The PTAB quietly hit a milestone in June in reversing Alice Section 101 rejections

As we have pointed out in a previous post, for more than a year, reversal rates for abstract idea (Alice) rejections have been extremely low. We are finally seeing an uptick of reversals likely due to Berkheimer and other Federal Circuit case law and recent guidance by the USPTO. As we’ve previously predicted, this reversal rate should continue (and may even go up). But until leadership at the USPTO clarifies its policies, it remains to be seen by how much.

As we’ve previously reported, from August 2016 to April 2017, the PTAB had months where it reversed abstract ideas in the 20 and 30 percentage range. That is, if a month had 100 abstract idea decisions, the Board would reverse the examiner on 20 or 30 of those cases. But May 2017 saw a dismal change in appellant fortunes: the reversal rate for abstract idea rejections tanked. For this period of over a year ago, many months saw only single digit reversal rates. Indeed, no month during this time exceeded a 15% reversal rate. The period was bad for Alice appellants.

abstractideareversals

But all this may be starting to change. Last month (June) saw a high number of abstract idea appeals decided, 176. Of those, 29 were wholly reversed, yielding a complete reversal rate of 16.5%.

It may be premature to characterize June as a watershed moment for patent eligibility at the PTAB. But there are three reasons for such hope.

First, June had a sizable number of reversals. In other words, the PTAB did not exceed a 15% reversal rate through a blip attributable to a small sample size. For some context, the number of reversals for the single month of June (29) was almost double the number of reversals for the six months between July 2016 and December 2016 (19).

Month Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18
Reversal Rate 33% 33% 27% 33% 29% 14% 28% 39% 20% 3% 11% 14% 15% 8% 15% 11% 14% 11% 14% 11% 10% 12% 9% 16%
Reversed 2 2 3 2 7 3 17 15 16 1 7 13 16 7 10 9 8 2 9 8 21 16 15 29
Total 6 6 11 6 24 22 60 38 81 31 63 94 108 93 68 83 56 19 64 73 203 137 172 176

Second, the number of decisions where the Board partially reverses an abstract idea rejection is increasing as well. In June, two decisions partially affirmed such rejections, pushing up the total rate with at least one claim reversed to 17.6%. March saw seven such decisions. These nine decisions for these months are more than the previous 9 months. The partial reversal rate tells a more complete story about how the Board is treating abstract idea rejections. As seen, the Board’s trend is toward increasing both the number of complete reversals and partial reversals. This means that the Board appears more willing to entertain dependent claims as patent-eligible, giving the appellant some options.

Finally, the Board is recently more holistically relying on both steps for reversing. We are starting to see a return to previous months where the PTAB has been more aggressive in reversing these types of rejections. Part of this is due to case law, which the Board follows. Berkheimer and Vanda guidelines may play a role. We previously noted that Berkheimer temporarily changed the way in which panels reverse. That is, whereas before panels primarily relied on Step 1 to overturn an abstract idea rejection, for a few months it was about even as to whether the Board uses Step 1 or Step 2 of the Alice/Mayo framework to reverse. June saw a return to the disproportionate reliance on Step 1 vs Step 2 reversal rationales (2:1). This goes to show that the Board may not be limiting itself to reversing cases just because of a single Federal Circuit decision (Berkheimer), but is developing a less erratic and more cogent way of deciding such rejections.

Why did the PTAB quietly hit this milestone in June? The PTO’s FOIA website, from which a majority of Anticipat’s data comes, has recently been delaying the time it takes to upload decisions to its page. Before a normal data upload would be a few business days and Anticipat Recap emails would play it safe by waiting until two weeks after a particular date to send a recap of a day’s decisions. So while we typically keep users updated on reversals using Recap emails after two weeks, for many days there have been no decisions to report on. Instead, we accessed this information by using the Research page.

After speaking with the USPTO’s webmaster, we were assured that the decisions will be more quickly uploaded going forward. This did not entirely assuage our concerns. So in the meantime, we are updating our Recap email functionality so that a user can modify the email settings to be sent in whatever way is most helpful to one’s practice. Stay tuned for updates very soon.

