The USPTO Brings New Guidance to the Section 101 Quandary

The USPTO Guidelines have been updated as the Section 101 law has evolved. The USPTO has elicited and received public comments on the Guidelines, and has also held roundtable discussions on the topic of subject matter eligibility. The Guidelines provide comprehensive guidance for patent examiners and the public on how to evaluate claims for subject matter eligibility under Section 101. They also contain examples applicable to life science patents, and Example 29 illustrates application of Section 101 for diagnostic and treatment claims.

On April 19, 2018, the USPTO issued a memorandum to the Examining Corps that changes how examiners approach their Alice Step 2 analysis. The memorandum recognizes the Federal Circuit's decision in Berkheimer v. HP Inc., 881 F.3d 1360, 1369 (Fed. Cir. 2018), where the court found that the question of whether certain claim limitations represent well-understood, routine, or conventional activity under Step 2B is a factual issue, precluding summary judgment that all of the claims at issue were not patent eligible. The memorandum suggests that a claim recites “significantly more” unless proven otherwise: “an additional element (or combination of elements) is not well-understood, routine, or conventional unless the examiner finds, and expressly supports a rejection in writing with” certain evidence. This evidence is limited to the following four categories: 1) a citation to an express statement in the specification or a statement made during prosecution about the element(s) in question; 2) a citation to a court decision in MPEP §2106.05(d)(II) which notes the well-understood, routine, or conventional nature of the element(s) in question; 3) a citation to a publication that demonstrates the well-understood, routine, or conventional nature of the element(s) — note that merely finding additional elements in a single patent or publication is not sufficient to demonstrate its well-known nature, but instead the “nature of the publication and the description of the elements … would need to demonstrate that the additional elements are widely prevalent or in common use in the relevant field.”; and 4) a statement that the Examiner is taking Official Notice, which can be challenged under §2144.04. If the Examiner does take Notice and the applicant challenges the Notice, the Examiner must provide evidence according to falling into one of categories (1) through (3) above or submit an affidavit or declaration with particular factual statements and explanation supporting their assertions.

On June 7, 2018, the USPTO issued a memorandum to the Examining Corps providing patent eligibility examination guidance in view of Vanda Pharmaceuticals Inc. v. West-Ward Pharmaceuticals, 887 F.3d 1117 (Fed. Circ. 2018), and providing a glimmer of hope for the subject matter eligibility of inventions in the area of diagnostics and personalized medicine. In Vanda, the claims at issue recited a method of treating a patient having schizophrenia with iloperidone, a drug known to cause QTc prolongation (a disruption of the heart's normal rhythm that can lead to serious health problems) in patients having a particular genotype associated with poor drug metabolism. The Federal Circuit evaluated the claims at issue as a whole, and found that they were not “directed to” the judicial exception because they were method of treatment claims that apply natural relationships as opposed to being “directed to” them. As noted by the Federal Circuit, “the Supreme Court explained that the administering step was akin to a limitation that tells engineers to apply a known natural relationship or to apply an abstract idea with computers.” Thus, “they claimed an application of that relationship.” The Federal Circuit distinguished Mayo, stating: “The inventors recognized the relationships between iloperidone, CYP2D6 metabolism, and QTc prolongation, but that is not what they claimed. They claimed an application of that relationship. Unlike the claim at issue in Mayo, the claims here require a treating doctor to administer iloperidone.” Id. at 1135 (emphasis added). Consequently, the Federal Circuit held the method of treatment claims satisfied Step 1 of Alice, because the claims “are directed to a method of using iloperidone to treat schizophrenia,” rather than being “directed to” a judicial exception. In line with this Federal Circuit holding, the Vanda memorandum emphasizes that method of treatment claims can be found to satisfy Step 1 of Alice, without requiring a showing of “nonroutine or unconventional steps.” The USPTO notes that “[t]he USPTO's current subject matter eligibility guidance and training example are consistent with the Federal Circuit's decision in Vanda, with the understanding that: (1) 'method of treatment' claims that practically apply natural relationships should be considered patent eligible under Step 2A of the USPTO's subject matter eligibility guidance; and (2) it is not necessary for 'method of treatment' claims that practically apply natural relationships to include nonroutine or unconventional steps to be considered patent eligible under 35 U.S.C. §101.” (Memorandum at page 2 (emphasis in original).)

