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.

 

PTAB Chief Judge Ruschke at PTAB Bar Association meeting: ex parte PTAB can develop Section 101 jurisprudence

The PTAB Bar Association has a committee called “PTAB Appeals” that scheduled a meeting on April 5, 2018 to discuss various topics with sitting judges at the PTAB. This meeting was set up in part because of interest in Chief Judge Ruschke to meet with practitioners to discuss ex parte appeals. Ex parte appeals is the less-discussed and less-focused on aspect of what PTAB does. The two-hour meeting was at the USPTO in Alexandria, VA and covered a lot of ground including Section 101.

At this meeting, Chief Judge Ruschke was optimistic about newly appointed director Andrew Iancu. According to Ruschke, Iancu has stressed that the USPTO has to do a better job of applying Section 101 in a more consistent, straightforward manner. And Iancu sees the corpus of decisions coming out of the PTAB as an important clue to this.

During the meeting, there was talk about how Examiners at the USPTO largely are not good at applying case law. And part of the challenge of overcoming Section 101 rejections is having the Examiners understand the legal arguments. But the Board comprises judges who are legally trained to entertain and apply case law. And as the judges are overturning Examiners’ 101 rejections, this becomes an additional way for Section 101 jurisprudence to develop (in addition to the federal court decisions). Because there are so many more decisions at the PTAB across more diverse technology centers, the PTAB seems to be an ideal forum for understanding the boundaries of patent-eligibility.

Anticipat.com is committed to tracking all the facets of decisions coming out of the ex parte PTAB. Stay tuned for continued developments as it relates to Section 101 among other areas.

 

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.

Business methods making comeback on appeal at the Board–Citing Berkheimer PTAB panel holds Examiner must show evidence

We have previously reported on the very low reversal rates of abstract idea rejection within tech center 3600, home of business method art. Indeed, over the past few months, the reversal rate has been about 12%, as shown on the Anticipat Research database. But the Federal Circuit has recently pushed the Alice test closer toward patentees, and the Board appears to be following their lead. This is shown in a pair of recently-decided appeals involving business method applications.

In Ex parte Bhogal (PTAB Mar. 19, 2018), the Board found that the claimed method recited more than the alleged abstract idea by “adding a specific limitation other than what is well-understood, routine and conventional in the field.” The Board acknowledged that the claims at issue, like most business method claims, recites generic computer, network and Internet components. But citing Bascom, panel noted that the inventive concept can still be found in the non-conventional arrangement of these pieces.

Here, the appellant had argued that a claimed rendering order prioritization technique is not well-understood, routine, or conventional. The Board found this argument persuasive, noting that the Examiner did not set forth with sufficient specificity or provided any finding that this claimed technique is routine, conventional or well-understood. Importantly, the panel cited to Berkheimer v. HP Inc., No. 2017-1437, slip op. at 14 (Fed. Cir. Feb. 8, 2018) for the proposition that “[w]hether something is well-understood, routine, and conventional to a skilled artisan at the time of the patent is a factual determination.” Without such a factual finding by the Examiner, the Board found that the rejection was improper and reversed.

It is interesting to note that the Berkheimer Federal Circuit decision very recently issued: February 8, 2018. We have seen Board panels quickly adopt Federal Circuit in the past, as reported here. So the Board appears to be going out of its way to use the decision in its analysis. This may signal that the Board is eager to make patent-eligibility holdings at trial consistent with examination.

In another appeal decided the previous day, Ex parte Hoff (PTAB Mar. 16, 2018), the Examiner had argued that there is no requirement to provide “documentary evidence to demonstrate abstractness.” Answer 9. But the Examiner had only looked at the claim elements individually. In response, the Board quoted Bascom that “the inventive concept inquiry requires more than recognizing that each claim element, by itself, was known in the art.” In view of the Appellant’s explanation of the effect of coordinated claim elements, the rejection does not sufficiently establish that the combined activity of various claim elements, as identified by the Appellant, fails to constitute significantly more than the abstract idea itself.

Both decisions involved applications with claims that have generic, conventional hardware that individually were not inventive. But the Board found in both cases that the Examiner had failed to establish on the record that the unique combinations of the elements were merely conventional or routine. Without such findings, the rejections were reversed.

The PTAB will continue to side with Examiners in affirming many abstract idea rejections of business method applications. But the recent reversals show that a compelling argument lies in the novel arrangement of claim elements. This is especially compelling if the Examiner has not established on the record that these elements are conventional or routine.

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.

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Anticipat Team