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Back to the claims drafting drawing board?

Supreme Court shifts the patent landscape for software, other business methods

This article appeared in the July 2014 issue of Technology Transfer Tactics. Click here for a free sample issue or click here to subscribe.

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The patent landscape may be only slightly altered in the wake of the Supreme Court’s decision in Alice Corp. v. CLS Bank, but it’s been altered in fairly significant ways, according to several IP attorney experts interviewed by Technology Transfer Tactics. What’s patentable remains largely the same, but the ruling did offer some important clarity on the critical issue of subject matter eligibility, and how claims are drafted may need to change, the attorneys say.

“Patent attorneys and TTOs instinctually try to reduce an idea to its heart and file a claim based on that to minimize the risk of design-arounds,” explains A.J. Tibbetts, a patent attorney in the Electrical and Computer Technologies Practice Group at Wolf Greenfield, Boston. “That tactic is still valuable, but needs to be balanced against the risk that it will abstract the invention so much that a court will label it an impermissible ‘abstract idea.’”

And Ronald I. Eisenstein, a partner at Nixon Peabody, also in Boston, notes that more detail and effort in drafting will now be necessary. “Including more and narrower claims will help,” he says, “which goes against what the USPTO has been asking for in trying to limit the number of claims.” He suggests that crafting patent applications that are in line with the European Patent Convention’s “problem/solution method” for assessing the presence of an inventive step “will be more of a help than a problem.”

The bottom line? If you weren’t already, advises Philip G. Semprevio II, JD, CLP, a licensing associate in the Emory University Office of Technology Transfer, Atlanta, you should “direct claims to the aspects that improve art and provide inventive concepts, not merely abstract ideas executed in computer medium.” That adjustment may have already been made by many TTOs in the U.S., in part because the ruling “more closely aligns the U.S. with the international Patent Cooperation Treaty’s rules on software.” His colleague Randi B. Isaacs JD, patent counsel at Emory, adds that “TTOs are likely to have been drafting patent applications and claims incorporating [the Alice] concepts if they have been considering to pursue patents outside the U.S.”

Even the Supreme Court ruling is not the last word on subject matter eligibility, however.

“The needle has most likely moved slightly,” Semprevio says. “However, it could move to ‘more than slightly’ or ‘less than slightly’ depending on how the USPTO examiners apply the instructions and how the lower courts, including the Federal Circuit, apply the ruling.”

Claim drafting tips

For now, that ruling and follow-up guidance mean this for TTOs: “Review new software and business methods to identify whether an invention is merely a computer implementation of a well-known algorithm or process,” advises Molly S. Lawson, a partner at Michael Best & Friedrich LLP, Milwaukee. If it is, she adds, “TTOs should consider whether there are any aspects of the invention that improve the functionality of the computer — such as increase its speed or reliability — or the previous implementations of the algorithm or process.” If so, consider documenting the improvements in the detailed description of the patent application and draft claims that focus on the improvements.

“TTOs should also consider drafting claims relating to software and business methods with a more application-specific focus,” she says, such as the specific interfaces created using the software, the other software or hardware components that the computer interacts with, or specific interactions with users.

To better accomplish that, Eisenstein notes that TTOs should “spend more time understanding the ultimate applications of early-stage technology to be able to write more focused and directed claims.” Tibbetts adds: “A popular approach with TTOs is to file very broad patent claims and wait for licensees to later identify the specific commercially valuable embodiments. But because very broad claims are going to be the ones most likely to trigger [eligibility concerns], TTOs need to work with their attorneys to ensure they are not only including narrower claims to potentially valuable embodiments that can survive the new test, but also drafting the written description in ways that build in evidence for potential arguments down the line.”

Broad claims, once thought to potentially confer more value on a patent, are now essentially off limits, he adds. “The basic takeaway is to be concerned about broad claims in any technology area, but particularly business method and software inventions,” Tibbetts says. Attorneys and TTOs should “consider whether a patchwork of slightly more specific claims might be better than a single very broad claim. Where a patchwork is not desirable, they might buttress their arguments in favor of patentability through different ways of drafting the claim or putting material into the specification.”

She adds: “Patent prosecutors can no longer rely on system and computer-readable medium claims to avoid Section 101 rejections. Also, patent prosecutors may want to include descriptions of improvements and other ‘advantages’ provided by the claimed software or method over industry norms to provide the framework for later arguments regarding patent eligibility.”