A New USPTO Director Is Driving Changes in the USPTO to Provide Greater Clarity and Predictability

On Feb. 23, 2018, a new Director, Andrei Iancu, was sworn in as Under Secretary of Commerce for Intellectual Property and Director of the USPTO. Since his appointment, Director Iancu has focused on the need for predictability in the US patent system to provide appropriate and proper incentives for innovation and economic growth. To that end, the USPTO updated the Trial Practice Guide in August 2018 published two new Standard Operating Procedures for PTAB in September 2018 (see, http://bit.ly/2rzfbo0) and http://bit.ly/2rCc26N), published a final rule on the claim construction standard in October 2018, and published a proposal for an updated claim amendment procedure in AIA trials in November 2018.

In addition to the above developments, Director Iancu revealed recently that the USPTO is working on revised patent eligibility guidelines he hopes will help keep patent eligibility issues and conditions-for-patentability issues as separate inquiries. In remarks made at the Intellectual Property Owners Association Annual Meeting in Chicago on Sept. 24, 2018, Director Iancu stated:

[T]he proposed guidance for Section 101, which addresses step 1 of Alice, would explain that eligibility rejections are to be applied only to claims that recite subject matter within the defined categories of judicial exceptions. And even then, a rejection would only be applied if the claim does not integrate the recited exception into a practical application. This provides significantly more clarity for the great bulk of cases. (emphasis added)

Director Iancu also stated:

More specifically, the contemplated guidance would do two primary things: First, it would categorize the exceptions based on a synthesis of the case law to date. And second, if a claim does recite a categorized exception, we would instruct examiners to decide if it is “directed to” that exception by determining whether such exception is integrated into a practical application. These two clarifications would help drive more predictability back into the analysis while remaining true to the case law that gave rise to these judicial exceptions in the first place. So first, what exactly should be captured by the judicial exceptions to §101? In essence, and because we no longer want to mush subject matter with the conditions of patentability, the exceptions should capture only those claims that the Supreme Court has said remain outside the categories of patent protection, despite being novel, nonobvious, and well-disclosed. And what are the categories of inventions that the court told us that we should not patent even where the applicant demonstrates full compliance with Sections 102, 103 and 112? The Supreme Court gave us the answer: the “basic tools of scientific and technological work. And what are these “basic tools?” I believe that the Supreme Court has also told us that, at least through their examples.

(emphasis added).

While patent practitioners, patent owners, patent examiners and the general public were keeping an eye out for this new guidance from the USPTO, John Cabeca, the director of the USPTO's Silicon Valley office, offered his own view of the proposed changes at IAM's second Software IP event, held in San Francisco on Oct. 30, 2018. At that event, Branch Director Cabeca stated that “I fully expect there to be fewer 101 rejections after the guidance has been issued.” With this in mind, the new guidance was eagerly awaited in certain life science sectors, such as diagnostics and personalized medicine, which continue to struggle with patent eligibility.

USPTO Releases New Guidance on Patent Subject Matter Eligibility

On Jan. 4, 2019, USPTO released the eagerly awaited guidance for patent subject matter eligibility under 35 U.S.C. §101. The guidance took effect on Jan. 7, 2019, and clarifies how patent examiners determine whether a claim is patent eligible under the Supreme Court's Alice test.

First, the guidance provides greater clarity as to what constitutes an “abstract idea.” It identifies the abstract idea exception as subject matter included in the following three enumerated groupings: 1) Mathematical concepts: Mathematical relationships, mathematical formulas or equations, mathematical calculations; 2) Certain methods of organizing human activity: Fundamental economic principles or practices (including hedging, insurance, mitigating risk); commercial or legal interactions (including agreements in the form of contracts, legal obligations, advertising, marketing or sales activities or behaviors, business relations); managing personal behavior or relationships or interactions between people (including social activities, teaching, and following rules or instructions); and 3) Mental processes: Concepts performed in the human mind (including an observation, evaluation, judgment, or opinion).

The guidance makes it clear to examiners that a claim should not be treated as reciting an abstract idea unless it recites subject matter that falls under the enumerated groupings. However, an examiner “in rare circumstances” has the discretion to treat a claim as reciting an abstract idea even when it does not fall within the enumerated groupings.

