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.

Update: These firms overturn abstract idea (Alice) rejections on appeal at PTAB

(Update: Kilpatrick was previously reported as having 4 reversals; in fact, it has 7)

A previous post showcased firms that successfully appeal abstract idea rejections at the PTAB. In that post, two firms stood out as clear leaders in overcoming the most difficult ground of rejection on appeal, Section 101 abstract idea. These firms were Schwegman Lundberg Woessner and Morgan Lewis. Five months later, we update the top firms to now add Kilpatrick Townsend and provide additional context of how many appeals it took to get there, with the aid of a recently introduced Customer Number lookup functionality.

Total Reversals for Abstract Idea Rejections (Numerator)

In an almost 2-year span post-Alice (July 25, 2016-April 30, 2018), there were 189 reversed abstract idea rejections on appeal at the PTAB. Of these, three firms–Schwegman, Morgan Lewis and Kilpatrick Townsend–were responsible for 11% of these reversals, with 7 reversals each. This is far ahead of the rest of firms. For context, the next closest firm had 3 abstract idea reversals on appeal. We discuss each of these three firms in more detail.

Total Abstract Idea Appeals (Denominator)

The first firm, Schwegman, took 42 abstract idea appeals to get its 7 reversals. This means that the reverse rate is 17%. This is a higher rate (more successful) than the average reverse rates for abstract ideas. From a comparison to other big patent firms, Schwegman pursues appeals for abstract idea rejections a lot more by a long shot. For comparison, during this window Knobbe Martens had 6 total abstract idea appeal decisions; and Fish & Richardson and Finnegan each had 19 total abstract idea appeal decisions.

But even with a more aggressive appeal strategy, Schwegman still maintains a higher-than-average reversal rate. And from the 204 total appealed decisions, almost a quarter have an abstract idea rejection. This suggests that a focus of the overall appeals includes in abstract idea rejections. Here is the firm’s information filters on the Anticipat Research page and the link to the Schwegman-filtered page here

schwegman

The second firm, Morgan Lewis, took far fewer appeals to get to its 7 reversals. It only appealed eight cases to get seven reversals. This translates into a reversal rate of 88% for abstract idea rejections. For a firm as big as Morgan Lewis, having only eight abstract idea appealed decisions is low compared to firms that are comparable in number of applications: Schwegman, Finnegan, Fish, Kilpatrick and Knobbe.

The overall number of appeals for Morgan Lewis during this time period is 52. This suggests that Morgan Lewis is conservative in pursuing ex parte appeals–not only for abstract idea rejections but in general. But when Morgan Lewis does proceed to appeal with a case (at least for Section 101 abstract idea rejections), it is very good at overturning such rejections. Again, the Research page and the Morgan Lewis-filtered Research page here.

morganlewis

The third firm, Kilpatrick, took 40 abstract idea rejections to get to its 7 reversals. This reversal rate of 18% is slightly above average, suggesting that Kilpatrick aggressively pursues appeals for this type of rejection. From 170 total appeals during that time period, it shows that abstract ideas make up a sizable part of the appealed rejections.  Kilpatrick Townsend-filtered Research page here.

kilpatrick

Conclusion

Each firm should be commended on the high number of abstract idea reversals. With such a difficult rejection, these firms are showing that one avenue of overcoming the rejection is by going straight to the Board for relief.

Context is extremely important for these statistics. Just because a particular firm has a higher reversal rate than another firm does not necessarily mean that the higher reversal rate firm is better. Perhaps the lower reversal rate firm is taking on more difficult cases. Perhaps the lower reversal rate firm had victories earlier in prosecution (like at the pre-appeal conference or appeal conference or even by responding to an Office Action) that are not counted in these statistics. But these statistics do show that when the Examiner conferees believe that an abstract idea rejection is proper, these firms know how to pursue a favorable outcome for their clients.

With a user account to Anticipat (sign up here for a free trial), you can lookup the above-discussed listing of reversed abstract idea decisions using the following links.

 

 

 

 

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.

 

Obviousness Reversal Rates Across Tech Centers: Unexpected Results

Obviousness is by far the most common rejection that gets appealed to the Board. This particular ground of rejection does not draw attention for being reversed at the low end or on the high end. Over the past year and a half, the 12,000 obviousness decisions were wholly reversed about a third (34%) of the time. And 43% of the appeals are at least partially reversed. One might expect these rates to be uniform across tech centers. They are not.

