Trading Technologies International, Inc. v. IBG LLC, Interactive Brokers, LLC (Fed. Cir. April 19, 2019).  Panel: Moore (author), Mayer, and Linn  Download TTI v IBG (April 18, 2019)

Trading Technologies International, Inc. v. IBG LLC, Interactive Brokers, LLC (Fed. Cir. April 30, 2019), Panel: Moore (author), Clevenger and Wallach.  Download TTI v. IBG (April 30, 2019)

This is a long post since it covers two opinions addressing Covered Business Method (CBM) review for business method claims, plus discussion of two related opinions for good measure.  tl;dr: The Federal Circuit affirmed the PTAB that the claims are subject to CBM review and are directed to ineligible subject matter.  Along the way it clarified some its jurisprudence interpreting the threshold CBM review regulation.

A potential conflict disclosure at the outset: MBHB, which represented Trading Technologies on these appeals, is the primary financial sponsor of PatentlyO.

On to the writeup…

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Background

Both April opinions in TTI v. IBG involve the same procedural posture, the same general subject matter (displaying market information to traders), and the same issues on appeal: whether the claimed inventions are subject to the “technological inventions” exception to CBM review and whether they claim patent eligible subject matter.  In both cases, the PTAB concluded that the patents were subject to CBM review and held the patents directed to patent ineligible subject matter.  Of the two opinions, the court’s April 18, 2019 opinion is meatier on both issues, so I’ll mainly focus that one.

The two April opinions also provide a counterpoint to the court’s February nonprecedential opinion involving the same parties, the same area of technology, the same procedural posture (appeal from Covered Business Method review decisions by the PTAB), and for some of the patents, the same outcome at the PTAB: lack of subject matter eligibility.   See TTI v. IBG (Fed. Cir. Feb 13, 2019) (nonprecedential).  Writing per curiam, the panel in the February opinion (Judges Lourie, Moore and Reyna) held the patents were for “technological inventions,” and thus were not properly subject to CBM review.  In the two April opinions, overlapping panels (Judges Moore, Mayer and Linn in one and Judges Moore, Clevenger and Wallach in the other) reached the opposite conclusion on different sets of GUI patents.

“Patents for Technological Inventions”

A threshold question for CBM review is whether the patents-in-suit are “patents for technological inventions.   Generally, CBM review is available “a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service…”  America Invents Act, § 18(a)(1)(E).  However, this mechanism comes with an important caveat: “…except that this term does not include patents for technological inventions.”  Id.

The USPTO regulation implementing the “technological invention” exception states that:

In determining whether a patent is for a technological invention solely for purposes of the Transitional Program for Covered Business Methods (section 42.301(a)), the following will be considered on a case-by-case basis: whether the claimed subject matter as a whole recites a technological feature that is novel and unobvious over the prior art; and solves a technical problem using a technical solution.

37 C.F.R. § 42.301(b). In Versata v. SAP, 793 F.3d 1306 (Fed. Cir. 2015), the Federal Circuit criticized the regulation while offering a sliver of guidance.  “In short, neither the statute’s punt to the USPTO nor the agency’s lateral of the ball offer anything very useful in understanding the meaning of the term ‘technological invention,'” the court wrote, concluding that “we agree with the PTAB that this is not a technical solution but more akin to creating organizational management charts.”  Id. at 1326, 1327.  

In a subsequent opinion, the court clarified the regulation as involving a “prong”-type analysis: that is, if a patent fails to meet either the “technological feature” or the “solves a technical problem using a technical solution,” it is not a “technological invention.”  See Apple v. Ameranth, 842 F.3d 1229, 1240 (Fed. Cir. 2016) (“We need not address this argument regarding whether the first prong of 37 C.F.R. § 42.301(b) was met, as we affirm the Board’s determination on the second prong of the regulation—that the claimed subject matter as a whole does not solve a technical problem using a technical solution.”)  The court did not elaborate on the meaning of the “solves a technical problem using a technical solution” language.

Meaning of “solves a technical problem using a technical solution”

The two April TTI v. IBG decisions shed additional light on the meaning of the “technical problem” and “technical solution” prong, drawing a distinction between the practice of a financial product as opposed to a technological invention:

“TT argues the inventions addressed technical problems in the way prior art GUI tools were constructed and operated. It claims the ’999 patent addressed problems related to speed, efficiency, and usability, and the ’056 patent. It claims the ’999 patent addressed problems related to speed, efficiency, and usability, and the ’056 patent addressed problems related to intuitiveness, visualization, and efficiency.”

April 18, 2019 Slip Op. at 8-9.  The Federal Circuit held that this is not a technical solution to a technical problem:

“We agree with the Board that the patents relate to the practice of a financial product, not a technological invention.  The specification states that a successful trader anticipates the market to gain an advantage, ’999 patent at 1:20–26, but doing so is difficult because it requires assembling data from various sources and processing that data effectively, id. at 1:51–54. The invention solves this problem by displaying trading information “in an easy to see and interpret graphical format.” Id. at 2:3–6. The specification makes clear that the invention simply displays information that allows a trader to process information more quickly.”

Ultimately, “This invention makes the trader faster and more efficient, not the computer.  This is not a technical solution to a technical problem.”  April 18, 2019 Slip Op. at 9 (emphasis in original).

Additional language in the opinion reinforces this line between business problems and solutions and technological problems and solutions.  In rejecting a challenge to the PTAB’s decision not to consider the testimony of TTI’s expert, the court wrote “Nothing in his declaration asserts that the claimed interface did anything other than present information in a new and more efficient way to traders. Even if the Board had considered this testimony, it could not have reached a different conclusion.”  April 18, 2019 Slip Op. at 10.  Analyzing another GUI patent, the court stated that providing the trader with information in the claimed manner “is focused on improving the trader, not the functioning of the computer.”

“Indeed, the specification acknowledges that the invention ‘can be implemented on any existing or future terminal with the processing capability to perform the functions described,’ id. at 4:4–6, and ‘is not limited by the method used to map the data to the screen display,’ which ‘can be done by any technique known to those skilled in the art,’ id. at 4:64–67.”

