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Senate Holds Hearing on Legislative Initiative to Address Patent Eligibility

by and | Feb 1, 2024 |

Seeking to undo the current jurisprudence “mess” on the issue of patent eligibility, the Senate Judiciary Committee’s Subcommittee on Intellectual Property heard testimony on January 23, 2024, on the Patent Eligibility Restoration Act (PERA) (text here). PERA seeks to address the uncertainty and unpredictable outcomes created by the 2014 Supreme Court of the United States decision in Alice Corp. Pty. v. CLS Bank Int’l.

PERA is the latest iteration of 35 USC § 101 patent eligibility reform that Senators Thom Tillis (R-NC) and Chris Coons (D-DE) have been introducing for years. Although the language has been tweaked over time, the bill’s purpose is to eliminate “[a]ll judicial exceptions to patent eligibility” and in their place codify several categories of inventions as unpatentable, such as mathematical formulas; processes that are substantially economic, financial, business, social, cultural or artistic; processes that are mental or purely natural; unmodified human genes; and unmodified natural materials.

The January 23 hearing featured eight witnesses, divided into two panels. The first panel included:

  • Andrei Iancu, former US Patent & Trademark Office (PTO) director
  • Richard Blaylock, testifying on behalf of Invitae Corporation
  • Courtenay Brinckerhoff, partner at Foley & Lardner
  • Phil Johnson, steering committee chair at the Coalition for 21st Century Patent Reform.

The second panel included:

  • The Honorable David Kappos, former PTO director
  • Adam Mossoff, professor at the Antonin Scalia Law School
  • Mark Deem, operating partner of Lightstone Ventures
  • David Jones, executive director of the High-Tech Inventors Alliance.

Harkening back to prior panels, the testimony was largely in favor of reform considering what many characterized as inaction by all other stakeholders. Senators and witnesses alike recognized that legislative reform is likely the only way to gain clarity on § 101 considering the Supreme Court’s failure to take up more than 100 certiorari petitions seeking review, many with the Solicitor General’s endorsement.

During the first panel, Blaylock testified that PERA would improperly provide patent eligibility to new uses of natural phenomena, such as genetic material, and therefore “would stifle innovation and harm patient care in the fields of diagnostic genetic testing and precision medicine.” Iancu testified in response that “all human invention is the manipulation of nature towards practical uses by humans on this planet . . . and it should be eligible for a patent.” Brinckerhoff’s testimony also opposed Blaylock’s view; she explained that considerable research and development is needed to develop new uses for isolated natural products and would be disincentivized without patent eligibility. Brinckerhoff highlighted an important theme at the hearing: “PERA would bring eligibility back in line with other countries” by permitting patents on methods of detecting new diagnostic markers, thus maintaining international competitiveness. Lastly, Johnson testified that “[j]ust because something is eligible doesn’t mean it’s patentable” and stressed the importance of using §§ 102, 203 and 112 as additional filters to determine patentability.

During the second panel, venture capitalist Deem testified that “the United States is failing many of our most innovative startups” because [...]

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Standard Techniques Applied in Standard Way to Observe Natural Phenomena? Not Patent Eligible

by | Jul 28, 2022 |

In what may be another blow to diagnostic patents, the US Court of Appeals for the Federal Circuit affirmed the patent ineligibility of claims that it held to be directed to detecting natural phenomena by conventional techniques. CareDx, Inc. v. Natera, Inc., Case No. 2022-1027 (Fed. Cir. July 18, 2022) (Lourie, Bryson, Hughes, JJ.)

CareDx is the exclusive licensee of three Stanford University patents directed to diagnosing or predicting organ transplant status by using methods to detect a donor’s cell-free DNA (cfDNA). When an organ transplant is rejected, the recipient’s body destroys the donor cells, releasing cfDNA from the donated organ’s dying cells into the blood. Detecting the naturally increased levels of donor cfDNA (due to the deteriorating organ condition) can be used to diagnose the likelihood of an organ transplant rejection.