Here is a detailed breakdown of the appeals across tech centers.

Tech Center 1600 1700 2100 2400 2600 2800 3600 3700 total
Reversed 251 558 375 436 360 291 858 1000 4166
At least partial reversed 71 135 120 161 132 48 210 308 1205
Affirmed 649 1143 901 916 857 414 885 935 6796
Total 985 1876 1423 1536 1374 763 1973 2299 12397
Reversal rate 25% 30% 26% 28% 26% 38% 43% 43% 34%
At least partial reversal rate 33% 37% 35% 39% 36% 44% 54% 57% 43%

For appeals in tech center 1600, pharma/biotech, the reversal rate is the lowest. Only a quarter of such appeals are wholly reversed and only a third are at least partially reversed. The chemical arts of tech center 1700 are only slightly better.

Next, tech centers 2100, 2400, 2600 and 2800 comprise computer and electrical art. These are reversed at a higher rate than the biotech and chemical tech centers, with tech center 2800 being the most overturned of the bunch.

Next, tech center 3600, which is predominately software/business methods, has a much higher reversal rate than average. That is, 43% of these appeals are wholly reversed and 54% are at least partially reversed.

Next, tech center 3700, which is home to mechanical and medical device technology also has a much higher reversal rate than average. That is, 43% of these appeals are wholly reversed and 57% are at least partially reversed.

obviousness

It is interesting that the biotech/pharma and chemical tech centers are lower than the average reversal rates. It is also interesting that the software/business methods and mechanical/medical device tech centers are reversed at a higher rate than average.

Why are some tech center reversal rates higher than others? For obviousness, this is no simple inquiry and instead requires considerable context. It starts with how strong is the Examiner’s rejection. Some fields are more crowded than others, making it easier for an Examiner to find prior art that would show obviousness. The Board panel that decides these appeals are technically trained in the technology center that they decide cases. They evaluate the legal and factual merits of the appeal. And theoretically, the Board will objectively evaluate each appeal equally. So for some tech centers where the reversal rates are low, this may signal that Examiner rejections are stronger than tech centers where the reversal rates are high.

Another reason relates to how “well” do the appeal conference examiners forward to the Board. The examiner conferences serve as a gatekeeper by reopening prosecution or even issuing a Notice of Allowance for bad rejections. But if these examiner conferences forward these bad rejections to the Board more than others, then the reversal rate goes up.

A third reason relates to the judges not being completely neutral in their decision-making. Instead, some judges may lean toward the Examiner while others may lean toward the appellant.  The more the judges lean toward Examiners, the lower the reversal rate; the more the judges lean toward appellants, the higher the reversal rate.

Next, some technology centers may be made of aggressive applicants who may want to stretch the claim coverage into the gray area of what their applications deserve. Many applications that seek to cover pioneering technology will understandably be ambitious in its scope. Other applicants may be more interested in adding another number to their patent arsenals.

These less ambitious applicants may be less interested in broad claims and appeal only at a significant impasse with the Examiner or with a particularly unreasonable rejection. The collective aggressiveness of applicants could affect the reversal rate within a tech center.

Anticipat provides the proper context to make sense of how likely it is for an application to succeed on appeal, say, if faced an obviousness rejection. With Anticpat Research, you can quickly identify those applicants in your art unit or tech center to provide a holistic context to the reversal rate numbers. Also with practitioner analytics, you can now input a customer number to see how often a particular applicant succeeds on appeal. Comparing apples to apples takes away the unexpected and instead gives you power to incorporate the statistics into powerfully guiding your prosecution strategy.

 

 

 

 

 

 

 

Abstract idea rejections in biotech/pharma are overturned far more than other technologies on appeal at PTAB

Since 2014, the USPTO has recognizably tried to come up with a holistic framework for determining subject matter eligibility for all sorts of patent applications. In particular, several subject matter eligibility guidelines have been issued in light of recent Supreme Court cases Myriad, Mayo, and Alice and subsequent Federal Circuit decisions. But this endeavor has not been easy. Especially in making a two-step solution for judicial exceptions work for all Examiners across all technology centers. Since appeals can be thought of as an ultimate mechanism for holding Examiner rejections accountable, here we look at how the Examining corps is doing with abstract ideas by looking at how the rate of reversing abstract idea rejections on appeal compares across tech centers.