The court’s April 30 opinion, reached the same conclusion on a different patent using similar reasoning.  “Merely providing a trader with new or different information in an existing trading screen is not a technical solution to a technical problem,” the court wrote, before repeating the language about the method focusing on “improving the trader, not the functioning of the computer.”   Apr. 30, 2019 Slip Op. at 7.

One final notable aspect of this set of the opinions: By affirming the PTAB on the second prong of the “technological inventions” regulation, the Federal Circuit avoided needing to address TTI’s argument that “Versata set aside the novelty and nonobviousness language of the first prong of the regulation….”  Apr. 18, 2019 Slip Op. at 8.  That issue remains unsettled.

Patent Eligible Subject Matter

The Federal Circuit affirmed the PTAB on the issue of lack of patent eligible subject matter for all the patents-in-suit in a fairly routine review.  The court conducted the Alice two-stage analysis, concluding that the claims were directed to abstract ideas and did not include an inventive concept.  The most interesting aspect of this component of the court’s analysis is the relationship with the 2017 TTI v. CQG nonprecedential opinion discussed below.

Constitutional Challenges: Not preserved by four sentences

The court declined to address TTI’s constitutional challenges, which consisted of “a total of four sentences in each of its opening briefs” based on “a right to a jury under the Seventh Amendment, separation of powers under Article III, the Due Process Clause, and the Taking Clause.”  “Such a conclusory assertion with no analysis to the underlying challenge is insufficient to preserve the issue for appeal.”  Id.

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Relationship with Prior Decisions

As I noted at the outset, these opinions represent a counterpoint to the court’s February nonprecedential opinion, although since the April decisions are precedential and the February one was not, there isn’t direct legal tension.

The February opinion involved a review of a set of CBM review PTAB decisions finding that the both the two patents involved an even earlier opinion, Trading Technologies International, Inc. v. CQG, Inc., 675 F. Appx 1001 (Fed. Cir. 2017) (nonprecedential), and two other patents were not “technological inventions” and therefore were subject to CBM; in the subsequent CBM review, the PTAB held that the two patents from TTI v. CQG were directed to patent eligible subject matter but the other two patents were not.  As with the April decisions, all the patents involved GUI claims.

The Federal Circuit reversed as to the institution decision on all four patents.  For the two patents involved in TTI v. CQG, the Federal Circuit reasoned that because the two patents were directed to patent eligible subject matter, they must be “technological inventions.”  For the other two patents, the Federal Circuit reasoned that “because we see no meaningful difference between the claimed subject matter [of the two sets of patents] for purposes of the technological invention question, the same conclusion applies in those cases as well.  (This is puzzling to me, since the PTAB held that the first set of patents were directed to patent eligible subject matter but the second set were not.)

There’s also the tension between the subject matter eligibility determination in TTI v. CQG and the lack of subject matter eligibility determinations in the two April 2019 TTI v. IBG decisions, but I’ll leave that for others to opine on.  The Federal Circuit itself declined TTI’s invitation to get into the specifics of how its April 2019 decisions relate to the earlier decisions:

“TT argues that because nonprecedential decisions of this court held that other TT patents were for technological inventions or claimed eligible subject matter, we should too. We are not bound by non-precedential decisions at all, much less ones to different patents, different specifications, or different claims. Each panel must evaluate the claims presented to it. Eligibility depends on what is claimed, not all that is disclosed in the specification.”

April 18, 2019 Slip Op. at 19.

Guest post by Professor Joshua D. Sarnoff of DePaul College of Law.  Below, he responds to Jeremy C. Doerre, Is There Any Need to Resort to a § 101 Exception for Prior Art Ideas?, 2019 PatentlyO L.J. 10. (2019.Doerre.AnyNeed)

In Is There Any Need to Resort to a § 101 Exception for Prior Art Ideas, Mr. Doerre states that “[n]otably, however, there is no similar need to resort to use of an implicit exception to prevent undue preemption of known prior art abstract ideas, as 35 U.S.C. § 102 and 35 U.S.C. § 103 already ensure that claims do not disproportionately ‘“t[ie] up the use of [] underlying” [prior art] ideas.’ This can be seen in that, under 35 U.S.C. § 103, a claim must be inventive over all known prior art ideas, and cannot simply be an obvious application of a prior art abstract idea, or an obvious combination of several prior art abstract ideas.”  Of course, since Section 103 often requires detailed factual evaluations not readily resolved early in litigation, the pressure to use Section 101 remains even for ineligible subject matter that is in fact prior art against the applicant.  And unlike for Section 103, the nature of the creative advance over that discovery may be readily apparent on the face of the patent’s disclosure (particularly where it lies in the discovery itself and thus there is no meaningful additional creativity to render the practical application non-obvious).  But courts are unlikely to grant motions to dismiss under Section 103, and for some bizarre reason we keep giving this ultimate question of law to juries.  Further, Section 103’s obviousness standard in fact is not much clearer than Section 101 standards.

But the important point is that Section 101 is needed for precisely the case Mr. Doerre avoids, when the ineligible discovery is not prior art against the applicant. Mr. Doerre would be absolutely correct that we do not need to use Section 101 if Section 103 could do the job (of excluding uncreative applications of ineligible discoveries in the three categories of excluded subject matter – which are judicial interpretations of the meaning of “invention or discovery” and are not “judicial exceptions” to Section 101 subject matter).  But Section 103 cannot do that job as current written, even though both provisions derived from the same statutory section under the pre-1952 Act.  And that is because such ineligible discoveries are not normally among the categories of Section 102 prior art as applied to an applicant who is also the discoverer of that ineligible subject matter.

As I have written before (see https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1757272 and the briefs for amici law professors that I filed in Bilski, Mayo, and Myriad), the ineligible subject matter is often discovered by the applicant himself or herself, and thus does not qualify as Section 102 prior art for Section 103 obviousness analysis.  If it did, then 103 in fact would be able to do the job, although given the tremendous uncertainty over what qualifies as a non-obvious advance under Section 103 we would still have roughly the same amount of uncertainty in the law.  Further, no person who objects to using Section 101 to exclude categorically ineligible discoveries claimed as practical applications thereof would be the happier if we were to amend Section 102 to permit Section 103 to do the job now being performed (and only capable of being performed) by Section 101.  This is because then we would just use obviousness law to have to make the difficult decisions as to whether the claim as a whole represents a non-obvious advance over the ineligible discovery while treating the discovery as prior art against the applicant.  And as just noted, we don’t have a clear theory of how much creativity constitutes a non-obvious advance.  Although the amicus brief I filed for law and economics professors in KSR sought to have the Court explicitly adopt a time and money threshold of ordinary creativity so as to create that clear theory, predictably the Supreme Court declined the invitation to make the law clearer (while still correcting the errors of analysis of the Federal Circuit in assessing what constitutes an “obvious” advance over the prior art of record).

Further, as Professor Katherine Strandburg has persuasively explained (see https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2196844) and as the recent and less recent history clearly reflects, the current concern (since Benson) with preemption is not in fact either the source of the current eligibility doctrine nor the grounds for finding any practical applications to be ineligible.  As I explained in both the cited paper and briefs noted above, non-preemption is a consequence of having an inventive application of ineligible subject matter; lack of preemption says nothing about whether the application is in fact inventive in light of the discovery of such ineligible subject matter.  Consequently, were preemption of the entire set of applications of ineligible discoveries actually the concern driving application of the doctrine, none of the claims held invalid by the Supreme Court or the Federal Circuit should have been held invalid, as all those claimed specific applications did not preempt many other things that might have been claimed when employing the ineligible discoveries. (Of course, some of those held-to-be invalid claims may have covered all of the valuable, then-known applications.  But the Supreme Court had held in the Telephone Cases that claiming all valuable applications was perfectly fine, so long as the claims reflected the actual “invention” – meaning, at the time, a creative advance over ineligible subject matter).  Parker v. Flook’s terminology made this quite clear, requiring “some other inventive concept in its application” than mere (i.e., uncreative) application of the categorically ineligible discovery.  Flook’s language (and approach) was explicitly reaffirmed by Mayo’s recitation of a requirement for an “inventive concept” (notwithstanding the failure of the Supreme Court to explicitly acknowledged that Diamond v. Diehr had impliedly overruled Flook on this point, and that Mayo has now impliedly overruled Diehr on this point by reinstating Flook.  That Mayo also improvidently reiterated Benson’s preemption rationale without applying it in any way in the analysis is simply another example of uncareful opinions of the Supreme Court that engender further confusion rather than clarifying the law.  As Professor Strandburg has suggested, we would do well to simply ignore the “preemption” language and focus on the real question, which Professor Jeffrey Lefstin has correctly described (see https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2398696) of whether we want a standard of inventive application or only of practical application.  (Although I disagree with Professor Lefstin in regard to whether Funk Brothers was in fact the first instance of inventive application, we agree that the 1952 Act did not clearly overrule Funk Brothers.  This is important so that people will not continue to argue that Giles Rich was correct in his later revisionist history (see https://books.google.com/books/about/Laying_the_Ghost_of_the_invention_Requir.html?id=xH1etwAACAAJ) that  all questions of inventive creativity were placed in Section 103 by the 1952 Act, notwithstanding that P.J. Federico, who was the other principal co-author of the 1952 Act, argued the opposite – successfully – in the Application of Ducci case, 225 F.2d 683 (C.C.P.A. 1955) that Section 101’s “process” category (incorporating Section 100(b)’s definition of “process”) continued the “analogous use” test of inventive creativity requirement for claimed processes that the Supreme Court had articulated in Ansonia Brass & Copper Co. v. Electrical Supply Co., 144 U.S. 11 (1892)).

In summary, Mr. Doerre is simply wrong that Section 103 can do the job as currently written.  But if it could, he would be no happier with the state of the law, so long as inventive application remained the law for what constitutes an eligible (or a patentable) “invention,” and all without regard to “preemption.”  Should legislation move forward to eliminate the requirement for inventive application, we will have to learn if it in fact is a requirement of constitutional stature in granting authority to “inventors for their discoveries” (or is simply like the dicta in Graham v. John Deere, 386 U.S. 1, 6 (1966), that Congress may not remove inventions that have entered the public domain by granting patents on them – which the Supreme Court subsequently rejected in the copyright context as a constitutional limitation on legislative power in Golan v. Holder, 565 U.S. 302, 323-24 (2012) (quoting Eldred v. Ashcroft, 537 U.S. 186, 202 n.7 (2003)).  But first, Congress would have to enact such legislation, and there are good reasons not to eliminate the inventive application requirement wholly without regard to the politics of which industries’ oxen will be gored thereby.  And let’s hope that if Congress does go there, that Congress is careful not to thereby permit aesthetic creativity to provide the “practical application” that thereby authorizes the grant of a utility patent as novel and nonobvious subject matter (whenever the aesthetic contribution to the claimed invention functionally interacts with the substrate that forms the remainder of the “claim as a whole,” so that the printed matter doctrine will not apply and thus the aesthetic creativity will thereby prevent a finding of non-obviousness, so we will end up with a design patent on steroids issued as a utility patent).

Disclosure statement: I have no current financial interest in the issues addressed.

by Dennis Crouch

Acorda Therapeutics, Inc., v.  Roxane Laboratories, Inc. (Supreme Court 2019)

Obviousness is the core doctrine of patentability and primary focus of both patent examination and post issuances PTAB challenges.  In this case, Acorda has asked the U.S. Supreme Court to spend some time on this important doctrine — and particularly consider the role of objective indicia of nonobviousness such as “commercial success, long felt but unsolved needs, [and] failure of others.” Quoting Deere.

The question presented is whether objective indicia of nonobviousness may be partially or entirely discounted where the development of the invention was allegedly “blocked” by the existence of a prior patent, and, if so, whether an “implicit finding” that an invention was “blocked,” without a finding of actual blocking, is sufficient to conclude that an infringer has met its burden of proof.

