Conductive Discussions: Patent Eligibility Under Section 101

Ropes & Gray’s podcast series Conductive Discussions focuses on legal issues of interest to the semiconductor industry. In this episode, IP litigation partners Mark Rowland and associate Jolene Wang discuss recent developments in patent eligibility under Section 101 and foreign practices relating to eligibility.

---

Transcript:

Mark Rowland: Welcome to this episode of Conductive Discussions, a Ropes & Gray podcast series focused on legal issues of interest to the semiconductor industry. My name is Mark Rowland, and I'm a partner at Ropes & Gray in our IP litigation practice, based in our Silicon Valley office. I will be hosting this episode. Today, we will focus on recent developments in patent eligibility law. You will be hearing from an exciting group of practitioners on this topic, all of whom have experience with legal matters relating to semiconductors. To start, let me introduce Steve Pepe, an IP litigation partner in our New York office—welcome, Steve. Also with me from the Ropes & Gray New York office is Jolene Wang in our IP litigation practice—welcome Jolene. We will start off with some recent legal news.

Speaker: In industry news, we have several developments relating to patent eligibility under Section 101.

• First, the Supreme Court recently showed interest in the American Axle case, involving a patent for a driveline propeller shaft found ineligible as directed to nothing more than a natural law. In May, the Supreme Court asked the Solicitor General to weigh in on American Axle’s petition for cert, demonstrating the Court’s interest in the case and willingness to take up the issue again.
• Second, at the request of Senators Tillis, Hirono, Cotton, and Coons, the United States Patent and Trademark Office (USPTO) is undertaking a study on the current state of patent eligibility jurisprudence in the United States, and how it has impacted investment and innovation, particularly in critical technologies like quantum computing, artificial intelligence, precision medicine, diagnostic methods, and pharmaceutical treatments.

Mark Rowland: Let’s turn to a discussion of patent eligibility under 35 USC 101. Jolene, what does this statute provide?

Jolene Wang: It states: “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent” subject to the conditions and requirements of the other sections of the Patent Act, including Section 102, which is the requirement for novelty; Section 103, the requirement of non-obviousness; and Section 112, which requires definiteness, enablement, and a written description.

Steve Pepe: Thanks, Jolene. Historically, Section 101 was construed broadly with the Supreme Court acknowledging in the 1980s that Congress intended Section 101 to extend to “anything under the sun that is made by man.” And for a long time, Federal Circuit law generally reflected this—allowing patents for business methods, software, and most any inventions. And this permissive trend largely continued until the Supreme Court’s 2014 decision in Alice v. CLS Bank.

Mark Rowland: Well, Steve just mentioned the Alice case—what did the Alice court hold?

Speaker: Well, Mark, in Alice, the Supreme Court reiterated that eligibility under Section 101 always contained “an important implicit exception—laws of nature, natural phenomena and abstract ideas are not patentable.” And the Alice court also set forth a two-part test for courts to determine whether or not claims are eligible.

• First, we need to determine whether the claims are directed to one of those patent-ineligible concepts—either abstract ideas, laws of nature, or a natural phenomena. And the courts have interpreted this first step as looking at the “focus” of the claims, or “the reality behind” the technical jargon of the claims.
• Then second—if the claim is found directed to ineligible subject matter, we next look to see whether there is an “inventive concept” in the claims—which the Supreme Court identifies as “something more” in the claims that “transform[s]” the claimed abstract idea into a patent-eligible application. Now, in applying the second step of the Alice framework, the Supreme Court noted that generic computer hardware and functionality would be insufficient to provide an inventive concept as that amounts to nothing more than an instruction to perform the abstract idea using a computer.

Steve Pepe: And again, while the case law on Section 101 was historically permissive, what we’ve seen in the last seven years since Alice is the pendulum swinging in the other direction. Some, in fact, argue that it has swung too far, with more and more claims, including claims in fields other than computers, found patent-ineligible based on these judicial exceptions—isn’t that right?

Speaker: Yes, Steve—that’s right. Initially, many post-Alice cases, like pre-Alice cases on eligibility, focused on computer-based claims relating to financial instruments—like the intermediated settlement found abstract in Alice—and claims relating to general business practices (such as advertisement-based content distribution) and generic computer data manipulation. And within that series of cases, the Federal Circuit developed a number of themes when looking to see whether claims were, in fact, directed to an abstract idea.

• One test is to look at what the specification claims to be the invention—or, the alleged improvement over the prior art.
• And when looking at the improvement over the prior art, we often ask whether it is a technological solution to a technological problem, or whether it’s simply an abstract idea that is merely implemented using computers. In other words, is the computer merely a tool to carry out the abstract idea, or is the invention a way to improve the computer?
• And in an important case known as Electric Power Group, the Federal Circuit held that merely collecting information, analyzing information, and displaying the results of that analysis is abstract and ineligible. And within that holding, the Federal Circuit also noted that “the essentially result-focused, functional nature of claim language has been a frequent feature of claims held ineligible under Section 101.”

