The Difficulty in Implementing an Idea Does Not Mean the Idea is Not Abstract

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In Apple, Inc., v. Ameranth, Inc., [2015-1703, 2015-1704] (November 29, 2016), the Federal Circuit affirmed in part and reversed in part the PTAB’s subject matter eligibility determination of claims of U.S. Patent Nos. 6,384,850, 6,871,325, and 6,982,733 in three separate CBM proceedings. The patent specifications disclose a first menu that has categories and items, and software that can generate a second menu from that first menu by allowing categories and items to be selected. The patents describe a preferred embodiment of the invention for use in the restaurant industry.

The Patent Trial and Appeal Board (“Board”) construed the claims, found that each patent met the statutory definition of “covered business method patent,” and instituted CBM reviews. In its final decisions, the Board found certain claims in each of the patents unpatentable under 35 U.S.C. § 101.

On appeal the patent owner did not contest that the claims were directed to a “financial product or service,” but it did argue that the patents fall within the exception for technological inventions. 37 C.F.R. § 42.301(b) provides:

In determining whether a patent is for a technological invention solely for purposes of the Transitional Program for Covered Business Methods (section 42.301(a)), the following will be considered on a case-by-case basis: whether the claimed subject matter as a whole recites a technological feature that is novel and unobvious over the prior art; and solves a technical problem using a technical solution.

The Federal Circuit observed that this regulation offers little towards understanding the meaning of the term “technological invention,” but noted that determining whether these patents are a technological invention does not require this court to determine “the full sweep of the term.” The Federal Circuit affirmed the Board’s determinations that the patents were not for technological inventions.

In the first step of the Alice test, the Board determined that the claims in all three patents are directed to the abstract idea of “generating a second menu from a first menu and sending the second menu to another location.” The patent owner complained that the characterization of the abstract idea changed from the institution decision to the final written decision. The Federal Circuit noted that an abstract idea can generally be described at different levels of abstraction, but concluded that the Board’s slight revision of its abstract idea analysis does not impact the patentability analysis. The Federal Circuit affirmed the Board’s conclusion that the claims in these patents are directed to an abstract idea.

In the second step of the Alice test, the Board found that the recited central processing unit, data storage device, and operating system components were “typical” hardware elements. The Board rejected the various elements identified by the patent owner as insignificant post-solution activity, and the Federal Circuit agreed. The Federal Circuit pointed out that the specifications describe the hardware elements of the invention as “typical” and the software programming needed as “commonly known.” Lastly the Federal Circuit rejected the patent owner’s argument that the required programming was difficult, and this difficulty indicated that the claims were not directed to an abstract idea. The difficulty of the programming details for this functionality is immaterial because these details are not recited in the actual claims. The degree of difficulty in implementing an abstract idea in this circumstance does not itself render an abstract idea patentable.

The Federal Circuit went on to reverse the confirmation of patentability of several of the claims.

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A Patent Does Not Become a CBM Patent Because its Practice Could Involve a Potential Sale of a Product or Service

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In Unwired Planet, LLC, v. Google, Inc., [2015-1812] (November 21, 2016) the Federal Circuit vacated and remanded the PTAB’s final written decision in Covered Business Method Patent Review No. 2014-00006, that found the claims of U.S. Patent No. 7,203,752 invalid, because the patent was not directed to a business method patent

The only issues on appeal was whether the patents are CBM patents and whether the challenged claims are directed to patentable subject matter under section 101. The Federal Circuit’s jurisdiction was based on 28 U.S.C. §1295(a)(4)(A) and 35 U.S.C. § 329, and included whether the ’752 patent is a CBM patent. Under the Administrative Procedure Act, the the Board’s actions are to be set aside if ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law’ or ‘unsupported by substantial evidence.’”

In accordance with the statute, a CBM review is available only for a “covered business method patent,” which the AIA defines as “a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions.” AIA § 18(d)(1).  The Federal Circuit said that while it might have been helpful if the PTO had used its authority to elaborate on its understanding of the definition of CBM provided in the statute, it did not do so, instead adopting by regulation the statutory definition of a CBM patent.

The Federal Circuit found that the Board did not apply the statutory definition, instead inquiring whether the patent claims activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity.  The Federal Circuit said that the Board determined that the ’752 patent was a CBM patent because the claimed location service could involve an eventual sale of services.  The finding that sales could result from advertising related to the practice of the patent was the sole evidence the Board relied on to find that the ’752 patent is a CBM patent.

The Federal Circuit rejected the use of general policy statements, or the legislative history, noting  neither the legislators’ views nor the PTO policy statement provides the operative legal standard. The authoritative statement of the Board’s authority to conduct a CBM review is the text of the statute.  The Board is only empowered to review “the validity of covered business method patents.” AIA § 18(a)(1).  Patents that fall outside the definition of a CBM patent are outside the Board’s authority to review as a CBM patent, and the PTO’s regulatory authority does not permit it to adopt regulations that expand its authority beyond that granted by Congress.

The Federal Circuit criticized the incidental or complementary language in the test applied by the Board, noting that a patent for a novel lightbulb that is found to work particularly well in bank vaults does not become a CBM patent because of its incidental or complementary use in banks.  Likewise, a patent covering a method and corresponding apparatuses does not become a CBM patent because its practice could involve a potential sale of a good or service. All patents, at some level, relate to potential sale of a good or service.

The Federal Circuit vacated the Board’s decision.

Federal Circuit to PTAB: “Play Fair.”

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In In re Nuvasive, Inc., [2015-1672, 2015-1673] (November 9, 2016), the Federal Circuit reversed one of two PTAB decisions because the patent owner was not given adequate notice of the grounds of invalidity asserted against the patent.  The Federal Circuit said that the Board’s ultimate reliance on material not adequately identified by petitioner in the cited reference, together with the Board’s refusal to allow NuVasive to respond
fully once that material was called out, violated NuVasive’s rights under the Administrative Procedure Act.

The Federal Circuit described the Board’s conduct:

NuVasive objected to Medtronic’s argument regarding

Michelson’s Figure 18, which it contended was a new ground of invalidity asserted for the first time on reply. It requested leave to file motions to strike or, alternatively, surreplies, which the Board denied. NuVasive also attempted to address the matter at oral argument, but the Board refused to allow NuVasive to make substantive arguments in response. When Medtronic made arguments relating to Michelson’s Figure 18 in its rebuttal time, NuVasive objected again, but the Board assured NuVasive that it understood NuVasive’s position and would consider the propriety of Medtronic’s arguments when making a final decision.

Under the Administrative Procedure Act, the Federal Circuit must “hold unlawful and set aside agency action . . . not in accordance with law [or] . . . without observance of procedure required by law.” 5 U.S.C. § 706. A patent owner is undoubtedly entitled to notice of and a fair opportunity to meet the grounds of rejection, based on due-process and APA guarantees.   For a formal adjudication like the inter partes review considered here, the APA imposes particular requirements on the PTO: The agency must timely inform the patent owner of the matters of fact and law asserted, 5 U.S.C. §554(b)(3),
must provide all interested parties opportunity for the submission and consideration of facts and arguments and hearing and decision on notice, 5 U.S.C. §554(c), and must allow a party to submit rebuttal evidence as may be required for a full and true disclosure of the facts, 5 U.S.C. § 556(d).

The Federal Circuit said that although the Board is not limited to citing only portions
of the prior art specifically drawn to its attention, in this case it is clear that the Board treated Michelson’s Figure 18 as an essential part of its obviousness findings
identifying claim elements in the prior art.  Under the APA’s standards, NuVasive was entitled to an adequate opportunity to respond to the asserted facts about Michelson. And under the APA’s fact-specific standard, common sense, and this court’s precedent, that entitlement was not lessened in this case by virtue of the opportunity NuVasive had to respond to other factual assertions about Michelson.

In one of the IPRs the Federal Circuit found that the Notice was adequate, based upon the way that the reference  was described in the Petition, but in the other there was no notice before NuVasive filed its patent owner response.  It was only after the petitioner’s reply that NuVasive as given fair notice, but at no point after the Reply did the Board give NuVasive the required opportunity to respond to that point.

 

Federal Circuit Gives the Board a Lesson on Hearsay

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In REG Synthetic Fuels, LLC v. Neste Oil Oyj, [2015-1773] (November 8, 2016), the Federal Circuit affirmed-in-part, reversed-in-part, vacated-in-part, and remanded the PTAB’s unpatentability determinations or claims U.S. Patent No. 8,231,804 directed to paraffin compositions
containing primarily even-carbon-number paraffins, and the Board’s exclusion of certain REG exhibits.

REG complained that the allegedly anticipatory reference discloses area percentages rather than the claimed weight percentages, and petitioners conversion of the area percentages to weight percentages was unreliable.  The Federal Circuit agreed with Petitioner that the conversion was reliable, relying in part upon REG’s own expert who agreed that the conversion could be calculated, concluding that substantial evidence supported anticipation.

With respect to anticipation by other claims, the Federal Circuit found that REG had successfully antedated the allegedly anticipating reference based on admitted exhibits, and exhibits that the Board improperly excluded.   With respect to the excluded exhibits, the Board partially excluded emails with a third party in which the inventor disclosed his conception of the invention on grounds of hearsay.  However, the significance of the email was that they were written, not their content, and thus the Federal Circuit found that the email should not have been excluded.

The Federal Circuit reversed the exclusion of evidence, and based upon the evidence of conception in that improperly excluded evidence, concluded that REG has successfully antedated the reference, and reversed the finding of anticipate.

The Search for an Abstract Idea Test Continues to Elude; Federal Circuit Goes Old School with Common Law Analysis of Precedent

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In Amdocs (Israel) Limited v, Openet Telecom, Inc., [2015-1180] the Federal Circuit reversed and remanded the district court’s judgment on the pleadings that U.S. Patent Nos. 7,631,065, 7,412,510, 6,947,984, and 6,836,797 were not directed to patent eligible subject matter under 35 USC 101.

The patents in suit concerned, inter alia, parts of a system designed to solve an accounting and billing problem faced by network service providers.  The Federal Circuit outlined the Alice/May two step framework, and noted that its cases generally follow the step one/step two Supreme Court format, reserving step two for the more comprehensive analysis in search of the inventive concept. The Federal Circuit went on to observe that recent cases suggest that there is considerable overlap between step one and step two, and in some situations this analysis could be accomplished
without going beyond step one.

The Federal Circuit said that the analysis presumably would be based on a generally-accepted and understood definition of, or test for, what an ‘abstract idea’ encompasses.  The Federal Circuit  conceded that:

a search for a single test or definition in the decided cases concerning § 101 from this court, and indeed from the Supreme Court, reveals that at present there is no such single, succinct, usable definition or test.

The Federal Circuit noted that in absence of a defintion, the decisional mechanism
courts now apply is to examine earlier cases in which a similar or parallel descriptive nature can be seen—what prior cases were about, and which way they were decided, which the Court identified as the classic approach of common law.

After reviewing some of its precedent, the Federal Circuit found the claims in the ’065 Patent were much closer to those in BASCOM and DDR Holdings than those in Digitech, Content Extraction, and In re TLI Commc’ns. Indeed, even if we were to agree that claim 1 is directed to an ineligible abstract idea under step one, the claim is eligible
under step two because it contains a sufficient “inventive concept.”  The Federal Circuit concluded the the claim entails an unconventional technological solution (enhancing data in a distributed fashion) to a technological problem (massive record flows
which previously required massive databases).

With respect to the ‘510, ‘984, and ‘797 Patents, the Federal Circuit said these claims were eligible for patenting for reasons similar to those that undergirded the eligibility of the ’065 patent claims.  With respect to the ’984 Patent.

 

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Congress Made a Rock So Heavy that the Courts Can’t Pick it Up

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In Medtronic, Inc. v. Robert BoschHealthcare Systems, Inc., [2015-1977, 2015-1986, 2015-1987] (October 20, 2016), the Court of Appeals for the Federal Circuit reaffirmed its earlier order that the PTAB’s vacatur of its institution decisions and termination of the
proceedings constitute decisions whether to institute inter partes review and are therefore “final and nonappealable” under § 314(d).

A decision whether to institute inter partes review is “final and nonappealable” under 35 U.S.C. § 314(d).  The Supreme Court confirmed this in Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131 (2016), holding that §314(d) operates to bar review in cases where the challenge consists of questions that are “closely tied” or “closely related” to “the application and interpretation of statutes related to the Patent Office’s
decision to initiate inter partes review.”