The infringement lawsuit was triggered when Roxane (and others) filed Abbreviated New Drug Applications (ANDAs) with the FDA to start making generic versions of Acorda’s drug treatment for multiple sclerosis (Ampyra). Roxane successfully defended the lawsuit by arguing that the asserted claims were obvious.

For the obviousness analysis, the patentee Acorda provided evidence of commercial success and long felt but unmet need that was tied to the invention at issue. However, the Federal Circuit found that those secondary factors did not apply because of a broader blocking-patent already exclusively licensed to Acorda.

The setup here begins with the fact that Acorda is the exclusive licensee of a broad patent for treating 4-AP to treat MS (Elan patent). The Elan patent has now expired, but it was firmly in place as Acorda conducted its research and obtained FDA approval. This petition here focuses primarily on four follow-on patents obtained by Acorda covering tweaks to the treatment plan. Despite the tweaks, it appears that Elan’s broad patent still covers the drug treatment at issue here.  I.e., Elan’s patent is a “blocking patent.”

When it came to the secondary indicia of nonobviousness, the Federal Circuit majority determined that a key reason why Acorda was able to do research on its four follow-on patents is that it was protected by the blocking patent — no other company was ready to risk infringement liability to do the research.  In other words, the commercial success, failure of others, and recognized but unmet need were all due to the Elan patent’s chilling effect on competition. From the majority:

“The risk of infringement liability for marketing in the US would have provided and independent incentive [for third parties] not to develop the invention of the Acorda patents, even if those inventions were obvious.”

The decision in Acorda falls in line with the court’s 2005 decision in Merck & Co. v. Teva Pharmaceuticals USA, Inc., 395 F.3d 1364 (Fed. Cir. 2005) (en banc denied; cert denied). In that case, the Federal Circuit also held that a prior patent that precluded market entry was the cause of Merck’s commercial success — not the invention’s ingenuity.

Full Panel Denies Rehearing in Fosamax Patent Case

In its brief, Acorda provides its legal case:

The Federal Circuit’s invocation and expansion of its judicially manufactured blocking-patent doctrine to negate Acorda’s “significant,” “convincing,” and unrefuted evidence of nonobviousness is plainly irreconcilable with this Court’s decision in Graham v. John Deere Co., 383 U.S. 1 (1966), which established that an inquiry into commercial success, failure of others, and long-felt but unmet need is an important protection against hindsight bias in the obviousness analysis. As Judge Newman recognized in her dissent—and as Federal Circuit judges have emphasized in prior dissents highlighting the blocking-patent doctrine’s deficiencies—the elimination of that essential safeguard makes it far more likely that courts will submit to the “temptation” of invalidating patents that are obvious only when viewed through the lens of the patents’ own teachings.

The Federal Circuit’s application of its blocking-patent doctrine in this case was particularly problematic because the court of appeals identified no evidence that anyone was actually deterred by the Elan patent from researching low-dose uses of 4-AP—and instead shifted the burden of proof to Acorda to “supply evidence” to negate the district court’s “implicit finding” of blocking.  In so doing, the Federal Circuit upended the clear-and-convincing-evidence burden of proof for invalidity challenges that this Court recognized in Microsoft Corp. v. i4i Limited Partnership, 564 U.S. 91, 101–02 (2011), and obliterated the presumption of validity that Congress codified in the Patent Act, 35 U.S.C. § 282(a).

Read the petition here: Link.

The following excerpt comes from Dir. Iancu’s recent speech in Chicago where he discussed his proposal for expanding Section 101 patent eligibility. – DC  (more…)

by Dennis Crouch

As part of the court’s en banc denial in Berkheimer v. Hp Inc., 2018 U.S. App. LEXIS 14388 (Fed. Cir. 2018), Judges Lourie and Newman joined together in an interesting concurring opinion that argues for some higher power to revisit the doctrine of patent eligibility to provide clarification and policy guidance.  The opinion is republished below:

Lourie, Circuit Judge, with whom Newman, Circuit Judge, joins, concurring in the denial of the petition for rehearing en banc.

I concur in the court’s declining to rehear this case en banc. There is plausibility to the panel holding that there are fact issues potentially involved in this case concerning the abstract idea exception to patent eligibility. And the panel, and the court, are bound to follow the script that the Supreme Court has written for us in § 101 cases.

However, I believe the law needs clarification by higher authority, perhaps by Congress, to work its way out of what so many in the innovation field consider are § 101 problems. Individual cases, whether heard by this court or the Supreme Court, are imperfect vehicles for enunciating broad principles because they are limited to the facts presented. Section 101 issues certainly require attention beyond the power of this court.

We started from the statute that provides for patents on “any new and useful process, machine, manufacture, or composition of matter.” 35 U.S.C. § 101. The Supreme Court put a gloss on this provision by excluding laws of nature, natural phenomena, and abstract ideas. Le Roy v. Tatham, 55 U.S. (14 How.) 156, 174-75 (1852) (“[A] principle is not patentable. A principle, in the abstract, is a fundamental truth; an original cause; a motive; these cannot be patented, as no one can claim in either of them an exclusive right.”); Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980) (“The laws of nature, physical phenomena, and abstract ideas have been held not patentable.”). So far, so good. Laws of nature (Ohm’s Law, Boyle’s Law, the equivalence of matter and energy), properly construed, should not be eligible for patent. Nor should natural phenomena (lightning, earthquakes, rain, gravity, sunlight) or natural products, per se (blood, brain, skin). Of course, the latter are also unpatentable as lacking novelty under § 102.

But it’s in the details that problems and uncertainties have arisen. The Court held in Mayo Collaborative Services v. Prometheus Laboratories, Inc., that the claim at issue “set forth laws of nature” and was ineligible under § 101 as “a drafting effort designed to monopolize the law of nature itself.” 566 U.S. 66, 77 (2012). That claim recited “[a] method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder, comprising” administering a drug and then measuring the level of a metabolite of the drug. Id. at 74-75 (quoting U.S. Patent 6,355,623).