Now, Steve, as a result of these themes, what we’re seeing is the invalidation of more and more claims that recite generic components and use result-oriented functional language. And this trend has continued, and continues to the point where the Federal Circuit recently invalidated as abstract seemingly mechanical inventions such as a movable garage door, a driveline propeller shaft for an engine, and even a digital camera.

Mark Rowland: Steve, you compared the Court’s rulings on Section 101 to a swinging pendulum—at what point do you think the trend will turn around again?

Steve Pepe: What we’re seeing, Mark, in the Federal Circuit is a true split of opinions. For example, in a concurrence in the America Axle case, Judge Moore highlighted how “bitterly divided” the Federal Circuit is on eligibility and, in fact, the judges have been actively and repeatedly asking the Supreme Court or Congress to step in and clarify the exceptions to patentability. As another example, in a 2018 dissent, Judge Plager said he concurred in the finding of the court based on the current state of the law, but “with little confidence that the outcome is necessarily correct,” and called the current state of the 101 law “incoherent.” So, with the Federal Circuit in such a divided state with some of the judges effectively throwing up their hands and asking for guidance, the pendulum, in my view, is ready to swing back. The real question though, in my mind, is, who is in a better position to provide that guidance—will it be Congress or will it be the Supreme Court?

Speaker: Steve, I think that’s a great question and entirely on point with today’s news updates, because it looks like both Congress and the Supreme Court are showing renewed interest in this issue, and either one or both may try to address it. Congress—as we see with the various Senators’ request that the USPTO seek comments on the issue—and the Supreme Court with its request to the Solicitor General for a CVSG in the American Axle case. 

Mark Rowland: Alright, that’s a new one on me—what is a CVSG?

Speaker: Well, Mark, CVSG stands for “Calls for the View of the Solicitor General.” As you may know, the Supreme Court occasionally calls for the views of the Solicitor General on issues where the U.S. government is not a party to the case, but lower court interpretation of federal law or agency regulation is called into question. In those cases, the Solicitor General may then reach out to various branches of government (or the relevant agencies, or both) before making a recommendation to the court as to whether or not the Supreme Court should grant cert. In most cases though, the Supreme Court follows the Solicitor General’s suggestion on whether to take up the case and grant cert or whether to push off the case and deny cert.

Mark Rowland: Has the Supreme Court issued a CVSG in other cases on patent eligibility?

Speaker: Yes. In fact, as recently as 2018, the Supreme Court asked the Solicitor General whether to grant cert in two high-profile 101 cases. The first was Hikma Pharmaceuticals v. Vanda Pharmaceuticals, which related to method-of-treatment claims, and the second was Berkheimer v. HP, where the Federal Circuit had established that the 101 analysis sometimes presents underlying questions of fact, which require courts to assume those facts in the patentee’s favor when ruling on motions to dismiss and motions for summary judgment of ineligibility.

Mark Rowland: What happened in those cases—what was the Solicitor General’s recommendation?

Speaker: Well, Mark, in both cases, the Solicitor General recommended that the Supreme Court actually deny cert. Interestingly, the Solicitor General recognized the frustration surrounding Section 101 and the need for the Supreme Court to step in and fix matters. However, the Solicitor General noted that, Berkheimer, for example, was a procedural issue and would not go to the heart of the substantive disagreements on the current state of 101 law. So, the Solicitor General recommended denying cert and waiting for a better case to present itself where the Court could get to the heart of the matter.

Mark Rowland: What do you think that means for American Axle?

Speaker: It’s hard to speculate what the Solicitor General will do, but this case, about a mechanical driveline prop shaft for an engine, does seem to be a better vehicle—if you’ll pardon the pun—for the Supreme Court to step in and address substantively, how to determine if a case is directed to a law of nature (or an abstract idea).

Mark Rowland: When will the Solicitor General provide its views?

Speaker: Typically, the Solicitor General’s office takes a few of months to respond to the Court. In practice, the Solicitor General tries to get briefs on file two to three times a year (based on the Supreme Court’s schedule)—first in late May, for consideration before the summer recess; next in August, for inclusion after the summer; and then in December, so the cases can be considered and argued that term. Given the current timing, we wouldn’t be surprised to see a brief filed this month.

Steve Pepe: Now, until the Supreme Court (or Congress) actually steps in and clarifies the law, one thing that I’ve been wrestling with is, how do we counsel clients in the face of all of this uncertainty around 101 law?

Speaker: That’s a great question, Steve. Whether advising patent owners or clients accused of infringement, we generally recommend they focus on the earlier mentioned themes that the Federal Circuit has developed.