The representative claims were summarized as having four steps for detecting a donor’s cfDNA in a transplant recipient:

  1. “Obtaining” or “providing” a “sample” from the recipient that contains cfDNA
  2. “Genotyping” the transplant donor and/or recipient to develop “polymorphism” or “SNP” “profiles”
  3. “Sequencing” the cfDNA from the sample using “multiplex” or “high-throughput” sequencing, or performing “digital PCR”
  4. “Determining” or “quantifying” the amount of donor cfDNA.

CareDx filed two lawsuits, one alleging that Natera’s kidney transplant rejection test infringed the patents, and another alleging that Eurofins Viracor’s various organ transplant rejection tests infringed one of the patents. Natera and Eurofins moved to dismiss the complaints for failing to state a claim because of a lack of patent-eligible subject matter under 35 U.S.C. § 101. The magistrate judge who reviewed the motions recommended that they be denied, finding that the claims were a “purportedly new, unconventional combination of steps” to detect natural phenomena. Although the recommendation was vacated with regard to Natera because the complaint was amended, the district court adopted the magistrate’s recommendation as to Eurofins with modified reasoning that the patent “specifications raise doubts about the patents’ validity” by suggesting that the steps were neither new nor unconventional. Still, the district court was wary of ruling prematurely and denied the motion so that the parties could conduct discovery to develop the record on what was considered conventional in the art.

Following expert discovery relating to § 101 eligibility, Natera and Eurofins moved for summary judgment on patent ineligibility. The district court denied summary judgment, citing a factual dispute as to the conventionality of the techniques for performing the claimed methods. Natera and Eurofins moved for certification of interlocutory appeals of the district court’s denial. After conferring with the parties, the district court agreed to reconsider its decision in view of case law raised in the certification motion. After reconsideration, the district court granted the summary judgment motions of ineligibility, finding that the asserted claims were directed to the detection of natural phenomena—specifically, the presence of donor cfDNA in a transplant recipient and the correlation between donor cfDNA and transplant rejection—and concluding that based on the specification’s many admissions, the claims recited only conventional techniques.

CareDx appealed, arguing [...]

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Authentication Claim Under Alice—A Two-Step Process

by | Oct 14, 2021 |

The US Court of Appeals for the Federal Circuit found patent claims directed to a method of authenticating the identity of a user performing a transaction at a terminal was patent-eligible under 35 U.S.C. § 101 and reversed the district court’s entry of judgment on the pleadings. CosmoKey Solutions GmbH & Co. KG. v. Duo Security LLC, Case No. 20-2043 (Fed. Cir. Oct. 4, 2021) (Stoll, J.) (Reyna, concurring).

CosmoKey sued Duo for patent infringement and Duo moved for judgment on the pleadings, arguing that all claims of the patent at issue are ineligible under 35 U.S.C. § 101. The district court analyzed the claims under the Alice two-step framework. At step one, the court agreed with Duo, finding that the patent claims were directed to the abstract idea of authentication—the verification of identity to permit access to transactions. Relying on Federal Circuit precedent, the court reasoned that “authentication” is an abstract concept. Moving to step two, the court determined that the patent merely teaches generic computer functionality, reasoning that the patent itself admits that “the detection of an authentication function’s activity and the activation by users of an authentication function within a pre-determined time relation were well-understood and routine, conventional activities previously known in the authentication technology field.” After the court granted Duo’s motion for judgment on the pleadings, CosmoKey appealed.

Applying Third Circuit law, the Federal Circuit reversed the lower court’s decision and provided more insight into the “inventive concept” analysis and “two-step” process framework. The Federal Circuit first acknowledged that while it had previously found claims directed to authentication to be abstract, it also found claims directed to specific verification methods that depart from earlier approaches and improve technology eligible under § 101.

