory limitations period, 35 U.S.C. § 286.” We published a news item, about the Supreme Court’s decision earlier in 2016 to take this case up for review. We also published a news item, about the decision en banc of the U.S. Court of Appeals for the Federal Circuit in this case. The Federal Circuit decided that the affirmative defense of laches (due to unreasonable delay by the plaintiff in bringing suit) was available in patent infringement lawsuits despite the existence of a six-year statute of limitations for collecting damages due to patent infringement.

The Court heard argument (the argument’s audio is available here) on April 25, 2016 and less than two months later issued its judgment and opinion. Justice Breyer wrote the opinion for a unanimous Court with respect to parts I and III and for the Court for part II.

The Court addressed two issues in deciding the case. First, does 35 U.S.C. § 314(d) bar a court from considering whether the Patent Office wrongly determined to institute an inter partes review when it did so on grounds not specifically mentioned in a third party’s review request? The Court concluded that the first provision, though it may not bar consideration of a constitutional question, does bar judicial review of the kind of “mine-run” claim at issue in Cuozzo Speed Technologies, involving the Patent Office’s decision to institute inter partes review. (The Court sometimes uses the term “mine-run” when others likely would use the term “run of the mill.” The first time the Court did so was in Monroe v. Pape, 365 U.S. 167 (1961) (opinion for the Court written by Douglas, J.), and in forty-four cases since then).

The second issue is whether 35 U.S.C. § 316(a)(4) authorizes the Patent Office to issue a regulation stating that the agency, in inter partes review, shall construe a patent claim according to its broadest reasonable construction in light of the specification of the patent in which it appears. The Court concluded that the Patent Office was authorized to issue the regulation.
With respect to the first issue, Garmin’s petition for inter partes review asked the Patent Trial and Appeal Board (PTAB) to institute review of claim 17 of the Cuozzo patent. The PTAB ordered inter partes review of claims 10 and 14 as well and on the basis of the same prior art as for claim 17. The Patent Office argued that the claims 10, 14, and 17 were logically interlinked (claim 17 depends on claim 14 which in turn depends on claim 10) and “a petition need not simply repeat the same argument expressly when it is so obviously implied” even though 35 U.S.C. § 312 requires that a petition for inter partes review must identify, “in writing and with particularity, each claim challenged, the grounds on which the challenge to each claim is based.

The Court agreed, citing the language of 35 U.S.C. § 314(d), which states that the “determination by the [Patent Office] whether to institute an inter partes review under this section shall be final and nonappealable [emphasis added].” The Court also was persuaded by what it considered an important Congressional objective, namely, “giving the Patent Office significant power to revisit and revise earlier patent grants” which would be undercut if the “agency’s final decision could be unwound under some minor statutory technicality related to its preliminary decision to institute inter partes review.” Furthermore, “the existence of similar provisions in this, and related, patent statutes reinforces our conclusion,” namely the non-appealability of determinations concerning petitions for inter partes reexamination.

The Court noted that it applies a “strong presumption” in favor of judicial review when it interprets statutes, including statutes that may limit or preclude review. Nevertheless, the “No Appeal” provision’s language forbids an appeal that attacks a determination whether to institute review because it is “an ordinary dispute about the application of certain relevant patent statutes concerning the Patent Office’s decision to institute inter partes review.” Thus, “we emphasize that our interpretation applies where the grounds for attacking the decision to institute inter partes review consist of questions that are closely tied to the application and interpretation of statutes related to the Patent Office’s decision to initiate inter partes review.”

The Court left open appeals from determinations whether to institute review based upon disputes that are not ordinary. “[W]e need not, and do not, decide the precise effect of §314(d) on appeals that implicate constitutional questions, that depend on other less closely related statutes, or that present other questions of interpretation that reach, in terms of scope and impact, well beyond ‘this section.’” Thus, the Court does not categorically preclude review of a final decision where a petition fails to give “sufficient notice” such that there is a due process problem with the entire proceeding, nor does its interpretation enable the agency to act outside its statutory limits by, for example, canceling a patent claim for “indefiniteness under §112” in inter partes review. (A petition for inter partes reviews must be based only on a ground under 35 U.S.C. §§ 102 or 103 and only on the basis of prior art. 35 U.S.C. § 311(b).)

Justice Alito, joined by Justice Sotomayor, filed an opinion concurring in part but dissenting in part with respect to whether the Patent Trial and Appeal Board’s decision to institute inter partes review is subject to judicial review. The Court dismissed the argument in Justice Alito’s opinion that the “No Appeal” provision forbids only interlocutory appeals but permits review of the decision to grant a petition during a final appeal from a decision on the merits.

With respect to the second issue, Cuozzo argued that the Patent Office lacked the legal authority to issue its regulation requiring the agency, when conducting an inter partes review, to give a patent claim “its broadest reasonable construction in light of the specification of the patent in which it appears.” 37 C.F.R. § 42.100(b). (The Patent Office amended this regulation on April 1, 2016 to add this alternative:“[a] party may request a district court-type claim construction approach to be applied if a party certifies that the involved patent will expire within 18 months from the entry of the Notice of Filing Date Accorded to Petition.”) Cuozzo contended that the Patent Office should, like the courts, give claims their “ordinary meaning . . . as understood by a person of skill in the art.”

The Court, however, pointed out that the statute contains a provision that grants the Patent Office authority to issue “regulations . . . establishing and governing inter partes review under this chapter.” 35 U.S.C. § 316(a)(4). The Court held that this statute gives the Patent Office the legal authority to issue its broadest reasonable construction regulation. The Court interpreted Congress’ grant of rulemaking authority in light of the Court’s decision in Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837, 842 (1984).

