Board panel citing Berkheimer to reverse judicial exception rejection to diagnostics claims: no evidence

Since the two weeks since we predicted that the PTAB would start to dramatically change its outcomes of rejections under Section 101, we have seen no such change. Since then, recap emails have mostly shown affirmances (only 7 reversals of 86 total Section 101 decisions = 8% reversal rate). But a decision in yesterday’s recap email shows precisely the kind of rejection analysis that is expected to become more mainstream at the PTAB.

Ex Parte Galloway et al (PTAB May 22, 2018) reversed the judicial exception rejection under Section 101 because of a lack of evidence. The panel, consisting of Donald E. Adams, Demetra J. Mills, and Ulrike W. Jenks, found that the Examiner had not provided evidence to support a prima facie case of patent ineligible subject matter.

The panel cited to Berkheimer in support of an apparent defective step 2 analysis: “The Examiner has not established with appropriate factual evidence that the claimed method uses conventional cell counting methods.”

As a stylistic aside, Section 101 rejections are typically presented in decisions toward the very top of the document. It is unclear how or why (it may stem from examiners or practitioners ordering the statutory rejections), but this practice has gone on in the Board’s decisions for several years. However, a recent trend is for the Board to analyze Section 101 after prior art rejections. Now it makes sense why because a lack of a good prior art rejection can make for a good support that step 2 of a Section 101 rejection is improper.

And that is precisely what happened here. The panel proceeded to support its assertion (that step 2 of the Alice/Mayo framework was defective) by referring to its obviousness reversal. In other words, the Board’s finding of non-obvious claims supported that the claim features were not simply conventional or known in the art.

Another interesting point to note about this case is that it reinforces the much higher reversal rates of Section 101 judicial exceptions. The Board’s practice, as in this case, appears to be helping the patent-eligibility of diagnostics inventions.

As the PTAB becomes more confident in using Berkheimer in their decisions, expect more of the same analysis as Ex Parte Galloway. The appeal backlog has far too many cases where the Examiners did not have the guidance of Berkheimer to establish the proper evidence for Step 2. Thus, the necessary analysis from the Board need only be short and crisp.

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.

Business method abstract idea rejections continue to get reversed at the Board, sparking form over substance debate?

In today’s Anticipat Recap email (March 22, 2018), three decisions at least partially reversed abstract idea rejections for business method claims. One of the decisions, Ex Parte Gershfang et al (PTAB Mar. 22, 2018), even included a dissenting opinion. Here, we report on an interesting decision pulled from another decision, Ex parte Beach (PTAB Mar. 22, 2018).

Before getting into Beach, some context behind the debate about form over substance of patent-eligibility. The Supreme Court in Alice v. CLS Bank struck down the method claims as abstract ideas, but also, importantly, struck down the computer system and computer readable medium claims for the same reason. The Supreme Court did not want clever practitioners to be able to get a claim based on the draftsman art. So just because a claim included computer recitations did not, by itself, make the claims more than an abstract idea. For this reason, it is very rare for the Board to split the claim set baby. For the most part, either all the claims are upheld as abstract or all the claims are reversed.

Ex parte Beach comes out differently than Alice because here the Board upheld the abstract idea rejection on the method claims but at the same time overturned the abstract idea rejection on the system claims. The representative method claim is here:

58. A method for processing coins, the method comprising:

receiving a plurality of randomly oriented coins in a coin counting machine;
dispensing a financial instrument from the coin counting machine in exchange for at least a portion of the coins;
receiving the financial instrument from a customer;
reading a code off the financial instrument with a machine;
sending at least a portion of the code to a database in a query for information to determine if the financial instrument is valid;
receiving the information from the database; and
redeeming the financial instrument for at least one of cash and merchandize [sic merchandise] when the information received from the database indicates the financial instrument is valid.

The Board found claim 58 to be a patent-ineligible abstract idea.

By contrast, the Board overturned the system claims as not an abstract idea. Here is a claim that was reversed:

91. A system for processing coins, the system comprising:

a coin counting machine, the coin counting machine having:

a coin input region configured to receive a plurality of randomly oriented coins from a user;
a coin discriminator configured to count the coins to determine a total; and
a dispenser configured to dispense a financial instrument to the user in exchange for at least a portion of the coins, wherein the financial instrument includes a code;

a database configured to receive information from the coin counting machine related to the financial instrument; and
a recognition subsystem configured to read the code off the financial instrument and send a related query to the database for information related to the financial instrument.

In its reasoning, the Board distinguished these system claims from the ineligible method claims because the structural elements of the system claims “simply do not recite an abstract idea.” According to the Board, these structural elements include a coin counting machine having “a coin input region configured to receive a plurality of randomly oriented coins from a user,” “a coin discriminator configured to count the coins,” “a printer configured to print a machine-readable code and a value on a voucher,” and “a dispenser configured to dispense the voucher.”

So here the Board holds that for a coin machine system claim, the structure of a coin input region, the coin discriminator to count the coins, the printer to print a voucher and the dispenser to dispense the voucher makes a claim patent-eligible.

Beach shows that the Board is willing to affirm some claims that were rejected as abstract ideas while reversing others. This is important because it shows that after Alice, the Board appears to be able to analyze the claims in a very much nuanced manner. Indeed, the extent that structural claim recitations can render a claim not abstract is far from over. But when it comes to a coin counting machine, these structural limitations were sufficient for the Board.

The Board will likely continue to render affirmed-in-part determinations on patent-ineligible judicial exception rejections only in rare cases. But we will report of any trends that develop.

PTAB finds encryption software claims not directed to abstract idea–Practice tips

How does the Board incorporate very timely case law in their decisions? How can you use this to your advantage? We consider these questions as we discuss a recent Board decision that reversed an abstract idea rejection while incorporating a very recent Federal Circuit into its analysis.

In a recent decision, Ex parte Jang (March 1, 2018) (available at https://anticipat.com/research?id=104015), the Board reversed an Examiner’s Section 101 rejection. In so doing, the Board panel found that the claimed software invention was not directed to an abstract idea under step 1 of the Alice/Mayo framework. Interestingly, the Board analogized to a Federal Circuit decision that had been decided not six weeks prior.

This recent Federal Circuit decision that the Board cited, Finjan, Inc. v. Blue Coat Sys., Inc., 879 F.3d 1299, 1303 (Fed. Cir. 2018), was not merely a cursory citation or a footnote. Rather, the Board specifically analogized to the patent in Finjan in holding that the claims at issue were similarly not directed to an abstract idea. How did the Board incorporate this legal authority into its own decision so quickly?

One thing that can be ruled out is any help from the appellant. Often times, the Board does indeed borrow persuasive arguments from the applicant (including persuasive legal authority). At times, you can see arguments literally lifted from appellants’ appeal briefs or reply briefs, as discussed in this blog post. Not so here. The reply brief was filed in September of 2016, long before Finjan was decided. Plus, the appellant choose not to pursue an oral hearing, which would have given the appellant a chance to address more recent case law. See 37 CFR 41.47 (“Upon a showing of good cause, appellant and/or the primary examiner may rely on a new argument based upon a recent relevant decision of either the Board or a Federal Court.”).

Instead it appears that PTAB judges keep very current on Federal Circuit case law and use it in their own decision drafting. This is somewhat different from examiners, who, in the face of a recent Federal Circuit decision, may have problems addressing the applicability of recent Federal Circuit decision. The Examiners may instead prefer the USPTO to interpret any new Federal Circuit decisions in an official USPTO guideline.

 

Now that we know that the Board analogizes to recent legal authority, how is this useful? How can you use the fact that the Board regularly cites to recent and relevant case law in reversing Examiner rejections? It turns out that this is most useful in fast-evolving areas of law, such as Section 101. For example, you can cite to the same legal authority that the Board uses to overturn your own Examiner rejections.

As we pointed out in a recent blog post, you can input any application number into the Anticipat Practitioner Analytics input field, and it will show the relevant legal authority for this application. Let’s say that you have an application in the software arts that is meeting stiff Section 101 headwinds. Perhaps, your application is even in the technical space of encryption. Let’s even say art unit 3621 (the same art unit that Ex parte Jang was decided).

After inputting art unit 3621 into the Analytics input field, you will see that the art unit field has legal authority for step 1 of the Alice/Mayo framework. There are three decisions where the Board relied on step 1 of the abstract idea test to reverse the rejection.

artunit3621

Within step 1, you see legal authority that the Board uses to support its reversal by the icon to the immediate right of the tag. This icon, which is clickable, provides all the decisions (and legal authority) for this art unit. It shows this popup for this art unit:

artunitlegal.png

In addition to Finjan, this Board decision used two other Federal Circuit cases in reversing the rejection: Enfish and Thales Visionix.

Chances are that if you have an application in this art unit and are facing a similar stubborn rejection, accessing legal authority that the Board found worthy of overturning an examiner can help guide strategy for what is persuasive. At best, the relevant legal authority is also found to be analogous and persuasive in your case. At worst, you are not completely off-base in citing to such a decision since independent judges in this art unit analogized to such legal authority.

The next column, tech center, has even more decisions and legal authority. Finally, the right-most column displays all the tags for this specific tag. This will provide all the legal authority Board decisions.

This practice tip is well-suited for responding to Office Actions as responses under 1.111 because you can quickly use recent legal authority. In theory, this same legal research could guide an applicant preparing for an appeal. This is especially relevant since if judges are using specific legal authority to overturn specific rejections, chances are they will be receptive to such legal authority in your brief. However, due to the substantial delay in reaching a final decision, and due to the volatility of Section 101, some of the cases may be outdated by the time the panel decides your case.

See what Practitioner Analytics can do for your practice. Feel free to give Analytics a 14-day free trial.

Let us know if you have any questions or if you would like a demo.

Anticipat Team

Rare request for rehearing granted to reverse obviousness rejection

It may be discouraging to an applicant to appeal all the way to a final decision only to see the rejection(s) be affirmed. The process can take years. Fortunately, there is a procedure that allows for such a decision to be reviewed by the same panel: request for rehearing. This procedure is at times successful, perhaps counter-intuitively.

In ex parte Clendenen (PTAB March 7, 2018), counsel from Faegre Baker Daniels LLP filed a request for rehearing, arguing that the Section 103(a) obviousness rejection was improperly affirmed. Specifically, they argued that the Board misapprehended the disclosure of a reference and that the reference did not teach the claimed features.

In the rehearing decision, the panel, which consisted of the exact same members as the original decision, acknowledged that the reference in fact did not disclose the claimed features. At best, the reference was ambiguous. While the modification was possible and potentially useful, the Board concluded it was unclear on the record that such correlation is required in the reference. Thus, the rehearing was granted.

As we have reported about a Section 101 rehearing getting granted, because of the makeup of the panel being the same as the original decision, intuition would suggest that these requests never get granted. However, they do happen. Plus there are no government fees to file a request for rehearing. So it doesn’t seem like a bad idea to add on a few more months to pursue this procedure, especially after going all the way to the final decision.

 

Recent pattern of PTAB cutting corners: Decide Section 101 and avoid deciding other pending grounds

We have previously reported that PTAB judges, like Examiners, are measured by a quota-based production system. For PTAB judges, the quota is based on the number of decisions they author. It is no secret that this production system prompts some Examiners and PTAB judges at times to get creative with practices to most easily meet their quotas. Here, we look at some recent decisions that show a pattern of PTAB judges deciding a Section 101 rejection without looking to the remaining pending grounds on appeal.

First some context. The Board has discretion not to reach all pending rejections on appeal, which makes sense. For example, ex parte appeals decisions often times do not reach prior art rejections after finding that the claims are indefinite because, e.g., the scope of the claims cannot be determined. But for the overwhelming majority of cases, PTAB judges decide all pending rejections on appeal (unless not argued by the appellant). This practice encourages compact prosecution, something that the USPTO very much favors. So this discretion to avoid deciding grounds of rejection is very rarely used.

But this discretion is sometimes used and as shown in two recent Board decisions, it can also be abused. For example, judges have recently affirmed a “Section 101 – patent-ineligibility” rejection and then declined to reach other pending rejections (either prior art rejections or 112 rejections).

The first decision is Ex Parte Snow (PTAB Feb. 8, 2018), deciding Section 101 and asserting that it therefore need not go to the pending Section 103(a) rejection. To support this action, the panel relied on two cases (one Federal Circuit and one precedential PTAB decision). From the decision:

Because claims 1—33, 35, 37, and 39 are directed to patent-ineligible subject matter, we do not reach the prior art rejection of those claims. See In re Comiskey, 554 F.3d 967, 973 (Fed. Cir. 2009) (declining to reach the prior art rejection when claims are barred at the threshold by § 101); Ex parte Gutta, 93 USPQ2d 1025, 1036 (BPAI 2009) (precedential) (same).

It is true that In re Comiskey declined to rule on a Section 103(a) rejection after concluding that the claims were directed to patent-ineligible subject matter under Section 101 (both the original decision in 2007 and the en banc decision). Interestingly, the Federal Circuit in In re Comiskey newly applied the Section 101 rejection without needing to go to the Section 103(a) rejection. The Board had only reached the Section 103(a) rejection, affirming the Examiner. Thus, it does not appear that the Federal Circuit was attempting to establish precedent for the Board to not reach pending prior art rejections when a Section 101 rejection is at issue. Instead, it merely did not need to go to the Section 103(a) because it vacated and remanded for the Board to pick this up.

The other case cited was a precedential case Ex parte Gutta. In Gutta, the Board declined to reach prior art rejections by citing to Comiskey as well as a 1942 case: In re Rice, 132 F.2d 140, 141 (CCPA 1942) (finding it unnecessary to reach rejection based on prior art after concluding claims were directed to nonstatutory subject matter).

Here, Gutta was an expanded panel that included then Chief-judge and vice-Chief judge. Similar to the Federal Circuit panel in In re Comiskey, it’s possible that this PTAB panel was a special case. In other words, maybe they didn’t want to mix another issue (prior art rejection analysis) with what they wanted to establish as precedential.

Said differently, the Gutta decision does not appear to have been trying to establish that if the Board finds that the claims are patent-ineligible subject matter, then there is no need to reach prior art rejections. Indeed, if all panels did that, then we would start getting into more subjective appeal analyses, where the Board favors ruling on Section 101 so that it need not address other issues. And by not addressing prior art rejections, doesn’t it seem like the panel is implicitly communicating that the application is a lost cause–no matter how the claims are amended? Section 101 should not be used as a tool by the Board to pick and choose eventual patent grants.

Indeed, a goal of the USPTO should be compact prosecution. Just because an appellant loses Section 101 on appeal is not the end of the road. It is possible that after the appeal, the applicant amends the claims to clear the Section 101 rejection. Other less likely scenarios are that a request for rehearing is granted or a Federal Circuit appeal vacates the Board’s findings. In all three of these scenarios, it’s possible that the Examiner and the applicant are later at an impasse with regard to the other rejection (e.g., prior art rejection) and an appeal is needed in the future. The judge panel could have resolved it in the first place.

The second decision cites to the same above-two cases: Ex Parte DeYoung et al (PTAB Feb. 7, 2018) (not reaching written description 112 rejection because Section 101 was affirmed, citing In re Comiskey, 554 F.3d 967, 973 (Fed. Cir. 2009); Ex parte Gutta, 93 USPQ2d 1025, 1036 (BPAI 2009) (precedential)). Unlike decisions where the Board understandably could not reach other rejections because the claims were indefinite and the scope could not be understood, here the Board took the opportunity to avoid analyzing whether the claims found written description support in the specification. And it did so because Section 101 was affirmed.

The fact-specific grounds of rejection to be decided on appeal, which were omitted in the above two cases, do require time to analyze and write up. Especially in Ex parte Snow, it would have taken a lot of time for the panel to pore over multiple references in deciding obviousness. And in Ex parte DeYoung, it would have required careful consideration of the specification. But even though this requires a lot of time, it’s what PTAB judges do. That is, these decisions that do not decide all contested issues are extremely rare compared with the overwhelming majority of decisions that decide every issue that is argued.

If you have experience or opinions about this subject, we would love to hear from you. Please provide feedback in the comments section or by email at admin@anticipat.com whether the Board seems to be correctly relying on In re Comiskey and Ex parte Gutta for the proposition that it need not evaluate rejections after finding Section 101 is affirmed. Unsure opinions are great. 

Practice Tip: Do not recite an abstract idea in claims while merely adding the words ‘apply it’

Alice v. CLS Bank in citing Mayo made one point very clear: stating an abstract idea while adding the words ‘apply it’ is not enough for patent eligibility. This point may seem apparent to patent practitioners who hopefully are not literally reciting abstract ideas in claims and adding “apply it”. But a recent ex parte appeals decision highlights how a more common claim may fall into this same patent-ineligible category.

In Ex Parte Perreault (PTAB Jan. 24, 2018), the Board assessed an extraordinary representative claim for patent-eligibility. This single claim spans five pages of the Board decision, tallying up an impressive 1100-word count. The final clause of the claim recites:

wherein said steps (a)(l)(i), (a)(l)(v), (a)(l)(vi), (b)(l)(i), (b)(l)(v), (b)(l)(vi), and (c) are performed by execution, on a processor of a computer, of computer-readable instructions contained on a non-transitory computer readable medium.

The Board was unconvinced of the appellant’s arguments and instead held that the claim was directed to gathering rules and remedies for each community and then displaying them to a sub-contractor. The fact that the claim recited the equivalent of “apply it” in the final element was no help to the patent-eligiblity of the claim.

The Board instead found that the claim includes neither a technical problem nor a technical solution, but merely the application of an abstract idea on a computer via the Internet. Then the final blow: “We have repeatedly held that such invocations of computers and networks that are not even arguably inventive are insufficient to pass the test of an inventive concept in the application of an abstract idea.” Elec. Power Grp., LLC v. Alstom S.A., 830 F.3d 1350, 1355 (Fed. Cir. 2016).

In conclusion, lengthy claims are not helped by merely reciting generic computer and network language. A final step with a wherein clause clarifying that previous steps are performed on a computer is perhaps a sign that the claim off course from patent-eligibility.