The Federal Circuit disagreed with the district court’s broad characterization of the claims under Alice step one, finding instead that the claims and written description suggest that the claims are directed to a more specific authentication function. Nevertheless, the Court noted that it did not need to answer this question because the patent claims satisfy Alice step two. Under step two, the Court focused on the purported technical advance and found that the invention provides a “specific improvement to authentication that increases security, prevents unauthorized access by a third party, is easily implemented, and can advantageously be carried out with mobile devices of low complexity.” The Court explained that the district court erred in its interpretation of certain sections of the specification. Specifically, the court read the specification to describe prior art that shows the steps were routine or conventional. However, the Court pointed out that the last four steps of claim one of the patent solved a technical problem in the field using steps that were not conventional.

Judge Jimmie V. Reyna concurred with the decision but took issue with the Court’s dismissal of analyzing the claims under Alice step one, finding the approach “extraordinary and contrary to Supreme Court precedent.” He noted that step two does not operate independently of step one, [...]

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Bascom Cannot Save Your Claims if Your Own Patent Says You Used Known Technology

by | Sep 9, 2021 |

The US Court of Appeals for the Federal Circuit affirmed a district court determination that claims of several patents were patent ineligible under 35 U.S.C. § 101 because they did not recite an innovation with sufficient specificity to constitute an improvement to computer functionality. Universal Secure Registry LLC v. Apple Inc., Case No. 20-2044 (Fed. Cir. Aug. 26, 2021) (Stoll, J.)

Universal Secure Registry (USR) sued Apple, Visa and Visa U.S.A. (collectively, Apple), asserting four patents directed to securing electronic payment transactions, which USR alleged allowed for making credit card transactions “without a magnetic-stripe reader and with a high degree of security” (e.g., allegedly Apple Pay or Visa Checkout). Apple moved to dismiss the complaint under Fed. R. Civ. Pro. 12(b)(6), arguing that the asserted patents claimed patent-ineligible subject matter under 35 U.S.C. § 101. The Delaware magistrate judge, quoting Visual Memory v. NVIDIA (Fed. Cir. 2017), determined that all the representative claims were directed to a non-abstract idea because “the plain focus of the claims is on an improvement to computer functionality itself, not on economic or other tasks for which a computer is used in its ordinary capacity.”

The district court judge disagreed, concluding that the representative claims failed at both Alice steps, and granted Apple’s motion to dismiss. The district court found that the claimed invention was directed to the abstract idea of “the secure verification of a person’s identity,” and that the patents did not disclose an inventive concept—including an improvement in computer functionality—that transformed the abstract idea into a patent-eligible application. USR appealed.

In assessing the claims under the Alice two-part test, the Federal Circuit noted that in cases involving authentication technology, patent eligibility often turns on whether the claims provide sufficient specificity to constitute an improvement to computer functionality itself. For example, in its 2017 decision in Secured Mail Solutions v. Universal Wilde, the Court (at Alice step one), held that claims directed to using a conventional marking barcode on the outside of a mail object to communicate authentication information were abstract because they were not directed to specific details of the barcode, how it was processed or generated or how it was different from long-standing identification practices. Similarly, in its 2020 decision in Prism Technologies v. T-Mobile, where the claims broadly recited “receiving” identity data of a client computer, “authenticating” the identity of the data, “authorizing” the client computer and “permitting access” to the client computer, the Court held at Alice step one that the claims were directed to the abstract idea of “providing restricted access to resources,” not to a “concrete, specific solution.” At step two, the Court determined that the asserted claims recited conventional generic computer components employed in a customary manner such that they were insufficient to transform the abstract idea into a patent-eligible invention.

The claims in issue fared similarly. The district court held that the representative claim was not materially different from the Prism claims, and the Federal Circuit agreed. Although the [...]

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USPTO Conducting Patent Eligibility Jurisprudence Study

by | Jul 15, 2021 |

At the request of Senators Thom Tillis (R-NC), Marie Hirono (D-HI), Tom Cotton (R-AR) and Chris Coons (D-DE), the US Patent & Trademark Office (USPTO) is undertaking a study on the current state of patent eligibility jurisprudence in the United States and how the current jurisprudence has impacted investment and innovation, particularly in critical technologies like quantum computing, artificial intelligence, precision medicine, diagnostic methods and pharmaceutical treatments. On July 9, 2021, the USPTO issued a Federal Register Notice seeking public input on these matters to assist in preparing the study. The deadline for submitting written comments is September 7, 2021.