By far the most common of the judicial exceptions—and the most elusive–is the abstract idea. Further to our recent report, abstract idea rejections are ubiquitous across all tech centers. They also get appealed in every tech center, but the reversal rate is far from uniform. The following shows the numbers and reversal rates of each tech center over the course of the past year and a half. We discuss two noteworthy tech centers.

techcenter

The first noteworthy tech center is 3600, where the bulk of the abstract idea appeals take place. This tech center, home to much of the USPTO’s business methods/software applications, has a very low reversal rate: 14%. In fact, the large volume of appeals in this tech center alone seems to substantially drag down the entire overall abstract idea reversal rate. See below graph.

The second noteworthy tech center is 1600. Even though the overall reversal rate has gone down since our last report (17% to 16%), tech center 1600, home to the biotech and pharma technical art, has actually solidified at a much higher rate. Specifically, this tech center’s reversal rate has increased from a rate of 28% to 37%. Even while having a limited sample size of 35 abstract idea decisions, this finding is significant. The probability that this reversal rate is higher just due to chance is quite low.

tech center

Why the higher-than-normal reversal rate in biotech? A couple possible reasons. First, possibly most intuitively, Examiners in the biotech/pharma technical space may be issuing and maintaining bad abstract idea rejections more frequently than Examiners in other tech centers, forcing the applicant to appeal. And the judges that are deciding these appealed applications are siding with the appellant more often than in other tech centers.

To the defense of Examiners in tech center 1600, the abstract idea doctrine is not as developed in the biotech/pharma space as other technologies. More prominent patent-eligibility cases in this technical space have focused on the other judicial exceptions: laws of nature (Mayo) and naturally occurring phenomena (Myriad). The lack of much abstract idea case law in biotech may create a blurry boundary line between patent-eligible inventions and patent-ineligible abstract ideas. Plus, with the infusion of computer-technology into life sciences, the applicability of other abstract idea case law has added further complexity to the analysis. Thus, Examiners may feel restricted in allowing a case, waiting for a Federal Circuit to provide a green light to support their position. But the Board seems not to be waiting around. Instead, the Board appears to be supporting the appellant’s position more often than in other tech centers, at least by saying that the Examiner has not met his/her burden of showing patent-ineligibility.

The second reason is that biotech/pharma applicants may have high stakes and/or resources to devote to pursuing broad claims than others (e.g., software applications). Compare these stakes and resources with where the bulk of abstract idea rejections on appeal come from, tech center 3600, where many of the business method applications reside. It is possible that biotech applicants are more motivated and less discouraged from winning on appeal. And as has been shown, not all appellants are equally successful in overturning abstract idea rejections on appeal. And perhaps the applicant or the counsel are driving strategy that fosters a more favorable appeal outcome for abstract ideas.

The USPTO will continue to struggle to strike the right balance between what is patent-eligible subject matter, but having the right appeals data from Anticipat Research can cut right to the heart of how specific grounds of rejection are being overturned on appeal. Even if the reason why remains elusive, biotech/pharma appears to be fertile room to appeal an unreasonable abstract idea rejection.

PTAB: Increasingly difficult to overturn abstract idea rejections on appeal

The latest data from Anticipat show that the effects of #AliceStorm are beginning to stabilize at the PTAB. At a webinar over the summer, we presented data on the reversal rates of abstract idea rejections. Month-to-month, we presented on a highly volatile, but overall low reversal rate for abstract ideas of about 17%. Now with several more months of data, the reversal rate appears to have stabilized around a lower overall reversal rate of 16%. See chart below.

monthly

To lower the overall reversal rate down to 16%, the past few months have seen low reversal rates: September at 15%; October at 11%; November at 14%; and December at 11%. This highlights a trend of eight months in which no monthly reversal rate has exceeded 20%.  See also below table.

Month 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
Reversal Rate 33% 27% 33% 29% 14% 28% 39% 20% 3% 11% 14% 15% 8% 15% 11% 14% 11%
Reversed 2 3 2 7 3 17 15 16 1 7 13 16 7 10 9 8 2
Total 6 11 6 24 22 60 38 81 31 63 94 108 93 68 83 56 19

The overall reversal rate means that for every appellant appealing an abstract idea rejection through to a final decision, less than one in six will be successful. While the data show this is a difficult rejection to overcome on appeal compared to other rejections, it also shows that appealing such rejections is not a completely futile endeavor.

