It is no secret that the Supreme Court has made a dog’s breakfast out of 35 U.S.C. §101. But, the Federal Circuit’s jurisprudence in this area of the law has not been the court’s finest hour, either. For example, while McRo v. Bandai was a good start, the Federal Circuit has been hesitant to address the role of facts/evidence in a patent eligibility analysis, in several ways.
As an aside, I made the mistake of working on this post while watching a video of Allen Iverson’s famous “Practice” press conference. Now every time that I think about these issues, I envision Allen Iverson sitting at the dais dressed in a black robe and my mind substitutes “evidence” for “practice” and “patent eligibility” for “game”:
Some of the ways that the Federal Circuit seems hesitant to address the role of facts/evidence of patent eligibility in its opinions are:
1) Acknowledging that patent eligibility is a question of law informed by underlying factual findings
While patent eligibility is a question of law, Federal Circuit opinions rarely recognize that previous CAFC panels have stated that there are underlying factual issues that can inform the analysis:
Whether a claim is directed to statutory subject matter is a question of law. Although determination of this question may require findings of underlying facts specific to the particular subject matter and its mode of claiming . . . .
Arrhythmia Research Technology v. Corazonix Corp., 958 F.2d 1053 (Fed. Cir. 1992).
It is well-established that “whether the asserted claims … are invalid for failure to claim statutory subject matter under 35 U.S.C. § 101, is a question of law which we review without deference.” AT & T Corp. v. Excel Commc’ns, Inc., 172 F.3d 1352, 1355 (Fed.Cir.1999). As a question of law, lack of statutory subject matter is a “ground [for affirmance] within the power of the appellate court to formulate.” Chenery, 318 U.S. at 88, 63 S.Ct. 454. While there may be cases in which the legal question as to patentable subject matter may turn on subsidiary factual issues, Comiskey has not identified any relevant fact issues that must be resolved in order to address the patentability of the subject matter of Comiskey’s application. Moreover, since we would review a Board decision on the issue of patentability without deference, see AT & T, 172 F.3d at 1355, the legal issue concerning patentability is not “a determination of policy or judgment which the agency alone is authorized to make.” Chenery, 318 U.S. at 88, 63 S.Ct. 454.
In re Comiskey, 554 F.3d 967 (Fed. Cir. 2009)(Judge Dyk writing for the court).
To their credit, many district court judges have not been shy to cite precedent that stand for the proposition that §101 is an issue of law informed by underlying factual issues. See, e.g., SINCLAIR-ALLISON, INC. v. FIFTH AVENUE PHYSICIAN SERVICES, LLC, No. CIV-12-360-M (W.D. Okla. Dec. 19, 2012); PROTOSTORM, LLC v. ANTONELLI, TERRY, STOUT & KRAUS, LLP, No. 08-CV-931 (PKC)(JO) (E.D.N.Y. June 5, 2015); WIRELESS MEDIA INNOVATIONS, LLC v. MAHER TERMINALS, LLC, Civil Action No. 14-7004 (D.N.Y. Apr. 20, 2015); EXECWARE, LLC v. BJ’S WHOLESALE CLUB, INC., Civil Action No. 14-233-LPS (D. Del. July 15, 2015); TRIPLAY, INC. v. WhatsAPP INC., Civil Action No. 13-1703-LPS (D. Del. Apr. 28, 2015); VS TECHNOLOGIES, LLC v. TWITTER, INC., Civil Action No. 2: 11cv43 (E.D. Va. Apr. 26, 2012); Cyberfone Systems, LLC v. Cellco Partnership, 885 F. Supp. 2d 710 (D. Del. 2012).
2) Identification of an abstract idea.
Despite the Supreme Court pointing to factual sources to support its conclusions that the claims in Bilski1 and Alice2 were directed to abstract ideas and that Mayo3 was directed to a natural phenomenon, the Federal Circuit has yet to confirm that a tribunal must always support an assertion of an abstract idea with factual evidence.
To its credit, the PTAB required such evidence in PNC Bank v. Secure Axcess, CBM2014-0100 (PTAB Sept. 9, 2014). And, the PTAB noted that the Supreme Court supported its determination in the Alice decision:
“We also find that Petitioner does not provide sufficient persuasive evidentiary support that the placing of a trusted stamp or seal on a document is “a fundamental economic practice” or a “building block of the modern economy.” See Alice, 134 S. Ct. at 2356 (citing various references concerning the concept of intermediated settlement, including an 1896 reference).”
PNC Bank v. Secure Axcess, CBM2014-0100 (PTAB Sept. 9, 2014).
This issue was before the court, for example, in IN RE VILLENA, No. 2016-1062 (Fed. Cir. Oct. 13, 2016). However, the court chose to decide that case by a Rule 36 Judgment;
3) Proof of (i) conventional, (ii) routine, and (3) well-understood activity in the “significantly more” analysis
The Federal Circuit has yet to confirm that factual evidence must be provided in order to prove that an ordered combination of claim elements is a (i) conventional, (ii) routine, and (iii) well-understood activity. At least this issue is on the radar screen of some of the judges. For example, in the oral argument of Apple v. Ameranth, Judges Reyna and Chen inquired about this type of inquiry. [Listen] and [Listen]. And, the USPTO Solicitor’s Office addressed the impact of a lack of evidence, as well: [Listen]. In IPLearn v. Microsoft, Judge Moore asked about evidence of conventionality: [Listen]. Unfortunately, the court issued a Rule 36 Judgment in that case.
The question of whether the “significantly more” inquiry — under step 2A of the Alice/Mayo test – is an “issue of law” or an “issue of fact” was before the Federal Circuit in January 2017 in America’s Collectibles Network v. The Jewelry Channel, Inc. USA. In this sound bite, you can listen to the appellant clearly tee up the issue for the Federal Circuit. [Listen] The court issued a Rule 36 Judgment, however.