But don’t think you can write your way around the restrictions imposed by Alice, notes Alfonso Chan, with Dallas’s Shore Chan Bragalnone DePumpo LLP. “Claims that include less generic limitations might be more likely to pass muster under Alice Corp.,” he says. “But the Alice Corp. opinion also warned against cleverly drafted claims whose patentable subject matter eligibility ‘depend[s] simply on the draftsman art.’”

Indeed, as Steven W Lundberg, a shareholder in the Minneapolis office of Schwegman Lundberg & Woessner PA, points out, “the way patent claims are drafted is not the issue. The issue is whether the invention comprises patentable subject matter.” The court noted that “stating an abstract idea while adding the words ‘apply it with a computer’ simply combines those two steps, with the same deficient result. Wholly generic computer implementation is not generally the sort of ‘additional featur[e]’ that provides any ‘practical assurance that the process is more than a [claim] drafting effort designed to monopolize the [abstract idea] itself.’”

Software patents not ruled out

Experts say software may still be afforded patent protection as long as it meets eligibility guidelines. Here’s how eligibility was spelled out in the PTO’s guidance to examiners issued shortly after the decision:

1. Is the claim directed to one of the four statutory categories of invention, i.e., process, machine, manufacture, or composition of matter?;

2. (a). If no, reject the claim as being directed to non-statutory subject matter;

(b). If yes, is the claim directed to a judicial exception, i.e., law of nature, natural phenomenon, or abstract idea?;

3. If yes, does the claim contain any element, or combination of elements, sufficient to ensure that the claim amounts to significantly more than the abstract idea itself?

It’s important to note that steps 2(b) and 3 in the PTO guidance are repeating what was already decided in the Mayo v. Prometheus case. “I would not characterize the decision as raising the bar for what is patentable,” Tibbetts comments. “Instead, the decision changes what parts of an invention might be patentable or how aggressive one could be when filing claims to an invention.” TTOs, he adds, “can likely apply their existing rules for whether an invention is patentable, but should now additionally consider the breadth of claims they may be able to pursue for some inventions.”

Lawson is emphatic. “It’s worth repeating that Alice never held that all software or business methods are invalid,” she says. “Furthermore, there are often other factors impacting whether patent protection should be sought, including increasing the value of an invention from a commercialization viewpoint and providing inventors with some level of assurance regarding IP protection. Accordingly, TTOs should continue to evaluate new inventions from a novelty and obviousness perspective, which should include considering whether an invention merely represents a well-known algorithm implemented in software.”

Chan disagrees with Tibbets, asserting that “the Alice Corp. decision raises the bar significantly for software patents, and effectively eliminates an entire category of otherwise patent-eligible subject matter.”

As navigational guidance, Lundberg notes that “a TTO can apply the two-step Mayo test for all technologies to the extent that a patent application includes an abstract idea, in order to evaluate the patent.” And Eisenstein adds that “if a TTO has been following the field since Bilski, the impact should be minimal, because the uncertainty that exists should already have been taken into account.”

After Mayo, Eisenstein comments, “the Alice Corp. ruling is not as draconian from a patent perspective, but it does broaden the reach of Mayo.”

Lawson agrees. “Given the subject matter overlap between Bilski and Alice, the decision does not create a new landscape for patenting,” she says. “Nevertheless, the decision did hold that system claims and computer-readable medium claims should analyzed in the same way as method claims. The explicit holding in Bilski was directed to method claims.” And, Lundberg adds, the ruling and guidance “clarify that the Mayo test may be applied to technologies other than pharmaceuticals.”

While that test is relatively easy to apply, Tibbetts comments, “the more complex task, given the uncertainty around the decision, is gathering evidence to support one’s analysis and persuade a decision-maker.”

The uncertainly he refers could be looked at as a bit of a silver lining, Tibbets adds. “The kinds of evidence that will be persuasive to an examiner, judge or jury concerning how a claim amounts to significantly more than an ‘abstract idea’ remains to be seen. But uncertainty is not always bad, because it leaves room for effective advocacy by attorneys on behalf of patent owners and challengers.”

Chan agrees that there remains significant room for interpretation. “The Alice Corp. [decision] did not articulate a standard of what would satisfy 35 USC 101 as patent-eligible subject matter,” he notes. “Instead, the court ruled on what would not be patent-eligible subject matter.”

