April shows fewer (but still high) abstract idea (Alice-based) reversals

April showed a continued high number (204) of abstract idea decisions decided at the Board. Of the 204 total decisions deciding abstract idea rejections for this month, the Board completely reversed the rejection 54 times. This shows a reversal rate of 26.5%, which is lower than the last several months, but higher than many previous months.

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In addition to the reversal rate, the volume of this type of rejection being decided continues to be high—higher than last year, with the number of reversals significantly higher.

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In a prior blog post, we correctly predicted that the reversal rates for these rejections would come down from record-breaking. We’ll emphasize here factors that are leading to this.

First, Federal Circuit case law has likely contributed to a cautious approach by the PTAB. As we mentioned, Director Iancu can only push patent-eligibility so far before it is inconsistent with case law. And this came to a head most recently with the Athena v. Mayo case, in which the Federal Circuit affirmed an invalidiy judgment on a claim as directed to a judicial exception (law of nature). This, despite the fact that the Examiner had found that it was analogous to a 2016 example claim that was patent-eligible. The Federal Circuit panel gave its respect to the USPTO, but said it was not bound by its guidance.

Likewise, the Board likely appreciates that even though it is bound by the 2019 Subject Matter Guidance, it also shares the USPTO’s interest in making sure that patents don’t get issued that will later be found patent-ineliigible. Thus, adherence to guidance won’t guarantee a patent eligible claim set, so panels are likely taking a careful consideration of the case law as well.

Second, an uptick in the number of remands (PAIR event code = “APAR”) have been observed. These remands are instructions from the Technology Center Director that sua sponte orders the proceeding to be remanded to the Examiner “for further consideration.”

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For patent-eligibility rejections, these remands (especially in light of recent subject matter guidance) serve as a sort of proxy for reversals. These remands, are normally very rare. Between 2008 – 2017, there were 2084 remands out of a total of roughly 78,000 final decisions. A quick review of recent remands showed that immediately after a remand, a Notice of Allowance was the next event. See 10/629,597. This seems to indicate that the application likely would have been allowed or had the proceeding continued at the Board Examiner to reopen prosecution, the Board could have reversed the ground.

Third, many of the upstream events have eliminated the need for a reversal from final appeal decisions. This is linked to the above point about remands. That is, Berkheimer and the subsequent Berkheimer memo were issued in March of 2018, which may have started the thaw in freezes to patent-eligibility for applications in examination. This is represented in applications that were allowed before a notice of appeal was filed, after a pre-appeal brief was filed, and after an appeal brief was filed. Thus, many of the reversals in recent months may represent easier cases than those now being decided that have survived such pre-filtering.

Despite chatter on Capital Hill about amending Section 101 for greater predictability, many believe that passage of such a bill will be difficult in this year with competing priorities. And even with such amendments, it appears unlikely that the problem of patent-eligibility will go away—it will simply change. Thus, abstract idea rejections do not appear to be going away any time soon. Expect the reversal rate to continue to be higher than historical reversal rates, but not necessarily record-breaking unless new more favorable case law is made.

 

 

 

 

Updated February ex parte decisions show Alice-based rejections getting overturned at a dizzying rate

For the past year, the PTAB has increasingly reversed so-called abstract idea rejections (Alice). But in recent months, the pace of these reversals has been nothing short of remarkable. Here, we report updated February numbers, which show the PTAB continuing to overturn abstract ideas at an unprecedented rate. We also look more deeply into how these rejections are getting overturned. It turns out the Board is increasingly relying on step 2A (Step 1 of Alice/Mayo) thanks to new guidance that makes it more difficult for an examiner’s rejection to hold.

As we recently reported on Patexia, the new examination guidance (effective early January) has fueled reversals at the Board. Now, with increased numbers for February 2019, this effect can now be seen much more dramatically.
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In February, there were 61 completely reversed decisions from a total 149 such rejections. This yields an astonishing 41% reversal rate. This is of course astonishing by standards of Section 101 judicial exceptions. We have long reported that many grounds of rejection are overturned by the PTAB (such as Section 112 and Section 102) at even higher rates. But even just over a year ago, the PTAB routinely sided with examiners on abstract idea grounds upwards of 90% of the time. Now the climate is completely different.

Notable changes in reversal rates can be seen from the color-coded timeline events in the graph above. Red refers to when Berkheimer and similar Federal Circuit decisions were decided, which put a higher evidentiary standard on showing that claims did not recite an “inventive concept.” With a little lag, the reversal rate ticked up. Then in the fall of 2018, Director Andrei Iancu started more actively promoting better (more consistent) Section 101 examination, eventually resulting in new 101 Examination guidance shown by the yellow line. The PTAB appears to quickly adapt to case law, guidance and internal cultural changes.

And these results do not appear to be from a sample size distortion (because applicants have already given up). while the total number of abstract idea rejections decided did not reach months seen last year, this is likely due to the PTAB picking up the new year on a slow note, which is historically the case. In fact, February 2019 saw the Board decide more abstract idea rejections than February 2018. See below. And even with the total number of decisions deciding abstract idea grounds of rejections being lower than prior months, it still set a record in the total number of such reversals (61) breaking the previous record of December 2018 (58).

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How is the PTAB overturning these rejections? Thankfully, the Anticipat research database makes this question easy to answer, cataloging the specific rationale (tag) that is used in overcoming the rejections. As shown from the following graph, Step 1 (which the USPTO refers to as Step 2A) has now separated itself from Step 2.

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A good practitioner will tell you that thanks to the new Section 101 guidance and other case law developments, it is now easier to overcome Abstract Idea rejections. These Board decisions directly show this at the final stage, but results can also be felt farther upstream of these decisions. 

Like many USPTO personnel, PTAB judges are quota-motivated. Because of this, end of quarters typically have higher output of decisions. For this reason, expect March 2019 to be a big month in the volume of abstract idea rejections decided and in the total number of reversals. If history is any indication, we could be looking at another record month.

Section 101 Alice (Abstract Idea) Appeal Decisions Surge, but Reversal Rate Stays Steady

Abstract idea rejections (mostly Alice-impacted in computer-implemented inventions) are experiencing a surge at the PTAB. We previously reported that August 2018 saw a record number of abstract idea appeals decisions. But the following month shattered this record number of appeals decisions by a large margin. Practitioners have been increasingly appealing abstract idea rejections and it is dramatically showing itself in the final written decisions. The most recent data show that appeals are a more attractive option to overcoming such rejections with still small but not hopeless odds.

As we previously reported, August 2018 saw a record number of reversals (30) based in part from the equally record number of total abstract idea decisions that month (207). The following month of September saw these records shattered at the PTAB. Even with a modest total increase in the total number of decisions (771 to 840, or about a 9% increase), the number of abstract idea decisions for September increased to 257, a 24% increase.

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That surge in abstract idea decisions resulted in a record-setting 37 reversals. So while the total number of abstract idea reversals was impressive, the actual reverse rate (14.4%) stayed relatively level, on par with previous months and far lower than other grounds of rejection. As we reported, June and July saw a Berkheimer bump above the 16% reverse rate.

While the reversal rates of recent August and September months are lower than June and July, considering the substantial number of appeals with these rejections, it appears that practitioners are looking to the PTAB for relief. That is, rather than abandoning cases with determined Examiners standing by their Section 101 rejections, practitioners are increasingly using less-trodden techniques (appeals) with overcoming these rejections. After all, some practitioners view appeals as a last resort, especially in some technology sectors, due to the substantial time commitment to reach a final written decision.

Continue to expect appeal decisions that decide Section 101 rejections to increase, as the unpredictability at the USPTO plays out. Also, check out the new Research user interface that allows you to select the specific issues and subissues that you are interested in.

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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.

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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.

 

 

The appeal outcome is one of the most telling metrics for patent prosecution analytics. Here’s why

Big data is slated to revolutionize all aspects society, and patent prosecution is no exception. But because of the complexity of patent prosecution, insights from big data must be carefully considered. Here we look at why appeals outcomes are one of the most telling metrics: it shows good insights with few misleading explanations.

Because much of patent data is publicly available, some companies are amassing troves of patent data. And some metrics that suggest insight are relatively easy to calculate.

Take the allowance rate. You can compare an examiner’s total granted patents to the total applications and voila. In some circles a high allowance rate is a good thing for both examiner and applicant. Under this theory, an Examiner with a high allowance rate is reasonable and applicant-friendly. On the same token, a law firm with a high allowance rate is good. This theory also holds that an examiner or law firm is bad because of a low allowance rate.