The Supreme Court whittled away at the § 101 statute in Mayo by analyzing abstract ideas and natural phenomena with a two-step test, including looking for an “inventive concept” at step two, thereby bringing aspects of §§ 102 and 103 into the eligibility analysis. Id. at 72-73, 90. The decision we now decide not to rehear en banc holds that step two of the two-step analysis may involve the type of fact-finding that underlies §§ 102 and 103, further complicating what used to be a fairly simple analysis of patent eligibility under § 101. We now are interpreting what began, when it rarely arose, as a simple § 101 analysis, as a complicated multiple-step consideration of inventiveness (“something more”), with the result that an increasing amount of inventive research is no longer subject to patent. For example, because the Mayo analysis forecloses identifying any “inventive concept” in the discovery of natural phenomena, we have held as ineligible subject matter even meritorious inventions that “combined and utilized man-made tools of biotechnology in a way that revolutionized prenatal care.” Ariosa Diagnostics, Inc. v. Sequenom, Inc., 788 F.3d 1371, 1379 (Fed. Cir. 2015) (internal quotation marks omitted).

The case before us involves the abstract idea exception to the statute. Abstract ideas indeed should not be subject to patent. They are products of the mind, mental steps, not capable of being controlled by others, regardless what a statute or patent claim might say. Gottschalk v. Benson, 409 U.S. 63, 67 (1972) (“[M]ental processes, and abstract intellectual concepts are not patentable, as they are the basic tools of scientific and technological work.”). No one should be inhibited from thinking by a patent. See Letter from Thomas Jefferson to Isaac McPherson (Aug. 13, 1813) (“[I]f nature has made any one thing less susceptible, than all others, of exclusive property, it is the action of the thinking power called an Idea.”). Thus, many brilliant and unconventional ideas must be beyond patenting simply because they are “only” ideas, which cannot be monopolized. Moreover such a patent would be unenforceable. Who knows what people are thinking?

But why should there be a step two in an abstract idea analysis at all? If a method is entirely abstract, is it no less abstract because it contains an inventive step? And, if a claim recites “something more,” an “inventive” physical or technological step, it is not an abstract idea, and can be examined under established patentability provisions such as §§ 102 and 103. Step two’s prohibition on identifying the something more from “computer functions [that] are ‘well-understood, routine, conventional activit[ies]’ previously known to the industry,” Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347, 2359 (2014) (alteration in original) (quoting Mayo, 566 U.S. at 73), is essentially a §§ 102 and 103 inquiry. Section 101 does not need a two-step analysis to determine whether an idea is abstract.

I therefore believe that § 101 requires further authoritative treatment. Thinking further concerning § 101, but beyond these cases, steps that utilize natural processes, as all mechanical, chemical, and biological steps do, should be patent-eligible, provided they meet the other tests of the statute, including novelty, nonobviousness, and written description. A claim to a natural process itself should not be patentable, not least because it lacks novelty, but also because natural processes should be available to all. But claims to using such processes should not be barred at the threshold of a patentability analysis by being considered natural laws, as a method that utilizes a natural law is not itself a natural law.

The Supreme Court also held in Association for Molecular Pathology v. Myriad Genetics, Inc., that claims to isolated natural products were ineligible for claiming “naturally occurring phenomena.” 569 U.S. 576, 590 (2013). The Court concluded that those claims “are not patent eligible simply because they have been isolated from the surrounding genetic material.” Id. at 596.

However, finding, isolating, and purifying such products are genuine acts of inventiveness, which should be incentivized and rewarded by patents. We are all aware of the need for new antibiotics because bacteria have become resistant to our existing products. Nature, including soil and plants, is a fertile possible source of new antibiotics, but there will be much scientific work to be done to find or discover, isolate, and purify any such products before they can be useful to us. Industry should not be deprived of the incentive to develop such products that a patent creates. But, while they are part of the same patent-eligibility problems we face, these specific issues are not in the cases before us.

Accordingly, I concur in the decision of the court not to rehear this § 101 case en banc. Even if it was decided wrongly, which I doubt, it would not work us out of the current § 101 dilemma. In fact, it digs the hole deeper by further complicating the § 101 analysis. Resolution of patent-eligibility issues requires higher intervention, hopefully with ideas reflective of the best thinking that can be brought to bear on the subject.

Berkheimer v. Hp Inc., 2018 U.S. App. LEXIS 14388 (Fed. Cir. 2018) (concurring opinion).

The call for higher authority to change the law is interesting here.

I believe the law needs clarification by higher authority, perhaps by Congress, to work its way out of what so many in the innovation field consider are § 101 problems. Individual cases, whether heard by this court or the Supreme Court, are imperfect vehicles for enunciating broad principles because they are limited to the facts presented. Section 101 issues certainly require attention beyond the power of this court.

For a federal appellate court, there are typically two such “higher authority” mechanisms for altering the law: (1) Supreme Court reinterpretations and (2) changes in the law itself.  In the opinion, Judge Lourie rules out a reinterpretation by the Supreme Court as insufficient — thus leaving us with changing of the law.

Typically, the Patent Act is modified through typical Congressional legislative process. I wonder why Judge Lourie did not then simply call for Congressional action but rather called on action by “higher authority, perhaps by Congress.” An intriguing question here is what other higher authority might Lourie be calling upon?  One potential is not for Congress to reexamine the law, but rather to provide the USPTO with rulemaking authority to reconsider the law of eligibility.

Guest post by Professor Kevin Emerson Collins, Washington University School of Law.

Praxair Distribution, Inc. v. Mallinckrodt Hospital Products IP LTD., 2018 U.S. App. LEXIS 12707 (Fed. Cir. 2018)

In a divided opinion, the Federal Circuit held that all of the claims challenged in an IPR were obvious, upholding the PTAB’s obviousness determination with respect to most of the claims but reversing its nonobviousness determination with respect to a few. Praxair Distribution raises of a number of distinct, yet interrelated, issues concerning the cryptic, yet essential, printed matter doctrine: the opinion addresses the doctrine’s extension to mental steps, its implications for the relationship between sections 101 and 102/103, and the breadth of its functional-relation exception.