Berkheimer’s biggest effect on PTAB outcomes

After Federal Circuit decisions Berkheimer and Aatrix held that abstract idea inquiries required a factual finding, this blog predicted that the number of abstract idea rejection reversals at the Board would dramatically increase. The logic being that many examiners did not perform the rigorous analysis seemingly required for Step 2 of the Alice/Mayo framework in light of these Federal Circuit decisions. It has now been over 4 months since Berkheimer was decided and we can safely say that this dramatic change has not yet happened.

In fact, take the decisions involving abstract idea rejections in the year leading up to Berkheimer (March 1, 2017-March 1, 2018, accounting for some lag time after Berkheimer was decided). In this year, the 107 reversals over the 901 total decisions yields a reversal rate of 11.9%. Post Berkheimer (from March 1, 2018 to present), there have been 54 reversals over 525 total decisions. This reversal rate is 10.3%–lower than the pre-Berkheimer range. (All these decisions can be found using the Anticipat Research page)

But there has been something that has changed: the way that the Board performs its analysis. Historically, the Board has favored relying on step 1 of the Alice/Mayo framework by almost a 3:2 ratio. That is, for every three decisions where the panel reversed because the claims were not directed to an abstract idea under step 1, there were two decisions where the panel reversed because the claims recited something more than the asserted abstract idea under step 2. From March 1, 2017 to March 1, 2018, there were 63 step 1 analyses versus 35 step 2 analyses.

An important piece of the step 2 analysis is whether the claims recite an element or combination of elements that are more than well-understood, routine, or conventional elements. As the Federal Circuit has made clear, this inquiry is an element of fact. And Examiners have been charged in the recent Berkheimer memo to carefully apply factual bases to this step. So it would make sense that the Board, in light of Berkheimer, is reversing under this step more frequently than before.

And that is exactly what is happening. Recently, the two steps are equally used in reversing abstract idea rejections. From March 30, 2018 to present, the Board has used step 1 analysis to reverse 16 times while using step 2 an almost equal 15 times. This means that the Board has become much more receptive to arguments of step 2 in light of Berkheimer–even if the reversal rates have not noticeably increased.

The lower post-Berkheimer reversal rate is not easy to explain. It may stem from a confluence of factors. Perhaps applicants are getting more aggressive and appealing claims that are less patent-eligible. It could be that some applications that would otherwise be reversed if appealed all the way to a final decision are getting allowed at the appeal conference stage or earlier.

Regardless of the success rates of appealing abstract idea rejections, the change in the way that the board reversed these decisions highlights a good practice tip. Focus appeal argumentation on step 2 where appropriate. For those appeals that have long since been forwarded to the appeal, it is not too late to bring this up to the panel by way of an oral hearing. During the oral hearing, explaining the step 2 piece could be helpful to the panel, assuming that some sort of step 2 argument has been made. And of course when interviewing and otherwise responding to Office Actions in response to abstract idea rejections, step 2 has become a powerful step.

Understanding the Examiner Answer: analyze anything new and contest as needed

The Examiner Answer can be a very important stage of the ex parte appeal process. It is at this stage that Examiners may want to make up for weak Office Action positions and set themselves up for getting affirmed at the Board. Understanding the Examiner incentives and tactical options, however, can give the patent practitioner the upper hand.

The Examiner Answer is technically optional (“The primary examiner may, within such time as may be directed by the Director, furnish a written answer to the appeal brief.” 37 CFR 41.39). Examiners usually prepare them because of the disposal credits that they receive. Outside of this most obvious incentive, Examiners also have an opportunity to present their case most favorably to the Board panel that will decide the case. Sometimes the analysis in the Answer can improperly go out of bounds. Since an appellant only gets 60 days to respond to an Examiner Answer (no extensions), a timely assessment of the Examiner Answer is critical. examineranswertimeline

Timeline image attributed to Fitch, Even, Tabin & Flannery LLP

One way that Examiners cure deficiencies in their pending rejections is by creeping their arguments closer to the definition of a new ground of rejection (new analysis or evidence described below). It requires a technology center signature to introduce a new rejection at the Examiner Answer stage, which makes formal new rejections unattractive to Examiners. We recently pointed out a growing awareness in the patent bar of improper Examiner Answers that include a new rejection without designating it as new.