As abstract idea rejections have grown in popularity among the Examining corps post-Alice, a low reversal rate may embolden Examiners to reject on abstract idea grounds. Technology that had previously rarely encountered abstract idea rejections is now seeing such rejections, making no art unit immune. Plus, computer technology infiltrating every technological sector makes abstract idea rejections even more likely to continue.

But each SPE of each art unit and each director of each tech center approaches Section 101 differently. Anticipat Research provides an ability to search for appeals-data for your particular art unit of interest to see the rates and the recent reversals. As will be seen in a forthcoming post on tech center rates, there are calms within the storm.

 

Which law firms are successful in overturning abstract idea rejections on appeal?

For difficult grounds of rejection, the right advocacy can make all the difference. The right counsel can know when to appeal and how to win on appeal. Here, we explore the demographic of firms that represent appellants that overturn one of the most difficult of all rejections: Section 101 abstract idea. Recent data show that while some big/specialized firms are successful, others without the same name recognition also are doing relatively well.

We have previously reported that in the post-Alice era, the PTAB reverses abstract idea rejections about 17% of the time. Updated for the past few months (blog post forthcoming), this overall rate has dipped. But this low percentage still represents a sizeable 135 decisions over the past year and a half (specifically, July 25, 2017 through December 1, 2017). This span of time represents the applications that are most likely to have been issued a post-Alice rejection and subsequently appealed. It turns out that select firms make up a good share of these successes, followed by a long tail of single reversals per firm.

Two firms immediately stand out from the pack: Morgan Lewis and Schwegman, Lundberg & Woessner. These firms each have 5 reversed decisions on appeal, a laudable number in this post-Alice climate.

Next are firms each having three reversals: Cuenot, Forsythe & Kim and Brinks Gilson and Lione (stemming from three related applications issued the same day).

Next come the firms/companies with two reversals apiece (arranged alphabetically):

Finally, there are 90 other firms/corporations/pro se applicants who have achieved one reversal (see end of post for names).

Our methodology involved using Anticipat Research database to find all reversed Section 101 decisions decided on abstract idea grounds. We then identified the law firm/corporation who signed the reply brief or appeal brief and crediting them with the reversal.

Two things are clear from these data: First, some firms are really quite good (relatively speaking) at appealing abstract idea rejections–even in the face of fast-evolving case law and various application filing dates (pre- and post-Alice). Make no mistake, a firm that can overturn an abstract idea rejection several times over the past year and a half is not doing so out of luck.

Additional research is needed into normalizing these data, which could identify whether these successful firms are achieving such high reversals by appealing much more frequently than others. However, Morgan Lewis and Schwegman would need to appeal quite a bit more than others for their high reversals to be explained only from sheer numbers of ex parte appeals.

Another related question relates to firms having smaller patent prosecution practices. Do these firms’ reversal numbers come in the face of handling a much smaller number of cases than bigger patent prosecution firms? This would indicate that smaller firms are in fact equally if not more successful than the Morgan Lewis and Schwegman types.

The second point that is clear is that a broad diversity of counsel succeeds in appealing abstract idea rejections. Counsel ranges from firms in big cities with the highest of billable rates to boutiques in smaller cities who carry much lower overhead. Solo practitioners also win and even pro se appellants succeed on Section 101 appeals. Common wisdom may suggest that you get what you pay for in patent counsel, and that a high stakes appeal of such a difficult rejection requires a Tom Brady billable rate. But the data show a broad range of counsel are successful, indicating that a superstar billable rate is not required to overturn an abstract idea rejection on appeal.

These two points strike at an interesting concluding point. While there are some certainties in navigating the abstract idea waters, there is a great deal of uncertainties. For the certainties, a certain level of legal sophistication and experience may be needed to successfully argue an abstract idea rejection at the PTAB (persuasive writing and rebutting the Examiner’s points with the right, relevant case law).

For the uncertainties, Section 101 case law has been evolving very regularly since Alice, meaning that there is a large amount of unpredictability and volatility. That being said, having the most up-to-date data available on Section 101 ex parte appeals can equip any counsel with the right tools. Anticipat Practitioner Analytics lets you see the reversal rates for certain Examiners, art units, and tech centers for all types of rejections. It also shows you the most often cited case law used by the PTAB for abstract idea grounds of rejection. Watch this YouTube video for more information or check out this page here: https://anticipat.com/accounts/signup/analytics/ Sign up now for a free trial.

 

As discussed above, here are the firms with one reversal, sorted alphabetically: