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

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

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.”

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

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

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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