There’s a good option for combating such an improper new ground of rejection that has not been so designated: file a Petition to designate the rejection as new and reopen prosecution. 1207.03(b). This petition tolls the 60 day window to respond to the Examiner’s Answer so that a resolution will not affect the ability to proceed with an appeal.

Another technique was very recently blessed by the Federal Circuit in In re Durance, 2017-1486 (Jun 1, 2018). This technique includes directly arguing against an improper new rejection in the Reply Brief–even if this appellant argument had never been argued before. In Durance, the Examiner in the Examiner Answer argued for the first time that there was no structural difference between the claimed invention and the combined teachings of the prior art references, citing a structural identity argument. The appellant challenged the structural-identity rejection in their reply brief, but it was not considered by the Board because of alleged waiver. This was error, the Federal Circuit held.

The Reply Brief, like the Examiner Answer, is also optional. There is not good data on whether filing a reply brief helps improve the chance of succeeding on appeal (although Anticipat is currently ingesting prosecution data to show this). But filing a Reply Brief can help the Board see defects in the Examiner’s case. This includes improper new rejections.

Whether an Examiner Answer includes an improper new rejection depends very much on the facts. The MPEP outlines what constitutes a new ground of rejection. See MPEP 1207.03(a). Here are factual factors for constituting a new ground of rejection.

  • Changing the statutory basis of rejection from 35 U.S.C. 102 to 35 U.S.C. 103.
  • Changing the statutory basis of rejection from 35 U.S.C. 103 to 35 U.S.C. 102, based on a different teaching.
  • Citing new calculations in support of overlapping ranges.
  • Citing new structure in support of structural obviousness.
  • Pointing to a different portion of the claim to maintain a “new matter” rejection.

In contrast to the above factual situations, no new ground of rejection issue arises when the basic thrust of the rejection remains the same, i.e., an appellant has been given a fair opportunity to react to the rejection. See In re Kronig, 539 F.2d 1300, 1302-03, 190 USPQ 425, 426-27 (CCPA 1976). Here are factual factors for the rejection not constituting a new ground of rejection.

  • Citing a different portion of a reference to elaborate upon that which has been cited previously.
  • Changing the statutory basis of rejection from 35 U.S.C. 103 to 35 U.S.C. 102, but relying on the same teachings.
  • Relying on fewer than all references in support of a 35 U.S.C. 103 rejection, but relying on the same teachings.
  • Changing the order of references in the statement of rejection, but relying on the same teachings of those references.
  • Considering, in order to respond to applicant’s arguments, other portions of a reference submitted by the applicant.

A good practice tip is to pay careful attention to arguments in the Examiner Answer. If they are different enough from the arguments on the record, consider pointing this out either in a petition or in a Reply Brief, as appropriate.

Recent critiques of the PTAB ex parte appeal process focus on Examiner involvement post-appeal

In the past month, two complementary but distinct criticisms of the ex parte appeal process have emerged. They deal with the way the Board treats appeals where the Examiner embellishes/modifies the rejections in between the last rejection on the record but before forwarding to the Board. These are serious criticisms that deserve serious attention. As people learn more about current Examiner practices, expect change at some level at the PTAB.

open Baltic sea at the sunset

The first criticism comes from Bill Smith and Allen Sokal on Law360 in a piece titled “A Way to Improve PTAB Ex Parte Appeals.” In the article, the authors decry the practice of examiners at the Examiner Answer stage. Examiners will copy and paste the written rejection from the appealed office action into the “statement of the rejection” section and state new facts and reasons in support of the rejection in the “response to arguments” section.