The Federal Circuit concluded that under Cuozzo a decision whether to institute inter partes review proceedings pursuant to §314(a) (the issue in Cuozzo) and a reconsideration of that decision (the current situation are both barred from review by § 314(d).  The Federal Circuit said that It is difficult to conceive of a case more “closely related” to a decision to institute proceedings than a reconsideration of that very decision. adding that “[i]t would be strange to hold that a decision to institute review would not be reviewable but a reconsideration of that decision would be reviewable.”

While Medtronic correctly pointed out that Cuozzo reserved the question of §314(d)’s effect on “appeals that implicate constitutional questions, that depend on other less closely related statutes, or that present other questions of interpretation that reach, in terms of scope and impact, well beyond ‘this section.’” The Federal Circuit did not agree that these issues applied here.

Although the result seemed preordained by Cuozzo, one can relate to Medtronic’s incredulity that Congress can give decision making authority to a government agency, and then completely insulate that agency’s exercise of that authority from review by courts,

 

Substantial Evidence Supports Determination of Reasonable Expectation of Success

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In In re Efthymiopoulos, [2016-1003] (October 18, 2016) the Federal Circuit affirmed the PTAB decision that the claimed invention relating to the administration or an anti-influeza drug “by inhalation through the mouth alone” was obvious.

There is no dispute that Von Itzstein I discloses the use of zanamivir to treat and prevent influenza. There is also no dispute that Von Itzstein II discloses several pages of different administration methods for an adjacent homologue of zanamivir to achieve the same result—treating or preventing influenza, expressly discloses administration
through “oral,” “nasal,” or other forms “suitable for administration
by inhalation,” among other methodologies.

Efthymiopoulos’s argument that a skilled artisan would not reasonably expect zanamivir to be effective if administered through oral inhalation is also unpersuasive.  The Federal Circuit found that substantial evidence supports the determination that a skilled artisan would have a reasonable expectation of success in combining the Von Itzstein references.   Efthymiopoulos further argued that the Board disregarded its evidence of unexpected results, namely the testimony of Dr. Hayden. However the Federal Circuit found that the record showed that the Board thoroughly considered and discussed
Dr. Hayden’s declaration in its decision and found that Dr. Hayden’s testimony insufficient to overcome the prima facie case of obviousness.

 

 

Claims for a New Abstract Idea are Still Claims to an Abstract Idea, Invalid under §101

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In Synopsis, Inc. v. Mentor Graphics Corporation, [2015-1599] (October 17, 2016), the Federal Circuit affirmed summary judgment that claims of U.S. Patent Nos. 5,530,841; 5,680,318; and 5,748,488 were invalid under 35 U.S.C. §101.  The Federal Circuit rejected the argument that the claims were directed to eligible subject matter because they relate to complex algorithms used in computer- based synthesis of logic circuits, instead finding that the are directed to the abstract idea of translating a functional
description of a logic circuit into a hardware component description of the logic circuit.

The Federal Circuit said that the idea of reviewing a description of certain functions and turning it into a representation of the logic component that performs those functions can be—and, indeed, was—performed mentally or by pencil and paper by one of ordinary skill in the art.  Furthermore the Federal Circuit said that the claims did not call for the involvement of a computer, and thus they cannot be characterized as an improvement in a computer as a tool.

At Step I of the Alice test, the Federal Circuit said that it continues to treat analyzing
information by steps people go through in their minds, or by mathematical algorithms, without more, as essentially mental processes within the abstract-idea category.  The justification for this is that computational methods which can be performed entirely in the human mind are the types of methods that embody the “basic tools of scientific and technological work” that are free to all men and reserved exclusively to none.

Synopsis argued that the complexity of the claims indicated that the method could not be performed mentally, but the Federal Circuit said that claims covered methods that could be performed mentally.  While Synopsys may be correct that the inventions were intended to be used in conjunction with computer-based design tools, the claims were not confined to that conception, and the §101 inquiry must focus on the language of the claims themselves.

At Step II of the Alice test, the Federal Circuit rejected the argument that the novelty of the claims saved them from being abstract, noting that a claim for a new abstract idea is
still an abstract idea, and concluded that the search for a § 101 inventive concept is distinct from demonstrating § 102 novelty.   Although conceding that the contours of what constitutes an inventive concept are far from precise, the Federal Circuit said that the claims contain no technical solution. To the extent the claims add anything to the abstract idea (of translating a functional description of a logic circuit into a hardware component description of the logic circuit), it is the use of assignment
conditions as an intermediate step in the translation process.  But, because the claims are for a mental process, assignment conditions, which merely aid in mental translation as opposed to computer efficacy, are not an inventive concept that takes the claims
beyond their abstract idea.

