PTAB reverses abstract idea rejection of business method patent application – Some key practice tips

There has been much energy focused on the flawed nature of the current Alice/Mayo framework for evaluating patent-eligibility. Even the well-intentioned desires of USPTO director Andrei Iancu’s to move away from this framework has its limits.

In a recent decision, Ex Parte Pasupulati et al, the Board reversed an abstract idea rejection to a claim directed to integrating an API-based mechanism to a merchant’s website without the merchant having to understand the API or having to know how to code in a language specific to the API. The Board rebuffed the Examiner’s position for both steps.

Step 1

Under Step 1, the Board first found that the Examiner had improperly overgeneralized the claims as “payment management in a network” or the general concept of “coding”. Without being able to over simplify the claim, it makes it much more difficult for the claims to be “directed to” an abstract idea.

Next, the Board found that the focus of the claims is not on judicical exceptions (i.e., “do not recite a mathematical algorithm … [n]or do they recite a fundamental economic or longstanding commercial practice” identified as an “abstract idea” by the Supreme Court in its trilogy of Benson, Flook, and Diehr, and its recent duet of Bilski and Alice). Instead, the Board found that the claims provide a particular solution to the particular problem of integrating an API-based mechanism to a merchant’s website without the merchant having to understand the API or having to know how to code in a language specific to the API.

Still, the Board did not have the confidence to rely only on Step 1 in reversing this rejection because “identifying the precise nature of the abstract idea [of Appellants’ claims] is not as straightforward,” it proceeded to Step 2.

Step 2

The Board analogized to DDR Holdings in showing that the claims contain an “inventive concept” for two reasons. The first reason is somewhat related to the step 1 analysis. That is, the Board found that the claims provide a technical solution to a technical problem unique to the Internet. Here it was generating code snippets and files that can be automatically integrated with an online website so that an API-based mechanism can be used with the online website.

The second reason analogized to Bascom. The Board found that the combination of Appellants’ claim elements, like the claims in Bascom, provides a practical application of integrating an API based mechanism to a merchant’s website without the merchant having to understand the API or having to know how to code in a language specific to the APL This transforms any abstract idea (i.e., “coding” or “payment management in network”) into “a particular, practical application of that abstract idea.”

Conclusion

Despite the chorus of criticism of the Alice/Mayo framework continuing to grow, it is the law of the land. That being said, there are ways to navigate through its complexities. This decision nicely shows practice tips that can be used for similarly rejected applications. For step 1, one practice tip is not to let the examiner oversimplify what the claims are directed to. Consider focusing of the claims with its technical features as a problem to solve. For step 2, if applicable, consider showing how the claimed invention is solving a problem unique to a computer-specific environment (e.g., the Internet). Lastly, consider how the combination of claim elements might transform the alleged abstract idea into a particular, practical application.

Number of abstract idea rejections decided at PTAB for August 2018 higher than ever, but reversal rate treads water

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Recently at the IPO Annual meeting on September 24, USPTO director Andrei Iancu acknowledged the obvious: Section 101 is making folks’ lives difficult. The director also had some strong words about the abstract idea patent-eligibility doctrine. Calling into question the established framework, the director asked: “How can a claim be novel enough to pass 102 and nonobvious enough to pass 103, yet lack an ‘inventive concept’ and therefore fail 101?” It does not look like a fix to 101 is coming anytime soon. But it does look like this struggle is increasingly making its way to the Board.

August 2018 saw a record-number of abstract idea rejections decided at the Board. The PTAB decided 209 abstract idea rejections. And even with such a high number of cases, the reversal rate only slightly dipped compared to prior months. See previous post on recent months abstract idea decisions. For August, 30 of 207 decisions were entirely reversed, yielding a complete reversal rate of 14.5%.

As examiners and applicants grapple with the abstract idea doctrine of patent-eligibility, the trend seems to be that applicants will increasingly seek the PTAB judges to adjudicate in their favor. And if recent months are any indication, that gamble is paying off more than ever before. But still with reversal rates in the teens, it’s still one of the most difficult of all rejections to overturn on appeal. Plus with the director’s strong words, the reversal rate should continue to trend upward.

Check out additional information at Anticipat.com. You can look up, for example, all the decisions where the board reversed specific examiner rejections. Try out a trial for Anticipat Research today.

Not a flash in the pan: abstract idea reversal rate continues upward trend for July

July saw a continued trend of reversing Examiners’ abstract idea rejections. Last month, we reported that the PTAB overturned abstract idea rejections in June above 15%. Before this, it had been a year since such a high reversal rate. Now it appears that June was not a one-off month anomaly, but rather a continuation of a trend.

Similar to June, in July the PTAB decided a lot of abstract idea rejections. Of 195 total, 32 were reversed, yielding a pure reversal rate of 16.5%. One decision was partially affirmed, yielding a partial reverse rate of 17%.

Of note, in July the Board decided 20 more abstract idea decisions than in June. And June was no small month for abstract idea decisions. Such a greater sample size (from an already impressive total in June) with similar reversal rate suggests the board has changed its deference of examiner abstract idea rejections in light of recent case law.

Check out additional information at anticipat.com. You can look up, for example, all the decisions where the board reversed specific examiner rejections. Try out a trial for Anticipat Research today.

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.

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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.

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.