In essence, the Examiner gets to clean up the rejection before being heard by the Board. And for the most part, the Examiner can get away with introducing new analysis and new facts (new ground of rejection) without reopening prosecution. Then the Board decides the enhanced rejections as if it were part of the original rejection being appealed. According to the authors, this practice “injects unpredictability into the board’s decision since the appeal brief addressed the as-stated record rejection, not the rejection based on the expanded facts and reasons.”

The solution that the authors propose: limit its review of the merits to the facts and reasons in the as-stated rejections in the “statement of rejection” section of the examiner’s answer. If an Examiner raises anything else in the Examiner Answer, do not let the Board give it weight.

The second criticism is interrelated and comes from a recent lawsuit Odyssey Logistics & Tech. Corp. v. Andre Iancu, (E.D. Va. May 11, 2018). This lawsuit challenges the above-noted practice at a more fundamental level by hitting against the the Amended Ex Parte Appeal Rules enacted on January 23, 2012.

The complaint cites U.S. Patent Application No. 11/458,603 as an example of the appeal process running afoul. In this Examiner Answer, the Examiner, for the first time, apparently cited three patents as new evidence to be considered in support of his rejection. The Examiner’s Answer also allegedly included changes in the Examiner’s rationale for his rejections.

While this fact pattern is eerily similar to the fact pattern proposed by Sokal and Smith, here the complaint alleges that these new grounds of rejection would not be proper but for the Amended Ex Parte Appeals Rules and their retroactive application to the ‘603 application. According to the complaint, the Amended Rules included changes to 37 C.F.R. §41.35(a) that change the start of the Board’s jurisdiction. Modifications were also allegedly made to the provisions for new grounds of rejection in 37 C.F.R. §41.39, and new definitions were provided for the terms “Evidence” and “Record” in 37 C.F.R. §41.30.

According to the complaint, the Examiner, the official whose rejection is challenged in the appeal, will always have the jurisdiction necessary to change the rejection challenged on appeal or provide entirely new grounds of rejection, and may add arguments, dictionaries, or other documents to the record, even after the applicant has filed an appeal brief. 76 Fed. Reg. at 72276-78.

The complaint then proceeds to raise a very interesting point that is consistent with the points raised by Sokal and Smith.

In this event, the decision rendered by the PTAB is not a decision affirming or reversing the original rejection(s) challenged on appeal but instead is a decision on the new and different grounds of rejection. If the PTAB’s decision is on different grounds of rejection, the applicant’s right to obtain a patent term adjustment is frustrated since there is no reversal of the original rejection on the written record. See 35 U.S.C. §154(b)(1)(C). Therefore, the Amended Jurisdiction Rule interferes with applicant’s statutory right to appeal and to obtain a patent term adjustment if the appeal is of a rejection that should be reversed.

 

In reviewing tens of thousands of final decisions at the PTAB, we at Anticipat.com confirm the unpredictability in how rejections are decided (More on this in a forthcoming piece). Being a relatively obscure procedure in a relatively dry practice, this issue does not get too many headlines. But as a new administration seeks to foster greater predictability and strength to the patent system, watch for this issue to become more prominent with some sort of change in the horizon.

 

Expect the Berkheimer-driven patent-eligibility pendulum to swing at the PTAB

The past few months have seen huge developments in patent-eligibility at the USPTO. In three and a half years after Alice, the most effective way to argue against patent-eligibility for software applications was to focus on Step 1–that the claims are not directed to an abstract idea. But based on these recent developments, Step 2–that additional elements of the claims transform the judicial exception into something more–looks to be the more powerful way. The only problem is that the PTAB has not yet caught on. It will.

These huge developments have taken place in the form of Federal Circuit decisions deciding patent-eligibility favorably to the patentee, especially Berkheimer v. HP Inc., 881 F.3d 1360, 1369 (Fed. Cir. 2018). Such a clear articulation of the need for factual findings for Step 2 should usher in big change in how the Alice/Mayo framework is applied.