Another metric is the speed of prosecution. Take the average time it takes to grant an application either in months, office actions, and/or RCEs. Under a theory on speed, an examiner or law firm with a faster time to allowance is better.

While these theories could be true in certain situations, there are confounding explanations that arrive at the opposite insight. In sum, these are woefully incomplete insights for three reasons.

First, these metrics incorrectly assume that all patent applications are of the same quality. By contrast, examiners are assigned patent applications in a non-random manner. The same applicant (because of the similarity of subject matter) will have a large proportion of applications assigned to a single Examiner or art unit. This means that related applications from the same applicant (drafted with the help of counsel) can have very high quality or very low quality applications. Related low-quality applications can suffer from the same problems (little inventiveness, lack of novelty, poorly drafted applications) that is not dependent on the examiner. So an examiner, through no fault of his own, can get assigned a high percentage of “bad” applications. In these cases, a low allowance rate should reflect on the applications–not the examiner.

Correspondingly, clients of some law firms instruct to prosecute patent applications in a non-random fashion. Especially for cost-sensitive clients, some firms are assigned very specialized subject matter to maximize efficiency. But not all subject matter is equally patentable. So even when a law firm has a low allowance rate, it often times does not mean that the firm is doing a bad job. By contrast, the firm could be doing a better-than-average job for the subject matter, especially in light of budget constraints given by the client.

This non-random distribution of patentable subject matter undermines use of a bare allowance rate or time to allowance.

Second, the allowance rate or allowance time metrics likely show a poor quality patent. That is, one job of patent counsel is to advocate for claim breadth. But examiners will propose narrowing amendments–even if not required by the patent laws–because it makes the examiner’s job easier and the examiner does not want subsequent quality issues. So often times, a quick and easy notice of allowance merely signifies a narrow and less valuable patent. Often times, office actions include improper rejections, so a metric that shows a quick compromise can show that the law firm isn’t sufficiently advocating. Thus, using these metrics to evaluate good law firms could be telling you the opposite, depending on your goals.

Plus, getting a patent for the client is not always best serving the client’s needs. Some clients do not want to pay an issue fee and subsequent maintenance fees on a patent that will never be used because it is so narrow and limiting. So it’s a mark of good counsel when such clients are not given a patent just because a grant is the destination. The client is ideally brought in to the business decision of how this patent will generate value. The counsel that does this, and has an allowance rate that drops because of this, unfairly is portrayed as bad.

Third, these metrics lack substantive analysis. Correlating what happens with patent applications only goes so far without knowing the points at issue that led to the particular outcomes. Some applicants delay prosecution for various reasons using various techniques including filing RCEs. There are legitimate strategies that are benefitting the client in doing so.

All this is not to say that such metrics are not useful. They are. These metrics simply need a lot of context for the true insight to come through.

In contrast to the above patent prosecution metrics, Anticipat’s appeal outcome very directly evaluates relevant parties in substantive ways. The appeal outcome metric reveals what happens when an applicant believes that his position is right and when the examiner and his supervisor think that he is right. In such cases, who is right? The parties are forced to resolve the dispute with an independent judge panel. And because getting to such a final decision requires significant time and resources (eg filing briefs and one or more appeal conferences that can kick out cases before reaching the board), the stakes are relativity high. This weeds out alternate explanations for an applicant choosing to pursue an appeal. Final decisions thus stem from a desire and position to win a point of contention that the Examiner thinks he’s right on–not a whimsical exercise. And tracking this provides insights into the reasonableness of Examiner rejections and how counsel advises and advocates.

The appeal metric helps to evaluate the Examiner because if overturned on certain grounds of rejection (say, more often than average), this means something about the examiner and his supervisor’s ability to apply and assess rejections. After working with an examiner, there can come a point when the examiner will not budge. The PTAB then becomes the judge as to whether the Examiner is right or wrong. This same analysis works at evaluating whole group art units or technology centers.

With Practitioner Analytics, you can see the reversal rates of specific Examiners, art units, tech centers, but you can also look at the specific arguments used that have been found to be persuasive at the Board. This means that if you are dealing with a specific point of contention, say “motivation to combine” issue of obviousness, you can pull up all the cases where the PTAB overturned your examiner based on this point. The overall reversal rate and specific rationales can both validate that the Examiner is not in line with the patent laws and rules.

