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Recent Federal Circuit decision, new examination guidelines provide hope for more structured approach to determining subject matter eligibility

Posted on May 16, 2016

Ever since Alice made landfall on patent jurisprudence nearly three years ago, the state of the law regarding subject matter eligibility has been in substantial disarray.  A recent Federal Circuit opinion and new examination guidelines for subject matter eligibility promulgated by the U.S. Patent Office provide reason to hope that  more structured approach to determining subject matter eligibility is being re-built.

For only the second time in nearly 50 decisions on subject matter eligibility since the Supreme Court’s June 2014 opinion in Alice Corp. Pty Ltd. v. CLS Bank Int'l, the Federal Circuit in Enfish v. Microsoft overturned a ruling that challenged claims failed to satisfy the requirements of subject matter eligibility.  Surprisingly, the basis for the Federal Circuits decision was the “step one” portion of Alice’s two-stage inquiry: whether the claims are “directed to” patent-ineligible subject matter.  In that respect, the Federal Circuit decision makes four important points.  First, under the first step, a claim must be “directed to” and not merely “involve” patent-ineligible subject matter:

In setting up the two-stage Mayo/Alice inquiry, the Supreme Court has declared: “We must first determine whether the claims at issue are directed to a patent-ineligible concept.” . . . That formulation plainly contemplates that the first step of the inquiry is a meaningful one, i.e., that a substantial class of claims are not directed to a patent-ineligible concept. The “directed to” inquiry, therefore, cannot simply ask whether the claims involve a patent-ineligible concept, because essentially every routinely patent-eligible claim involving physical products and actions involves a law of nature and/or natural phenomenon—after all, they take place in the physical world. . . . Rather, the “directed to” inquiry applies a stage-one filter to claims, considered in light of the specification, based on whether “their character as a whole is directed to excluded subject matter.”

Second, neither improvements to computer-related technology nor software per se are excluded from the type of invention that is not necessarily and inherently “directed to” an abstract idea:

We do not read Alice to broadly hold that all improvements in computer-related technology are inherently abstract and, therefore, must be considered at step two. Indeed, some improvements in computer-related technology when appropriately claimed are undoubtedly not abstract, such as a chip architecture, an LED display, and the like. Nor do we think that claims directed to software, as opposed to hardware, are inherently abstract and therefore only properly analyzed at the second step of the Alice analysis. Software can make non-abstract improvements to computer technology just as hardware improvements can, and sometimes the improvements can be accomplished through either route. We thus see no reason to conclude that all claims directed to improvements in computer-related technology, including those directed to software, are abstract and necessarily analyzed at the second step of Alice, nor do we believe that Alice so directs. Therefore, we find it relevant to ask whether the claims are directed to an improvement to computer functionality versus being directed to an abstract idea, even at the first step of the Alice analysis.

Third, as a result of the first two points, the crucial inquiry for computer- or software-implemented inventions is whether the claimed invention improves computer capabilities or merely uses computers as a tool:

For that reason, the first step in the Alice inquiry in this case asks whether the focus of the claims is on the specific asserted improvement in computer capabilities (i.e., the self-referential table for a computer database) or, instead, on a process that qualifies as an “abstract idea” for which computers are invoked merely as a tool.

Fourth, the claim language is significant in the step one analysis:

[D]escribing the claims at such a high level of abstraction and untethered from the language of the claims all but ensures that the exceptions to § 101 swallow the rule.

On the basis of the above requirements, the Federal Circuit found the claims at issue to not be “directed to” patent ineligible subject matter, and did not reach the second step of the Alice analysis.

The week prior to the Federal Circuit’s Enfish decision, a memorandum by the USPTO’s Deputy Commissioner for Patent Examination Policy regarding “Formulating a Subject Matter Eligibility Rejection and Evaluating the Applicant's Response to a Subject Matter Eligibility Rejection” provided guidance to the Examining Corp on formulating subject matter eligibility rejections, identifying for the first time four significant requirements of a proper rejection.  First, claims must be individually analyzed in a proper subject matter eligibility rejection (emphasis in original):

After determining what the applicant invented and establishing the broadest reasonable interpretation of the claimed invention, the eligibility of each claim should be evaluated as a whole using the two-step analysis detailed in the Interim Eligibility Guidance.

Second, the claim limitations that “set forth or describe[]” a judicial exception must be identified in a proper subject matter eligibility rejection (emphasis in original):

A subject matter eligibility rejection should point to the specific claim limitation(s) that recites (i.e., sets forth or describes) the judicial exception. The rejection must identify the specific claim limitations and explain why those claim limitations set forth a judicial exception (e.g., an abstract idea). Where the claim describes, but does not expressly set forth, the judicial exception, the rejection must also explain what subject matter those limitations describe, and why the described subject matter is a judicial exception.

Third, when an abstract idea is alleged as the judicial exception set forth or described in the claims (as in this matter), a proper subject matter eligibility rejection must include (a) an identification of the abstract idea and (b) an explanation as to why the claim language corresponds to a judicially-identified abstract idea (emphasis in original):

When the examiner has determined the claim recites an abstract idea, the rejection should identify the abstract idea as it is recited (i.e., set forth or described) in the claim, and explain why it corresponds to a concept that the courts have identified as an abstract idea. See, for example, the concepts identified on the July 2015 Update: Interim Eligibility Guidance Quick Reference Sheet, page 2. Citing to an appropriate court decision that supports the identification of the subject matter recited in the claim language as an abstract idea is a best practice that will advance prosecution. Examiners should be familiar with any cited decision relied upon in making or maintaining a rejection to ensure that the rejection is reasonably tied to the facts of the case and to avoid relying upon language taken out of context.

The requirement of citing an appropriate court decision supporting identification the subject matter as an abstract idea is particularly significant since Examiners are not permitted to independently define new abstract ideas:

Examiners should not go beyond those concepts that are similar to what the courts have identified as abstract ideas. Examiners are reminded that a chart of court decisions is available on the USPTO's Internet Web site.

Fourth, an explanation of why any addition claim elements, taken both individually and as a combination, is required in a proper subject matter eligibility rejection, together with an explanation of the rationale underlying that conclusion (emphasis in original):

After identifying the judicial exception in the rejection, identify any additional elements (features/limitations/steps) recited in the claim beyond the judicial exception and explain why they do not add significantly more to the exception. The explanation should address the additional elements both individually and as a combination when determining whether the claim as whole recites eligible subject matter. It is important to remember that a new combination of steps in a process may be patent eligible even though all the steps of the combination were individually well known and in common use before the combination was made (Diehr). Thus, it is particularly critical to address the combination of additional elements, because while individually-viewed elements may not appear to add significantly more, those additional elements when viewed in combination may amount to significantly more than the exception by meaningfully limiting the judicial exception.

A rejection should be made only if it is readily apparent to an examiner relying on his or her expertise in the art in the Step 2B inquiry that the additional elements do not amount to claiming significantly more than the recited judicial exception. When making a rejection, it is important for the examiner to explain the rationale underlying his or her conclusion so that applicant can effectively respond. On the other hand, when appropriate, the examiner should explain why the additional elements provide an inventive concept by adding a meaningful limitation to the claimed exception. See the Interim Eligibility Guidance for a listing of considerations that courts have found to qualify, and to not qualify, as significantly more than an exception.

This guidance from the USPTO provides applicants with a basis for challenging overbroad rejections.  

Between them, the Federal Circuit’s Enfish decision and new examination guidelines provide hope to patent owners and applicants for relief from the chaos that resulted from Alice.  Time will reveal if the state of the law continues to progress to a more rational approach to evaluating subject matter eligibility.