U.S. Patent 8,846,112 covers methods of distributing nitric oxide gas cylinders for pharmaceutical applications. Inhaling nitric oxide dilates blood vessels in the lungs and improves blood oxygenation, and it is approved for treating neonates with hypoxic respiratory failure. The prior art taught that inhaled nitric oxide may lead to pulmonary edema, a serious adverse event, in neonates with left ventricular dysfunction. The claims of the ‘112 patent address methods that build on this prior art. Roughly, the claims can be sorted into three groups: the informing claims, the informing-and-evaluating claims, and the informing-and-discontinuing-treatment claims. This commentary addresses each of these three groups of claims in turn.

The Informing Claims: Easy Cases?

In gross, the informing claims recite supplying nitric oxide to a medical provider and providing the medical provider with information relevant to the clinical use of the nitric oxide on neonatal patients. Claim 1, for instance, includes the steps of:

• “supplying the cylinder containing compressed nitric oxide gas to a medical provider responsible for treating neonates” and
• “providing to the medical provider (i) information” about the recommended dose for neonates with hypoxic respiratory failure “and (ii) information” about the risk of that dose for neonates with left ventricular dysfunction, wherein “the information of (ii) [is] sufficient to cause a medical provider … to elect to avoid treating one or more” neonates with left ventricular dysfunction in order “to avoid putting [them] at risk of pulmonary edema.”

The PTAB held, and the Federal Circuit affirmed in a majority opinion authored by Judge Lourie and joined by Chief Judge Prost, that the informing claims were unpatentable as obvious under the printed matter doctrine. Under recent Federal Circuit precedent, the informing claims present an easy case of unpatentability. The printed matter doctrine states that “[c]laim limitations directed to printed matter are not entitled to patentable weight unless the printed matter is functionally related to the substrate on which the printed matter is applied.” Opinion at *9. If a limitation is not given patentable weight, it cannot be relied upon to distinguish the claimed invention from the prior art in the novelty or nonobviousness analyses. In claim 1, the limitations apart from the providing-information limitation are obvious in light of the prior art as an ordered combination, and the providing-information limitation cannot be given patentable weight. Federal Circuit precedent clearly establishes that printing information about how to use a product onto that product as a substrate does not create a functional relationship between the printed matter and the substrate. See, e.g., In re Ngai, 367 F.3d 1336 (Fed. Cir. 2004). But see In re Miller, 418 F.2d 1392 (CCPA 1969) (finding a functional relationship between volumetric indicia and the measuring spoons on which they were printed). Importantly, the printed matter doctrine still applies even though the providing-information limitation does not require the information to be in the form of printed matter per se. In King Pharmaceuticals v. Eon Labs and In re Kao, the Federal Circuit had already extended the printed matter doctrine to encompass the conveyance of information in non-printed forms, such as verbal speech or sign language. See, Kevin Emerson Collins, An Initial Comment on King Pharmaceuticals: The Printed Matter Doctrine as a Structural Doctrine and Its Implications for Prometheus Laboratories, 2010 Patently-O Patent L.J. 111.

Not only is the lack of patentable weight for “informing”-type limitations settled law, but it is good policy, as well. As I have repeatedly argued elsewhere, the core of the printed matter doctrine, as well as its expansion to information conveyed through speech and other non-print media, is necessary to ensure that the knowledge disclosed in patent specifications remains free for all to use qua knowledge during the term of the patent. Kevin Emerson Collins, The Structural Implications of Inventors’ Disclosure Obligations, 69 Vand. L. Rev. 1785 (2016); Kevin Emerson Collins, The Knowledge/Embodiment Dichotomy, 47 U.C. Davis L. Rev. 1279 (2014). Claim limitations that read on communicative acts can restrain the diffusion of the teachings contained in patent disclosures, so a broad interpretation of the printed matter doctrine is necessary to ensure that patentee’s exclusive rights to claimed inventions cannot interfere with the free dissemination of the informational content of patent specifications.

The Informing-and-Evaluating Claims: Mental Steps and Patent Eligibility

The informing-and-evaluating claims depend from the informing claims, adding a number of steps to be performed, presumptively, by medical providers who use nitric oxide. (Bracket the divided infringement issue afoot here.) For example, claim 3 adds inter alia the following limitations to claim 1:

• identifying a neonate with hypoxic respiratory failure,
• determining whether the neonate has left ventricular dysfunction, and
• “evaluating the potential benefit of treating” that neonate with nitric oxide “vs. the potential risk” of doing so.

The PTAB and the Federal Circuit both identify the evaluating limitation as a mental step performed in a medical provider’s mind. They then both extend the printed matter doctrine to preclude giving patentable weight to mental steps and, as a result, hold the informing-and-evaluating claims obvious. The Federal Circuit breaks new ground by extending the printed matter doctrine to mental activity in this manner, and Judge Newman’s concurrence argues that the extension is not proper. Simply put, “[m]ental steps are mental, not printed.” Concurrence at *1. (The concurrence may also be read more broadly to suggest that even the extension of the printed matter doctrine to spoken information in King Pharmaceuticals, discussed in the previous section addressing the informing claims, is legal error.)

Given the policy concerns discussed above for extending the printed matter doctrine to speech, however, I believe that its extension to at least some mental steps is a logical and justifiable move. As Judge Louie correctly notes, the evaluating limitation:

requires a medical provider to think about the information claimed in the providing information limitation of claim 1. But adding an ineligible mental process to ineligible information still leaves the claim limitation directed to printed matter. To hold otherwise would make the printed matter doctrine a dead letter, requiring no more than a “think about it” step to give patentable weight to a claim limitation directed to information content. There is no meaningful distinction between claim limitations directed to written information … verbal information … and mentally-processed information.

Opinion at *13. In brief, the extension of the printed matter doctrine to encompass “mentally-processed information” prevents form from trumping substance.