The “Chevron deference” doctrine requires that when a statute is clear, an agency must follow the statute, but when a statute leaves a gap or is ambiguous, the Court typically interprets it as granting the agency leeway to enact rules that are reasonable in light of the text, nature, and purpose of the statute. The Court has “recognized a very good indicator of delegation meriting Chevron treatment in express congressional authorizations to engage in the process of rulemaking or adjudication that produces regulations or rulings for which deference is claimed.” United States v. Mead Corp., 533 U. S. 218, 229 (2001). The statute allows the Patent Office to issue rules “governing inter partes review,” 35 U.S.C . § 316(a)(4), and the broadest reasonable construction regulation is a rule that governs inter partes review.

The Court therefore found an express delegation of rulemaking authority, a “gap” that rules might fill, and “ambiguity” in respect to the boundaries of that gap. Applying Chevron deference, the Court concluded that that the regulation represented a reasonable exercise of the rulemaking authority that Congress delegated to the Patent Office.

Cuozzo and the Federal Circuit judges that dissented from the denial of en banc review argued that an inter partes review was like (or a surrogate for) patent litigation in the district courts because of similarities in procedure and the fact that a decision to cancel patent claims normally has the same effect as a district court’s determination of invalidity of patent claims. They argued the PTAB should apply the standard of construction of patent claims used in court, namely, the ordinary meaning construction. The Court disagreed with this argument because “in other significant respects, inter partes review is less like a judicial proceeding and more like a specialized agency proceeding” and the “purpose of the [inter partes review] proceeding is not quite the same as the purpose of district court litigation.”

In the examination of patent applications the broadest reasonable construction is properly employed to protect the public from overly broad claims and give the applicant a fair chance to draft a precise claim that will qualify for patent protection. Cuozzo argued that in inter partes review the broadest reasonable construction standard may help protect certain public interests, but the patent owner has no absolute right to amend any challenged patent claims. The Court was not impressed with this argument because “[t]he process however, is not as unfair as Cuozzo suggests. The patent holder may, at least once in the process, make a motion to do just what he would do in the examination process, namely, amend or narrow the claim.” That motions to amend claims in inter partes review proceedings are rarely granted “may reflect the fact that no amendment could save the inventions at issue, i.e., that the patent should have never issued at all” (at least with those claims).

Cuozzo also argued that the use of the broadest reasonable construction standard in inter partes review, together with use of an ordinary meaning standard in district court, might produce inconsistent results and cause added confusion. Thus, a district court may find a patent claim to be valid, and the agency may later cancel that claim. The Court agreed that this could happen but its possibility, however, has long been present in the patent system with its different tracks for the review and adjudication of patent claims. The different burdens of proof on the challenger in the courts as compared to inter partes review mean that “the possibility of inconsistent results is inherent to Congress’ regulatory design.”

Justice Thomas filed a concurring opinion in Cuozzo expressing his desire (expressed previously, see, e.g., Michigan v. Environmental Protection Agency, 576 U.S. ___, 135 S. Ct. 2699, 2712, 192 L. Ed. 2d 674 (2015) (Thomas, J. concurring)) that “this Court should reconsider that fiction of Chevron and its progeny.” He concurred in the judgment in Cuozzo, however, because he believed the Court effectively asked whether the rulemaking was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,” in conformity with the Administrative Procedure Act, 5 U. S. C. § 706(2)(A).

The study concluded that the TTAB had conducted 192 trials of inter partes review proceeding in which the patent owner filed motions to amend the claims. Due to settlement, original claims being held patentable, and the motions being solely to cancel claims (easily granted), the TTAB actually decided motions to amend in 118 trials. Two of those motions were granted and four granted in part. The TTAB therefore denied ninety-five percent of the motions to amend.

The Federal Circuit recently decided for the first time that the PTAB was wrong to deny a motion to amend the claims. In Veritas Techs. LLC v. Veeam Software Corp., ___ F.3d ___, 2016 U.S. App. LEXIS 15978 (Fed. Cir. August 30, 2016) the court vacated the PTAB’s denial of the patent owner’s motion to conditionally amend the claims because the Board’s decision was “arbitrary, capricious, or otherwise not in accordance with the law” under the Administrative Procedures Act (specifically, 5 U.S.C. § 706(2)(A)).

The standards for motions to amend the claims in inter partes review actions, and how the PTAB should act if the patent challenger does not contest such a motion or does so inadequately, are the subject of a rehearing en banc by the Federal Circuit. In re Aqua Products, Inc., 2016 U.S. App. LEXIS 14862, 119 U.S.P.Q. 2d (BNA) 1882 (Fed. Cir. August 12, 2016)(vacating the panel opinion reported at 823 F.3d 1369 (Fed. Cir. May 25, 2016) and granting motion for rehearing en banc). The questions for briefing are:

• When the patent owner moves to amend its claims under 35 U.S.C. § 316(d), may the PTO require the patent owner to bear the burden of persuasion, or a burden of production, regarding patentability of the amended claims as a condition of allowing them? Which burdens are permitted under 35 U.S.C. § 316(e)?
• When the petitioner does not challenge the patentability of a proposed amended claim, or the Board thinks the challenge is inadequate, may the Board sua sponte raise patentability challenges to such a claim? If so, where would the burden of persuasion, or a burden of production, lie?