Then on top of the decisions came the revised USPTO Berkheimer memo last month. These guidelines emphasized that to establish under Step 2 that an additional element (or combination of elements) is well-understood, routine or conventional, the examiner must find and expressly support a rejection in writing with one of the four:

1. A citation to an express statement in the specification or to a statement made by an applicant during prosecution that demonstrates the well-understood, routine, conventional nature of the additional element(s).

2. A citation to one or more of the court decisions discussed in MPEP § 2106.05(d)(II) as noting the well-understood, routine, conventional nature of the additional element(s).

3. A citation to a publication that demonstrates the well-understood, routine, conventional nature of the additional element(s).

4. A statement that the examiner is taking official notice of the well-understood, routine, conventional nature of the additional element(s).

It should come as no small surprise to any practitioner that Examiners have not been including the above support in their Step 2 analyses for these additional elements of claims. This is no slight to the examining corps; it simply was never a USPTO requirement. So if the PTAB were faithful to the principles set forth in the guidelines, one would expect a dramatic turning of the tide.

While the PTAB is not bound to the USPTO examiner memos, it shouldn’t stray too far from them. Plus, it must comply with the Federal Circuit decisions, which are consistent with the guidelines. So one wouldn’t expect the PTAB to continue its practice of overwhelmingly affirming on Section 101. However, so far the PTAB has not significantly deviated from its previous course of mostly affirming judicial exception rejections.

Since April 19, 2018–the day that the Berkheimer memo was published–there have been 120 decisions that have decided judicial exceptions. Of these, only 13 have reversed, meaning a reversal rate of 11%. This 11% reversal rate is below the recently reported reverse rate for abstract ideas of 14%. It would appear that panels have not yet had the time to incorporate this new Step 2 framework into their decision-making. Or alternatively, they are preoccupied with the arguments raised by the appellant. Expect a greater number of request for rehearings on these.

Sooner or later, these PTAB judges should realize that many Section 101 rejections on appeal do not have the proper support for Step 2. This is not to say that these Examiners, on remand, could reformulate a proper rejection given another opportunity. While theoretically the judges could affirm the 101 rejections with a designation of new, the Board may not be well-equipped for to do so as this new requirement requires factual basis supporting Step 2. That is, the PTAB is a body that decides the propriety of pending rejections, not a body for searching and making such support findings. So expect a greater number of reversals to let the Examiners follow Berkheimer.

The State of Appealing Abstract Idea Rejections of Business Method Applications post-Alice

As seen from Anticipat’s daily recap emails, last month the PTAB reversed a slew of abstract idea rejections. As already discussed in our blog post, several of these reversals related to business method applications. Using Anticipat’s Research database to look even beyond last month, we see interesting results relating to trends of business method appeals outcomes.

The term “business method” has been broadly defined as “a method of operating any aspect of an economic enterprise”. Tech center 3600 includes broad categories of business methods. For example, three sets of art unit groups are listed below.

Here is a visual representation of the reversals over the course of almost the past two years. These are appeals that make it all the way to a final decision on tech center 3600 (Data from Anticipat Research.)

abstractidea3

The first interesting point is that last month’s 10 abstract idea reversals at first blush seems high. Only two other months in the last couple years have had higher numbers of reversals for business method rejections. From such numbers, one might think that the PTAB might be engaging in business method friendly behavior. But looking at the denominator of how many total abstract idea decisions of business method applications, a different picture is painted. It took 125 decisions to get these 10 reversals, a reversal rate of 8%. This is hardly business method friendly.

The second interesting point is that the number of appeals of abstract idea rejections for business methods is going up even as appeal production is going down. As pointed out by Ryan Alley, the PTAB’s opinion output for ex parte appeals is down from 2017. More concretely, in March of 2017, the PTAB decided a total of about 1650 decisions. In contrast, in March of 2018, the PTAB decided a total of about 930 decisions. Even with monthly variability of output (December 2017 and January 2018 had much lower output), it is telling that with such a dramatic drop for the same month, the number of abstract idea rejections decided increased substantially from 43 to 125. This goes to show that the trend is to appeal business method abstract idea rejections. This is especially apparent when looking at the total number of abstract idea decisions for business methods in months of 2016.

The reversal rate for these business method applications seems to be stabilizing at a low rate, as shown in the following graph. (Data from Anticipat Research.)

reversalratesabstract

For the past year, these abstract idea rejections for business method applications have been consistently reversed at about 10%. This is a very low reversal rate compared with all grounds of rejection. But as applicants choose to appeal rejections of their business method applications, even if the reversal rate stays low, it still means that a large number of such rejections will get reversed. That is, a 10% reversal rate of 120 applications still yields 12 reversals even if it took a lot of applications to get there.

In conclusion, Examiners will likely continue to reject business method applications as patent-ineligible abstract ideas and as applicants opt to pursue an appeal, the Board seems to be overturning the Examiner relatively infrequently. This may change, as case law continues to develop and as a new director of the USPTO Andrei Iancu has promised a new path which could include better application of Section 101. Use Anticipat Research to analyze trends of business methods or of other technology centers. Sign up for a free trial here.

 

The PTAB backlog for ex parte appeals continues its plunge

Perhaps one of the most interesting speakers at the PTAB Bar Association annual conference on March 22, 2018 was Chief Judge Ruschke. Ruschke highlighted several statistics at the Board including the ever-diminishing backlog for ex parte appeals. Noticeably proud of this effort, which we report on below, Ruschke deserves credit for being at the helm of the PTAB during this time of a historic drop in appeals backlog.

Several months back, we reported on the dip in ex parte appeals backlog comparing fiscal year 2016 with fiscal year 2017. Since then, the USPTO recently released a chart, of which Chief Judge Ruschke spoke, that tracks a moving monthly average for February 2018 with February 2017. Here is the new chart available here at the USPTO.

pendency2

Any way you slice it, this chart with updated data shows that the PTAB appeals backlog continues its plunge. For biotech/chemical art, this decrease is pronounced. For example, for tech center 1600, which previously dipped all the way to 19.2 months as we reported previously, the backlog is now down to 18.3 months. For tech center 1700, which we reported as previously dipping to 16.9 months, is now down to an impressive 13.1 months.

For computer/electrical art, the backlog shows modest, but consistent declines. Tech center 2100 had previously dipped to 13.2 months. Now, it has decreased to 13 months. Tech center 2400, which had previously dipped its backlog to 12.7, now has a backlog of 12.5 months. Tech center 2600, previously at 13 months, now has the backlog lowered to 12.8. Finally, tech center 2800, which dipped to 16.9 months is now at 14.4 months.

The tech center with the most number of forwarded appeals is 3600, home of many business method applications. This tech center had previously decreased to 22.4 months. Now this backlog is all the way down to 19.3 months.

Finally, tech center 3700, home to mechanical and biomedical art, had previously decreased its backlog to 23 months. Now, the tech center’s backlog has decreased even further to 15.2 months.

The appeal backlog is calculated as the amount of time from when the appeal is forwarded to the Board (shortly after an Examiner’s Answer is issued) until a final decision is made. As this backlog increasingly shortens, the decision to pursue an appeal becomes more attractive. This, in combination with recent increases in USPTO fees that disproportionately makes more expensive pursuing continuing prosecution with RCEs. This also, knowing that some grounds of rejection statistically get overturned at higher levels than you might think. You can see for yourself how your specific grounds of rejection are handled at the Board to guide your particular prosecution strategy.

From all accounts, Chief Judge Ruschke does not intend to discontinue the work at cutting the backlog for ex parte appeals. We at Anticipat.com will continue to track this as well as other PTAB appeals statistics. Stay tuned for developments such as backlog that can affect the decision to pursue an ex parte appeal.