Similarly, in In re Villena, Judge Taranto asked whether the inquiry into whether something is “conventional” could be anything other than a fact question: [Listen]. Unfortunately, the court issued a Rule 36 Judgment.
4) Secondary indicia of patent eligibility
Despite the opportunities to do so, the Federal Circuit has yet to recognize a principle of “secondary indicia of patent-eligibility.” Just as evidence of “secondary indicia of non-obviousness” can be used in a 35 U.S.C. §103 analysis, evidence of “secondary indicia of patent eligibility” should be permitted in a 35 U.S.C. §101 analysis. For example, if there is a nexus between a claimed invention and the claimed invention’s significant commercial success, it must not have been a (i) conventional, (ii) routine, and (iii) well-understood activity. If the Supreme Court is going to conflate §§101 and 103, then secondary indicia principles under §103 should be infused into the §101 analysis, as well.
This is an issue that has been raised in several oral arguments. For example, it was raised in Lending Tree v. Zillow : [Listen]. And, Judges Chen and Stoll observed that the argument had been made in Apple v. Ameranth: [Listen] and [Listen]. To its credit, the USPTO Solicitor’s Office even acknowledged in the oral argument of Apple v. Ameranth that secondary indicia should be considered as long as there is a nexus between the proffered secondary indicia and the claim elements: [Listen].
5) Standard of proof to establish patent ineligibility
The Federal Circuit recently passed up the opportunity to rule that the standard of proof required to establish patent ineligibility must be by “clear and convincing evidence.” See TRADING TECHNOLOGIES INTERNATIONAL, INC. v. CQG, INC., No. 2016-1616 (Fed. Cir. Jan. 18, 2017), at footnote 2:
2. The parties dispute whether the district court erred in requiring proof of ineligibility under § 101 by clear and convincing evidence. Because our review is de novo, and because under either standard the legal requirements for patentability are satisfied, we need not address this dispute.
TRADING TECHNOLOGIES INTERNATIONAL, INC. v. CQG, INC., No. 2016-1616 (Fed. Cir. Jan. 18, 2017).
1. In Bilski v. Kappos, the Supreme Court noted: ”In light of these precedents, it is clear that petitioners’ application is not a patentable “process.” Claims 1 and 4 in petitioners’ application explain the basic concept of hedging, or protecting against risk: “Hedging is a fundamental economic practice long prevalent in our system of commerce and taught in any introductory finance class.” 545 F.3d, at 1013 (Rader, J., dissenting); see, e.g., D. Chorafas, Introduction to Derivative Financial Instruments 75-94 (2008); C. Stickney, R. Weil, K. Schipper, & J. Francis, Financial Accounting: An Introduction to Concepts, Methods, and Uses 581-582 (13th ed.2010); S. Ross, R. Westerfield, & B. Jordan, Fundamentals of Corporate Finance 743-744 (8th ed.2008). “ Bilski v. Kappos, 130 S. Ct. 3218, 3231 (2010).
2. In Alice v. CLS, the Supreme Court noted: ”On their face, the claims before us are drawn to the concept of intermediated settlement, i.e., the use of a third party to mitigate settlement risk. Like the risk hedging in Bilski, the concept of intermediated settlement is “`a fundamental economic practice long prevalent in our system of commerce.’” Ibid.; see, e.g.,Emery, Speculation on the Stock and Produce Exchanges of the United States, in 7 Studies in History, Economics and Public Law 283, 346-356 (1896) (discussing the use of a “clearing-house” as an intermediary to reduce settlement risk). The use of a third-party intermediary (or “clearing house”) is also a building block of the modern economy. See, e.g., Yadav, The Problematic Case of Clearinghouses in Complex Markets, 101 Geo. L.J. 387, 406-412 (2013); J. Hull, Risk Management and Financial Institutions 103-104 (3d ed. 2012). Thus, intermediated settlement, like hedging, is an “abstract idea” beyond the scope of § 101. ” Alice Corp. Pty. Ltd. v. CLS Bank Intern., 134 S. Ct. 2347, 2356 (2014).
3. In Mayo Collaborative v. Prometheus Labs., 132 S. Ct. 1289, 1295 (2012), the Supreme Court observed the factual findings in the patentee’s own patent:
The patent claims at issue here set forth processes embodying researchers’ findings that identified these correlations with some precision.
More specifically, the patents—U.S. Patent No. 6,355,623 (623 patent) and U.S. Patent No. 6,680,302 (302 patent)—embody findings that concentrations in a patient’s blood of 6-TG or of 6-MMP metabolite beyond a certain level (400 and 7000 picomoles per 8×108 red blood cells, respectively) indicate that the dosage is likely too high for the patient, while concentrations in the blood of 6-TG metabolite lower than a certain level (about 230 picomoles per 8×108 red blood cells) indicate that the dosage is likely too low to be effective.
Mayo Collaborative v. Prometheus Labs., 132 S. Ct. 1289, 1295 (2012).
To the extent that the use of these factual observations in Bilski, Mayo, and Alice was mere dicta by the Supreme Court in interpreting its prior decisions, the Federal Circuit noted In Insurance Co. of the West v. US, 243 F.3d 1367, 1372 (Fed. Cir. 2001) that the Federal Circuit is obligated to follow dicta of the Supreme Court in its interpretation of prior cases:
This court is obligated to follow the Supreme Court’s interpretation in Blue Fox of those three cases, even though that interpretation may be dicta. See Stone Container Corp. v. United States, 229 F.3d 1345, 1349-50 (Fed.Cir.2000).
Insurance Co. of the West v. US, 243 F.3d 1367, 1372 (Fed. Cir. 2001).