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The appeal metric also helps evaluate counsel because it shows the results of when counsel feels that their position is right even when the examiner will not budge. If counsel wins on appeal, this metric confirms the counsel’s judgment and their ability to make persuasive arguments in briefs.

Even a ninja can generate allowance rate metrics. But the savvy patent practitioner looks for more context to guide prosecution strategy. Insights from the data that are carefully analyzed avoid counter-intuitive explanations.

How appeals can stop Examiner tricks that needlessly undermine patent applications

Patent Examiners are tasked with a daunting task of checking each patent application for compliance with all the patent laws and rules. Most importantly, the Examiner must show that the claims are not unpatentable, including being free and clear of prior art. And they must do all this within the time expectations that the USPTO offers.

But sometimes it seems like Examiners are engaged in a sophisticated game of cat-and-mouse. Some Examiner tricks, which aren’t expressly prohibited by the rules and incentives offered by the USPTO, cut corners to make their jobs easier. And some might say that the frequency of these games has increased in recent years. But left unchecked, the consequences of these tricks can undermine applications in serious ways.

To their defense, Examiners are allotted only a limited number of hours in the day to reach the bi-weekly expectation levels (or a bonus for ambitious Examiners). This expectation is driven by a simple formula:

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Source. As an example provided by the USPTO, let’s say that an Examiner works 36 hours a week. If the Examiner is starting out at GS7 in the complex field of satellite communications, this examiner is required to perform enough work to generate about 3.6 production units (or 7.2 counts) every bi-week (72 x 0.7)/27.7. That is the equivalent of 3 Non-Final Office Actions (1.5 counts each), 14 Final Office Actions (.25 counts each), 2 first-time RCEs (1.75 each), or 7 Notice of Allowances (.5 each) per week.

An Examiner drafting three Office Actions in a week would have 12 hours per Office Action. This is not quite two days of work for each application, to perform the search, consider the prior art, and draft the Office Action. No small task, especially with this complex subject matter.

On top of this, Examiners are cautious about allowing cases for fear that an allowed patent application does not meet a patent quality assurance threshold. In this case, an allowed case could get referred back to the Examiner to try again.

With these incentives in mind, it is easy to understand the first examiner trick: cutting corners on a quality first Office Action. Good examiners understand that a good initial prior art search sets the stage for the entire prosecution of an application. It’s best to conduct the best and most thorough search once, right at the get-go, applying the closest prior art references to the invention. Once this prior art search is done well, the Examiner can really just slightly modify the rejection as the applicant attempts to distinguish the claims.

But based on the allotted time given to examiners, it might take an examiner more than a few days to familiarize oneself with the claimed invention, perform the search, consider the prior art and draft the Office Action. Some Examiners cut corners with this initial search, applying references that are easiest to find, but not very related to the invention. But because the references may have snippets that can be arguably broadly interpreted to disclose aspects of the claims, the Examiner applies them and moves on. And because often times applications go through several rounds of prosecution, the Examiner may think to perform a better search down the road, with potentially more relevant prior art. This is bad for applicants for a number of reasons.

For one, it wastes money and time. Some Examiners become attached to their own work product and refuse to see error in the first Office Action. Thus, it can be difficult to persuade the Examiner to withdraw a rejection through argument alone. This behavior is reinforced by the USPTO not granting counts for a Non-Final Rejection do-over. So if claim amendments are not introduced, Examiners–hungry for RCE counts–typically issue a Final Rejection with little change to the original analysis.

Sometimes, Examiners offer to cut a deal where a claim amendment is introduced to distinguish the applied prior art references. Applicants, incredulous at being required to distinguish from very different prior art references, may take this option. But no proposed claim amendment is guaranteed to result in an allowance. Examiners may commit to overcoming the current rejection, but a revised rejection with perhaps a different prior art reference can easily be manufactured.

Thus, “working with” the Examiner may give the applicant false hope, leading the applicant to continue to try different claim amendments without committing to allowance. These Examiner-appeasing amendments carry no guarantee of advancing prosecution, and instead often drag out prosecution even through the RCE process, so that the Examiner can get more counts.

Besides expense and wasted time, each argument and/or clarifying amendment used to distinguish a prior art reference makes up the prosecution history estoppel. This is disadvantageous because it narrows the scope of coverage of the claims during enforcement of the patent. As the Supreme Court made clear in Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., an applicant that makes a claim amendment to comply with the Patent laws automatically assumes surrender of the territory between the original claim and the amended claim. This means that there is a presumption of surrendering all equivalents for the particular claim limitation that was narrowed by the amendment. For an application that has many amendments over many Office Action responses, the consequences can be substantial.