The Federal Register Notice included 13 concerns on which comments were requested:

  1. Explain how the current state of patent eligibility jurisprudence affects the conduct of business in your technology areas, and identify your technology areas.
  2. Explain what impacts you have experienced as a result of the current state of patent eligibility jurisprudence in the United States. Include impacts on as many of the following areas as you can, identifying concrete examples and supporting facts when possible:
    1. patent prosecution strategy and portfolio management;
    2. patent enforcement and litigation;
    3. patent counseling and opinions;
    4. research and development;
    5. employment;
    6. procurement;
    7. marketing;
    8. ability to obtain financing from investors or financial institutions;
    9. investment strategy;
    10. licensing of patents and patent applications;
    11. product development;
    12. sales, including downstream and upstream sales;
    13. innovation and
    14. competition.
  3. Explain how the current state of patent eligibility jurisprudence in the United States impacts particular technological fields, including investment and innovation in any of the following technological areas:
    1. quantum computing;
    2. artificial intelligence;
    3. precision medicine;
    4. diagnostic methods;
    5. pharmaceutical treatments and
    6. other computer-related inventions (e.g., software, business methods, computer security, databases and data structures, computer networking, and graphical user interfaces).
  4. Explain how your experiences with the application of subject matter eligibility requirements in other jurisdictions, including China, Japan, Korea, and Europe, differ from your experiences in the United States.
  5. Identify instances where you have been denied patent protection for an invention in the United States solely on the basis of patent subject matter ineligibility, but obtained protection for the same invention in a foreign jurisdiction, or vice versa. Provide specific examples, such as the technologies and jurisdictions involved, and the reason the invention was held ineligible in the United States or other jurisdiction.
  6. Explain whether the state of patent eligibility jurisprudence in the United States has caused you to modify or shift investment, research and development activities, or jobs from the United States to other jurisdictions, or to the United States from other jurisdictions. Identify the relevant modifications and their associated impacts.
  7. Explain whether the state of patent eligibility jurisprudence in the United States has caused you to change business strategies for protecting your intellectual property (e.g., shifting from patents to trade secrets, or vice versa). Identify the changes and their associated impacts.
  8. Explain whether you have changed your behavior with regard to filing, purchasing, licensing, selling, or maintaining patent applications and patents in the United States as a result of [...]

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Too Good to Be True? Federal Circuit Demands Evidence of Reliance on Favorable Ruling, Stipulation

by | Nov 4, 2020 |

The US Court of Appeals for the Federal Circuit held that notwithstanding a stipulation on claim construction, a party may still induce infringement absent proof that it actually relied on the stipulation, and that mere inaction, absent an affirmative act to encourage infringement, cannot be the basis for a claim of inducement. The Federal Circuit also affirmed the district court’s reduction of the jury’s damages award to $0 despite a finding of direct infringement because the plaintiff failed to prove damages. TecSec, Inc. v. Adobe Inc., Case Nos. 19-2192, -2258 (Fed. Cir. Oct. 23, 2020) (Taranto, J.).

TecSec owns several patents on systems and methods for multi-level security for network-distributed files. TecSec sued Adobe (among other defendants) in this now-10-year-old-case, which the Federal Circuit has considered several times. As relevant here, the district court entered a claim construction in 2011 that led to a stipulation of non-infringement, and the Federal Circuit reversed that claim construction in 2013. On remand, the district court barred TecSec from introducing evidence of inducement in the 2011–2013 period on the grounds that it was reasonable for Adobe to have relied on the district court’s ruling and the stipulation. On the new claim construction, Adobe stipulated to one act of direct infringement. Adobe also moved for summary judgment of patent ineligibility, which the district court denied, stating that its rationale supported judgment for TecSec that the patents claimed eligible subject matter. At trial, the jury found that the claims were valid and that Adobe directly infringed but did not induce infringement. The jury awarded TecSec $1.75 million in damages. On Adobe’s post-trial motion, the district court reduced the damages award to $0 because TecSec had not proved inducement and had proved no damages associated with the single act of direct infringement. Both parties appealed.

Inducement

The Federal Circuit reversed the district court’s decision on Adobe’s motion in limine barring inducement evidence for the 2011–2013 period. The district court’s primary rationale for granting the motion had been the reasonableness of Adobe’s reliance on the claim construction order and stipulation of non-infringement. However, the Federal Circuit reasoned that the intent prong of inducement is a subjective inquiry, and that inducement could still be found upon a showing that Adobe subjectively believed that the claim construction order was wrong and would subsequently be reversed.

Jury Instructions

The Federal Circuit next addressed two challenges by TecSec to jury instructions. The first instruction was predicated on three facts: (i) that Adobe had admitted that a certain sequence of steps constituted direct infringement, (ii) that Adobe had performed the steps on at least one occasion, and (iii) that “the parties agree that the one time for which Adobe had admitted infringement . . . occurred before TecSec filed its lawsuit.” The Court found that this instruction was factually accurate and therefore not erroneous. The second instruction explained that inducement required “an affirmative act to encourage infringement,” and that “[e]vidence of mere inaction, or a failure to stop or prevent infringement, does not [...]

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Hooked on Precedent or Something New

by | Aug 13, 2020 |

Highlighting internal disagreement regarding patent eligibility under § 101, a divided panel of the US Court of Appeals for the Federal Circuit issued a series of opinions revising and reissuing a previous opinion on § 101 patent eligibility for a mechanical invention and, in an even split, denied a petition for en banc review. American Axle & Manufacturing, Inc. v. Neapco Holdings LLC, Case No. 18-1763 D.I. 134 (Fed. Cir. Oct. 3, 2019) (Dyk, J.) (Moore, J., dissenting); id. D.I. 133 (denying en banc by a 6–6 vote).

In October 2019, a divided Federal Circuit panel in American Axle v. Neapco affirmed a district court finding that method claims for a mechanical invention were invalid under 35 U.S.C. § 101. The majority specifically found that the claimed invention was nothing more than a recitation of Hooke’s law, which undoubtedly is a law of nature. Judge Moore dissented, arguing that the majority improperly expanded the § 101 eligibility inquiry beyond its statutory gatekeeping function and distorted patent eligibility under § 101 and enablement under § 112.

Neapco filed a petition for rehearing and a petition for rehearing en banc. Several amicus briefs were also filed. Notably, retired Judge Paul R. Michel, formerly the chief judge of the Federal Circuit, filed an amicus brief in support of the en banc petition because he believed the panel’s original decision “conflicts with the Supreme Court’s and [Federal Circuit’s] precedent.”

In view of the petition for rehearing, the original panel modified and reissued its opinion. The Court affirmed its original decision that two of the three independent claims were invalid under § 101 (patent claims 22 and 36); however, the Court reversed its original decision invalidating claim 1. Regarding claims 22 and 36, the majority reiterated that the claims were merely an application of Hooke’s law and that it was simply applying Supreme Court and Federal Circuit precedent, analogizing this case to the Supreme Court’s 1853 O’Reilly v. Morse decision where the Supreme Court determined the patentability of claims directed to a natural law of using electromagnetic force to transmit messages. When responding to the dissent, the majority reiterated that it was not departing from prior precedent, and that its “holding is limited to the situation where a patent claim on its face and as construed clearly invokes a natural law, and nothing else, to accomplish a desired result.”

Regarding claim 1, the majority reversed its original decision because the claim had an additional limitation that could cause the claim to not merely be an application of Hooke’s law. Because the district court did not address this limitation, the majority remanded the case so the district court could address this issue in the first instance.

Judge Moore maintained her dissent, arguing that the majority was announcing a new patentability test: the “Nothing More” test. She argued that the decision created a new test for instances when claims are directed to a natural law even though no natural law is specifically recited in the claims. Judge Moore further reiterated [...]

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