Second, the guidance provides a two-prong test for evaluating if a claim is “directed to” a judicial exception, under Step 2A. In Prong One of Step 2A, the examiner determines if the claim recites a judicial exception (i.e., a law of nature, a natural phenomenon, or an abstract idea). If so, the examiner proceeds to Prong Two of Step 2A. This requires the examiner to analyze whether the judicial exception is integrated into a practical application. A claim that integrates a judicial exception into a practical application is not directed to a judicial exception and is patent eligible. The procedure evaluates “integration” early on in Step 2A and specifically delays, until Step 2B, the analysis of well-understood, routine, conventional activity. As such, examiners are not to shortcut the process by simply labeling claim elements “well-understood, routine, conventional activity” early in their analysis.

The guidance provides several illustrative examples in which a judicial exception has been integrated into a practical application. Notably, one of these examples is that where “[a]n additional element that applies or uses a judicial exception to effect a particular treatment or prophylaxis for a disease or medical condition.” This exemplary practical application bodes well for patentability of applications that use algorithms for diagnosis and treatment decisions in personalized medicine.

The USPTO is now seeking public comment on the 2019 Revised Patent Subject Matter Eligibility Guidance, and “may issue further guidance, or modify the current guidance, in the future based on its review of the comments received, further experience of the USPTO and its stakeholders, and additional judicial actions.”

Analysis

Recent Federal Circuit concurrences and dissents identify the uncertainty in the law and, in fact, are calling for a change. See, Ariosa Diagnostics, Inc. v. Sequenom, Inc., 809 F.3d at 1282-1287 (Fed. Cir. 2015); Berkheimer v. HP Inc., No. 2017-1437, 2018, 2018 WL 2437140 at 1-3 (Fed. Cir. May 31, 2018). Consistent with the issues voiced by the appeals court judges, Judge Giles Rich articulated in 1979 the problems of commingling Section 101 jurisprudence with other statutory provisions (problems can arise due to the “unfortunate … though clear commingling of distinct statutory provisions which are conceptually unrelated, namely, those pertaining to the categories of invention in § 101 which may be patentable, and to the conditions for patentability demanded by the statute …. ” In re Bergy, 596 F.2d 952, 961 (C.C.P.A. 1979).

In line with this call for change, Director Iancu is spearheading changes at the USPTO to provide greater clarity and increased reliability so that patentees and the public can better predict how patent disputes might play out. According to Director Iancu:

[P]ursuant to the Patent Act of 1952, we should keep invalidity rejections in their own lanes. If something is not novel or is obvious, we should invalidate it under 102 or 103. If something is indefinite, or too broad to be fully enabled or described, we should invalidate it under 112 …. Section 101 is about the eligibility of subject matter. To that end, the judicial exceptions should address categories of subject matter that are not eligible per se, or on their own, no matter how inventive or well-claimed they are. We don't need 101 to address other problems with the claims. We have Sections 102, 103 and 112 for that purpose. The exceptions to the 101 statute are judicially created. In the spirit of judicial restraint, let's apply them only where we have to.

Intellectual Property Owners Association Annual Meeting in Chicago on Sept. 24, 2018.

With the USPTO's release of new guidance for patent subject matter eligibility in the first week of 2019, it appears as Director Iancu's desired changes are beginning to take practical effect.

Thus, it appears that at least at the Federal Circuit and the USPTO, there is a new drive to disentangle the unfortunate commingling of Section 101 jurisprudence with other statutory provisions, and to provide a more predictable and reliable patent system. With a more predictable and reliable patent system, there is renewed hope for resolving the present conflict between the incentive to invent and the breadth of patent-eligible subject matter to provide the proper incentives to invent based on real technological innovation.

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Patricia Campbell, Ph.D., J.D., is a Partner in the Silicon Valley Office of Jones Day. She practices in the area of intellectual property law, focusing primarily on patent procurement and portfolio management in the pharmaceutical and biotechnology sectors, including for small molecule pharmaceuticals, antibodies and antibody-drug conjugates, diagnostics, enzyme replacements, and in silicon screening methods for drug identification and development. Susan M. Gerber, B.S., J.D., is Counsel in the Cleveland Office of Jones Day. She practices in the area of intellectual property law, focusing primarily on patent infringement litigation and appeals. She has experience in many facets of patent infringement litigation, including cross-border enforcement and Section 1782 discovery actions.