 

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Disavowal By Description, Disparagement, and Argument Limit Claims

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In Poly America, LP v. API Industries, Inc., [2016-1200] (October 14, 2016), the Federal Circuit  affirmed the district court’s construction of “short seal” in the claims of U.S. Patent No. 8,702,308 to require that such seals extend inwardly, because of clear and unequivocal statements that the inventor intended to limit the claimed invention.

Poly-America argues that in construing the term “short seal” to require inward extension, the district court erred by importing limitations from embodiments described in the specification, misreading the prosecution history, and ignoring principles of claim differentiation.  The Federal Circuit disagreed.

Claim construction departs from the plain and ordinary meaning in only two instances: (1) when a patentee acts as his own lexicographer; and (2) when the patentee disavows the full scope of the claim term in the specification or during prosecution.  There was no indication or assertion of lexicography in this case, so the only question remaining was whether the inventor disavowed trash bags with short seals that do not extend inwardly.  The Federal Circuit noted that disavowal can be effectuated by language in the specification or the prosecution history, but in either case, the standard for disavowal is exacting, requiring clear and unequivocal evidence that the claimed invention includes or does not include a particular feature.  However, while disavowal must be clear and unequivocal, it need not be explicit.

The Federal Circuit noted the short seal was described as “one of the characteristics of the present invention,” and that the specification disparaged prior art without the claimed feature. Furthermore, the Federal Circuit found that Poly-America’s reply to the rejection of all claims also contains a clear and unmistakable disavowal of short seals that do not extend inwardly.

The Federal Circuit said that this analysis did not involve importing limitations from embodiments described in the specification, noting that every embodiment described in the specification has inwardly extended short seals and every section of the specification indicates the importance of inwardly extended short seals.

 

No Disclaimer Found When Statements are Viewed in Context of Claims Pending at the Time They were Made

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In Massachusetts Institute of Technology v. Shire Pharmaceuticals, Inc., [2015-1881] (October 13, 2016), the Federal Circuit affirmed the district court’s construction of “vascularized organ tissue” and “cells derived from a vascularized tissue” and its determination that the term “three-dimensional scaffold” was not indefinite, and thus the parties stipulated to a final judgment of validity and infringement stands.

The Federal Circuit said that the doctrine of prosecution disclaimer precludes patentees from recapturing through claim interpretation specific meanings disclaimed during prosecution. In order for prosecution disclaimer to attach, the disavowal must be both clear and unmistakable.  Where the alleged disavowal is ambiguous, or even amenable to multiple reasonable interpretations, the Federal Circuit said that it has declined to find prosecution disclaimer.

On the first term, “vascularized organ tissue,” the district court determined that there was no clear and unmistakable disclaimer that would exclude skin from the term’s ordinary meaning, and construed the term “vascularized organ tissue” as “vascularized tissue from an organ,” reasoning that because “the dermal layer of skin contains blood vessels, this term encompasses skin,” and the Federal Circuit agreed. The Federal Circuit analyzed the statements identified by Shire in the context of the claims pending at the time they were made.  Federal Circuit determined that a skilled artisan, reading the prosecution history as a whole, would conclude that MIT’s invention does in fact cover vascularized skin.

The Federal Circuit also agreed with the district court’s construction of “cells derived from a vascularized tissue” to include both parenchymal and non-parenchymal cells, noting that the claims themselves do not make a distinction.  After reading the full prosecution history in light of the then-pending claim language, the Federal Circuit concluded that a skilled artisan would not read MIT’s statements made during prosecution — and directed to very different claim language — as limiting the term “cells derived from a vascularized tissue” to parenchymal cells.

Lastly with respect to the district court’s determination that the term “three-dimensional scaffold” is not indefinite, the Federal Circuit affirmed the district court’s claim construction and validity determination.  While Shire asserted that there was no definition of “three-dimensional,” the district court construed the term “three dimensional” according to its accepted, ordinary meaning, as confirmed by dictionary definitions. Shire complained that these were current, non-technical dictionaries, but the Federal Circuit pointed out that Shire failed to show how technical dictionaries or dictionaries contemporaneous to the patents’ filing date would define the term any differently, and in fact the definitions were consistent with Shires own experts.