The second trick is the examiner requiring narrower claims than is required by the law. Even when an Examiner performs a very exhaustive search in the prior art, there is still no guarantee that a killer prior art reference is just around the corner. That is partially why Examiners will almost always want more narrow claims than are needed to overcome prior art so they can pass a patent quality assurance threshold. In general, the more features and claim elements the better for the Examiner to pass scrutiny. It can be tempting to pursue a strategy that pursues narrower claims to get a quick notice of allowance. But unless an Examiner can show why a more narrowing claim amendment must be made in a prima facie rejection, it is not a legally proper rejection.

The savvy patent practitioner knows that the fewer the claim amendments and the shorter the prosecution history, the better. An appeal early in prosecution (upon receiving a Final Rejection) can shortchange the negative implications of prosecution history estoppel. Rather than distinguishing and amending against a circulating set of unreasonable prior art rejections, the Board can decide the first unreasonable set. And if completely successful (no other grounds of rejection affirmed and no new rejections by the Board), a Notice of Allowance should issue. Plus, with Anticipat Research, you can see the reversal rate for your specific ground of rejection for your specific Examiner, art unit, tech center, etc.

Quit playing games and instead be strategic. That is why appealing can be a good solution.

Does appealing a patent application lead to a more valuable patent?

The savvy patent practitioner will tell you that it is difficult to predict which type of patent will be really valuable, so it is best to draft and prosecute every application with utmost care, as if it were the most valuable. But budgets for many patent applications, especially defensive applications for companies amassing patent arsenals, have been capped and fixed. With these incentives, often times applicants end up pursuing a strategy that sacrifices valuable claims for a quick Notice of Allowance.

Such a tradeoff may very well be justified, but do some prosecution strategies preserve high value while balancing other competing factors? Here, we propose that appeals may be such a strategy that can result in a higher-valued eventual patent.

A recent paper noted that going through the USPTO appeals process during examination is associated with a nearly 50-percent increase in the odds that the resulting patent will be litigated. See Alan C. Marco and Richard D. Miller, “Patent Examination Quality and Litigation: Is There a Link?”, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2995698 (June 2017). This is important because it is well known that patents that are litigated are more valuable. (Cooter and Rubinfeld, 1989; Lanjouw and Schankerman, 1997; Lerner 2008). Why might appealing an application lead to a more valuable patent? We discuss three possible explanations.

Appealed claims lead to broader claims?
A first explanation relates to the breadth of the patent claims and the incentives for the patent being pursued. While difficult to empirically prove, it is expected that patents with broader claim scope are more likely to be litigated (Lanjouw and Schankerman, 1997). Appealing an application to allowance could result in broader claims than pursuing rounds of narrowing claim amendments because it is possible that some claim amendments that the examiner asserts are needed in fact are not needed by the Board to get an allowed case.

When a patent is being planned to be used (especially offensively), having this breadth can be a critical reason for having the patent at all. And one important way that such breadth can be preserved is by fighting for it through an appeal rather than settling for claim amendments.

Board stamp of approval means less likely invalid patent?
An explanation proposed by Marco and Miller is that an eventual patent is more valuable as a direct result of appealing. Under this theory, by virtue of the PTAB judges scrutinizing the patent application during prosecution, the later patentee is emboldened in thinking that the patent is much less likely to be invalidated by the courts.

This explanation is possible, especially because PTAB judges are technically- and legally-trained and could very well serve as a strengthener of patent applications. However, it seems simplistic to think that just because the PTAB has reviewed a particular set of rejections being appealed, that the patent is somehow protected–especially as many judges only decide the merits of the appealed rejection. Further research investigating this theory is needed.

Correlation not causation?
A third explanation relates to higher value patents merely being correlated with the appeal process. Here, applicants with higher value applications may happen to pursue appeals as a strategy more often than other applicants. This may be due to exhausting other prosecution procedures and resorting to appealing as a last resort. Or it could be due to applicants with high value inventions having counsel that is more sophisticated and more likely to propose and succeed on appeal.

If a valuable patent is on the menu, do not discount appealing rejections in the prosecution of your application. You may find that you don’t have to go for the Examiner’s head-fake all the time. Instead, you might get better claims.