Although Praxair Distribution does not expressly make this point, it seems to revive some variant of the historical mental steps doctrine. In the mid-twentieth century, the mental steps doctrine did for mental steps what the printed matter does today for printed matter: it invalidated claims that relied on the content of mental processes to establish a distinction from the prior art. See, e.g., In re Abrams, 188 F.2d 165, 165 (C.C.P.A. 1951). The PTAB cited to some of these mid-century mental steps cases to support its extension of the printed matter doctrine to mental steps. 2016 WL 3648375 at *10 (2016). The Federal Circuit, however, did not, most likely because the CCPA abandoned the mental steps doctrine decades ago in the course of grappling with the patent eligibility of software, In re Musgrave, 431 F.2d 882, 889 (C.C.P.A. 1970), and the Federal Circuit has refused to reinstate it, Prometheus Labs. v. Mayo Collaborative Servs., 628 F.3d 1347, 1358–59 (Fed. Cir. 2010). Nonetheless, in practice, if not in name, Praxair Distribution plainly reinvigorates some variant of the mental steps doctrine. Technically, the opinion could be read narrowly so that the printed matter doctrine only extends to mental steps when claims recite both a printed matter limitation with certain informational content and a think-about-it limitation to the same informational content. However, the argument that the informational content of an evaluating, think-about-it limitation should be given patentable weight if the informing limitation is removed from the claim is difficult to fathom.

Another interesting aspect of Praxair Distribution is that it opens a new front in the ongoing debate concerning the intermixing of sections 102 and 103, on the one hand, and section 101, on the other hand. The Supreme Court’s opinions on patent eligibility in Mayo and Alice are highly controversial, in part, because their “inventive concept” analysis—i.e., what is now known as Mayo/Alice “step 2″—requires consideration of the advance over the prior art, a factual issue that is usually addressed in the novelty and nonobviousness analyses. Mixing the patentability requirements in the other direction—that is, using 101 concerns to inform 102/103 doctrine—has to date not received much attention. However, the printed matter doctrine has long mixed in this other direction, and Praxair Distribution brings this other-direction mixing into the spotlight:

Claim limitations directed to the content of information and lacking a requisite functional relationship are not entitled to patentable weight because such information is not patent eligible subject matter under 35 U.S.C. § 101. Cf. Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 90 (2012). While the doctrine’s underlying rationale is in subject matter eligibility, its application has been in analyzing other patentability requirements, including novelty … and nonobviousness.

Opinion at *10. (Interestingly, the European Union, too, mixes patent-eligibility concerns into the inventive step analysis with its requirement that that the inventive step reside in a technical effect. European Patent Office, Guidelines for Examination, Part G, Chapter VII.5.2.) The printed matter doctrine reveals that, at least under limited circumstances, what are often conceived of as the rigid statutory silos of patent law must break down. As Judge Newman notes in her concurrence, the printed matter doctrine started out as a prohibition on patenting business forms that was administered as part of the doctrine of patent eligibility. Concurrence at 2–3. However, over time, as patent applicants attempted to claim printed matter in combination with otherwise patent-eligible subject matter, the doctrine developed the two statutory branches that it has today: it is administered via section 101 in cases that involve claims to printed matter per se and via sections 102 and 103 in cases that involve claims to printed matter in combination with statutory processes, machines, manufactures, or compositions of matter. The extension of the printed matter doctrine to mental steps merely further highlights the mixing that is already occurring because mental processes are today, understood, well-understood to be the basis of patent-eligibility rejections. The mental steps doctrine, that the printed matter doctrine now resembles, was administered entirely as a section 101 doctrine, employing the equivalent of a patentable-weight analysis as part of patent eligibility. It never partially migrated from section 101 into sections 102 and 103 like the printed matter doctrine did.

Finally, the dispute underlying the Praxair Distribution opinion also reveals an overlap between sections 102 and 103 and section 101 in yet another way. The parallel district court proceeding invalidated all claims of the ‘112 patent that were at issue for lack of patent eligibility under Mayo, although the representative claim was a more conventional diagnostic claim from a different patent. 2017 WL 387649, *14–*20. The PTAB, of course, could consider this section 101 ground because it is limited in IPRs to 102 and 103 grounds.

The Informing-and-Discontinuing-Treatment Claims: An Expansive Functional-Relation Exception

Like the informing-and-evaluating claims, the final group of claims also depends from an informing claim. Technically, however, these claims depend from a claim that requires slightly different information to be provided to the medical provider with the nitric oxide cylinders, namely information in the form of a “recommendation that, if pulmonary edema occurs in a [neonate] who has pre-existing left ventricular dysfunction … the treatment with … nitric oxide should be discontinued.” Again like the informing-and-evaluating claims, they add further steps presumptively performed by medical providers to the steps performed by nitric oxide distributors. The representative claim here is claim 9. After reciting the limitations of identifying a neonate with hypoxic respiratory failure and determining whether the neonate has left ventricular dysfunction, it adds treatment and treatment-cessation steps:

• “treating the neonatal patient with left ventricular dysfunction with … nitric oxide, whereupon the [neonate] experiences pulmonary edema; and
• in accordance with [the information provided], discontinuing the … nitric oxide due to the neonatal patient’s pulmonary edema.”

The PTAB held claim 9 not unpatentable as obvious. It construed the “in accordance with” language to mean that the discontinuation of the treatment was performed “based on, or as a result of” the information/recommendation provided with the nitric oxide cylinders. It then concluded that the fact that the information was the reason or motivation for the medical provider to discontinue treatment created a functional relationship between the information and the discontinuing-treatment step. Opinion at *6. In turn, the PTAB held that the functional-relation exception to the printed matter doctrine applied, that the information provided could be given patentable weight, and that claim 9 was not obvious.

The Federal Circuit approved of the PTAB’s interpretation of the functional-relation exception to the printed matter doctrine as well as its application to claim 9. Opinion at *17. However, the Federal Circuit reversed the PTAB’s ultimate nonobviousness determination, concluding that, even when the content of the information is given patentable weight, the claim is obvious in light of the prior art. The prior art taught that nitric oxide may be given to patients with left ventricular dysfunction as long as those patients are monitored during treatment. The information provided—namely that nitric oxide should be discontinued for patients with left ventricular dysfunction upon pulmonary edema—was too small of an advance over the prior art to render the claim patentable.