• So, for example, when analyzing a patent portfolio, we may ask what the real underlying inventions were—what did the inventors believe was the problem in the prior art, and how did they try to solve that problem?
• Next, we might look to those concepts to see whether those concepts are sufficiently reflected in the claims. So, the Federal Circuit has made repeatedly clear that, under Section 101, the language of the claims is paramount, which means improvements and inventive concepts not reflected in the claims themselves will typically not be considered by courts.
• Then, when looking at the claims, we look for specificity in the language. Basically, does the claim recite how to implement the invention? As we noted earlier, claims that are result-focused and use a lot of functional language tend to be more at risk for a finding of ineligibility under the current Federal Circuit law.

Mark Rowland: Jolene, Congress was also looking into the current state of 101 law. Can you tell us a little bit more about that?

Jolene Wang: Sure, Mark. Earlier this year, Senators Tillis, Hirono, Cotton, and Coons asked the PTO to seek information from the public as to “how the current jurisprudence has adversely impacted investment and innovation in critical technologies like quantum computing, artificial intelligence, precision medicine, diagnostic methods, and pharmaceutical treatments.” On July 9, the PTO published a request for comments in the Federal Register. The comments period will close on September 7, 2021, so companies and practitioners who want to provide feedback should go the Federal Register website and get their comments in this month.

The PTO is then expected to prepare a summary of its findings by March 5, 2022 after evaluating the public’s response per the Senators’ request.

Steve Pepe: So, Jolene, what factors are the PTO looking into?

Jolene Wang: So, there are a lot of questions directed to how companies have been impacted by 101 law and how the current law is “affect[ing] the conduct” of business within each sector, but one of the more interesting questions asks the public to identify instances where they have been denied patent protection for an invention in the U.S. solely on the basis of patent subject matter ineligibility, but obtained protection for the same invention in a foreign jurisdiction, or vice versa, and to provide specific examples. So, it appears Congress has been thinking about how U.S. law on eligibility compares with other countries (and wants, obviously, the public and the PTO to think about it, too).

Mark Rowland: Well, how does the U.S. law on eligibility compare to the law of other countries?

Jolene Wang: Unsurprisingly, other countries have varied approaches for determining patent-eligible subject matter, but with some similarities to the U.S. In Europe, for example, Article 52 of the European Patent Convention sets forth a definition for patentable inventions and requires that they be “new, involve an inventive step and are susceptible of industrial application,” and also lists specific exclusions, including scientific theories, mathematical methods, rules and methods for performing mental acts, and programs for computers. Article 53 then specifies a number of exceptions to patentability in the field of medicine, including biological processes for the production of plants or animals, methods of treatment or therapy, and diagnostic methods. Similar to the Alice test, EU patents need to have an “inventive step,” and the EU interprets this step as requiring the invention to have a “technical effect.” Under this technical effect approach, some routine or conventional applications of software algorithms may be unpatentable.

UK and German national patent eligibility law also mirrors EU law and applies EU law with of course some differences, but generally speaking, in comparison, the U.S. bars a broader swath of software/computer patents under the Alice abstract idea test than the EU and UK frameworks. A practical application of software (for example, via a physical structure or process) that is not entirely routine or conventional is usually patent-eligible in the EU and UK, whereas the U.S. tends to require a bit more.

The EU is also more permissive with respect to life sciences patents. Diagnostic tools measuring natural phenomena may be patentable in the EU, whereas the U.S. likely would find that patent ineligible. Tests relying on newly discovered natural phenomena that are conducted in vitro are likely patent-eligible in Europe, but not the U.S.

Mark Rowland: How about in Asia—have there been any recent 101 developments there?

Jolene Wang: Actually, there has been some concrete expansion of patent-eligible subject matter in China fairly recently. For example, as of November 1, 2019, technology related to stem cells obtained from a human embryo within 14 days of fertilization that has not gone through in vitro development have become patent-eligible in China per an amendment to China’s Guidelines for Patent Examination. China’s approach to determining the boundaries of patent eligibility is more administrative than judicial, which as we know, has been the cornerstone of the development of 101 in the U.S.

Mark Rowland: Thanks, Jolene. I’d love to talk more about 101 in foreign jurisdictions, but that could easily take up, it sounds like to me, a whole other “conductive discussion.” But that’s it today. Thanks, Steve, and Jolene for joining us today, and for sharing these recent developments and insights. I am sure we will all be on the look out for the Solicitor General’s views, and if and when the Supreme Court grants certiorari in American Axle, as well as the Patent Office’s patent eligibility jurisprudence study. Subscribe to Conductive Discussions and other RopesTalk podcasts in the newsroom page of ropesgray.com. If you have any questions or comments, just drop us a line. For more information about our practice specific to semiconductors, just type “semiconductors Ropes Gray” to get our semiconductors page. Thank you for listening, and we hope that you join us next time. Goodbye.