The point of agreement between the PTAB and the Federal Circuit on the expansive interpretation of the functional-relation exception raises an interesting—and possibly troubling—precedent for future cases. The logical reason for a real-world, extra-mental action can now distinguish a claim reciting the action from the prior art. That is, the “invention” of a nonobvious mental motivation for a human actor to perform an already-known, real-world (i.e., non-mental) action, like discontinuing treatment, can give rise to a patentable method claim.

Consider a simple hypothetical. Assume that doctors routinely decrease the dosage of a drug when a metabolite of the drug in a patient’s bloodstream exceeds a certain threshold because of a known potential for a serious adverse event, namely liver problems. Now assume that a researcher discovers that, unexpectedly, the same metabolite in a patient’s bloodstream exceeding the same threshold also raises the risk of a different, serious adverse event, namely heart problems. The researcher claims a method of a medical provider: (a) administering a dose of a drug to a patient from a package with a printed indication that a metabolite level exceeding a threshold creates a medically unacceptable risk of heart problems, (b) determining the level of the drug’s metabolite in the patient’s bloodstream, and (c) reducing the dosage of the drug “in accordance with” the printed indication (i.e., due to the risk of heart problems) if the threshold is exceeded. Even though the medical provider infringing the claim performs conduct that, to an external observer, cannot be differentiated from the prior art (except for the printed indication on the drug package), the claim is patentable. The functional-relation exception to the printed matter doctrine allows the content of the printed matter be given patentable weight because the information conveyed motivates the medical provider’s conduct, and the unexpected nature of the connection between high metabolite levels and heart problems strongly supports nonobviousness.

To be clear, even if one finds the patentability of this hypothetical claim to be problematic—and reasonable minds may differ on whether it is problematic—there is no reason to question the Federal Circuit’s actual holding concerning claim 9 in Praxair Distribution. The Federal Circuit held the claim unpatentable for obviousness even when it gave the content of the printed (or spoken or thought) matter patentable weight. By necessity, it therefore would have reached the same holding if it had refused to give that content patentable weight. The expansiveness of the functional-relation exception in Praxair Distribution will only become outcome-determinative in future cases when a claim recites information that provides an unexpected reason or motivation for a real-world, extra-mental action that, standing alone, is known or is merely an obvious departure from the prior art.

Inversely, a narrow interpretation of the functional-relation exception—one that does not label the content of information as functionally related to an action recited as a limitation when the action is performed because of the information—would not widely undermine patentability. In particular, it would not invalidate most claims to actions that are motivated by newly discovered information. For example, consider a researcher who discovers that, unexpectedly, a particular genetic mutation means that a patient should be taking a lower dosage of a drug. The researcher may claim a method of a medical provider: (a) testing a patient for the mutation and (b) administering the lower drug dosage to the patient if the mutation is present. The printed matter doctrine is irrelevant to the nonobviousness of this claim because the claim does not recite the content of printed information (or a mental state of a doctor who thinks about the information) as a limitation. Such an information limitation is not required for validity, and would thus be unnecessary drafting surplusage, because the real-world (non-mental) conduct of testing and administering under the specified conditions is sufficient to distinguish the claim from the prior art. Although it is not recited as a claim limitation, the newly discovered information still provides an explanation for why the claimed invention is useful and why it produces unexpected results. (Further highlighting the interconnection of the printed matter doctrine and patent eligibility, compare the outcome in this hypothetical to the Federal Circuit’s recent holding in Vanda Pharmaceuticals Inc. v. West-Ward Pharms Int’l Ltd., 887 F.3d 1117 (Fed. Cir. 2018), which upheld the patent eligibility of a hybrid diagnostic/treatment claim under Mayo.)

The Federal Circuit’s expansive interpretation of the functional-relation exception to the printed matter doctrine in Praxair Distribution can be traced to a recent shift how the Federal Circuit articulates that exception. Traditionally, the functional-relation exception was applied only when there was a functional relationship between the content of the printed matter “the substrate on which the printed matter is applied.” Opinion at *9 (emphasis added). For example, in one of the few non-software cases in which the Federal Circuit actually held that the functional-relation exception allowed the content of printed matter to receive patentable weight, the content of a series of numbers printed on a loop of paper was held to be functionally related to the substrate/paper because the numbers themselves were a looping series. In re Gulack, 703 F.2d 1381 (Fed. Cir. 1983). In contrast, the PTAB and the Federal Circuit in Praxair Distribution looked for, and found, a functional relationship between the content of the printed matter and a different limitation in the claim other than the printed-matter limitation, namely the discontinuing-treatment limitation. From my quick research, Praxair Distribution appears to be the first case in which the functional-relation exception has been found to apply based on a functional relationship between printed matter and a claim limitation directed to something other than the printed matter’s substrate. Both King Pharms. and Kao use language that suggest the possibility of such a non-substrate relationship satisfying the functional-relation exception, but neither finds that it exists on the facts presented. If the functional-relation exception were limited to claims in which there is a functional relationship between the printed matter and the substrate in particular, then claims to new motivations for already-performed conduct would not be patentable under the printed matter doctrine.

DSS Tech. v. Apple (Fed. Cir. 2018)

In its March 23 opinion, the Federal Circuit reversed two USPTO IPR decisions favoring the patent challenger — holding that “the Board did not provide a sufficient explanation for its conclusions” of obviousness.

In its decision, the PTAB held that the “ordinary creativity” of a skilled artisan would supplied the previously undisclosed function of energizing a transmitter base-station using “low duty cycle RF bursts” — even though it was not taught in any of the cited prior art.  The PTAB did not provide evidence to support its creative-leap.  Still, that leap might have been appropriate if the addition was “unusually simple” or “particularly straightforward.”  On appeal though, the Federal Circuit found that the PTAB had not shown its case — its conclusions lacked evidentiary support.

Dissent by Judge Newman mostly on procedure.