Impact on existing patents and licenses?

Existing patents should remain unaffected. “Issued patents are entitled to a presumption of validity, and nothing in this decision changes that,” Tibbetts observes. “But it does offer a patent challenger a new argument for invalidity.” That challenger would still have to prove invalidity with “clear and convincing evidence,” he adds. “Of course, given the present uncertainty over what kind of evidence will be persuasive to decision makers, that bar might be high.”

License agreements should be safe as well. The decision may create large shifts in the law down the line, but the high court “intentionally kept its holding very focused and narrow,” Tibbetts points out. “Because of that, there is little in the decision that should affect current license agreements, and TTOs should certainly not rush to rewrite agreements.” Still, he emphasizes, “it will be important to stay abreast of how the various courts and the USPTO interpret this decision over time to see if changes are needed as agreements come up for renewal.”

When that happens, a TTO could consider filing a reissue application to change the claims or potentially add new claims more likely to survive the new test, he suggests. 

A blow to patent trolls

The decision is likely to have a negative impact on patent assertion entities — so-called “patent trolls” — but failed to deliver a knockout punch. “Many trolls have obtained patents that relate to software and business methods,” Lawson explains. “However, the court did not hold that all software and business methods are ineligible for protection, so the patents owned by trolls are not automatically invalidated in view of Alice.”

Isaacs points out that the ruling “will help curb many of the suits involving computer-implemented inventions by patent trolls because many pending suits can be resolved in summary disposition under Section 101. Additionally, the U.S. Patent Trial and Appeal Board has another mechanism to invalidate claims in post-grant proceedings.”

Says Tibbetts: “In many ways, the decision amounted to the Supreme Court’s response to overly broad business method patents, which are the bread and butter of NPEs. The decision isn’t a direct blow, but it gives a savvy attorney a very effective tool to use against them.” It may be especially effective when used with post-grant review procedures at the USPTO, such as the “covered business method” review procedure.

Boiling it all down

The gist of the ruling, Eisenstein explains, is that “all exceptions to Section 101 should be treated the same way. You cannot just say ‘apply’ the exception; you must be able to explain how the claim improves on the existing technology.” The PTO reiterates that in its instructions, he adds, “but points to its Mayo guideline as being applicable to the analysis.

Adds Lawson: “The guidelines reinforce that the two-part test provided in the decision is neither a new test nor a test that applies solely to software and business method patents. Because the guidelines are simply guidelines and not law, however, there are still questions regarding how and whether patent examiners will apply the guidelines.”

Tibbets notes that an important part of the decision is its application of the Mayo test, which covered laws of nature in biotech, to abstract ideas in the software and other industries. “Patentees are prevented from writing broad claims that cover basic laws of nature or physics because the courts have decided that those laws should be freely available for public use rather than monopolized with a patent,” he explains. “Within the realm of business methods and software, those basic laws of nature are often not very relevant to the technology. In the past, that prevented courts from invalidating broad business method patents using this legal test.”

But in Alice, the court restored the test by “drawing an analogy between laws of nature and what it is calling ‘basic economic concepts,’ explaining that business method patents cannot be so broad as to claim basic ideas.” The decision, he feels, “muddies the waters a bit, but only because the Supreme Court created a new category of idea while declining to fully delineate what an ‘abstract idea’ is, leaving that question for appeals courts to tackle.”

Not surprisingly, opinion is mixed on whether the court nailed it or erred. “The whole of the patent field is based upon the impact of certain words on the scope of a claim,” Eisenstein says. “For example, whether a claim satisfies Sections 102 and 103 related to prior art frequently depends upon minor changes in claim language. The same is true with respect to Section 112.” Accordingly, he adds, “the court is wrong when it says how you write a claim should not affect whether it satisfies Section 101.”

According to Lawson, the justices could have been a little more specific. “There is certainly room for debate regarding the breadth of Section 101 and the judicially created inherent exceptions to Section 101, especially in view of Sections 102 and 103 relating to novelty and obviousness,” he comments. “The court even acknowledged that ‘we tread carefully in construing this exclusionary principle lest it swallow all of patent law.’”

Based on the arguments presented in the case, Isaacs says she agrees that Alice’s patent claims could reasonably be held invalid. “However, I do not necessarily agree with the framework and analysis provided in the decision,” she adds. “Arguably, the Supreme Court could have invalidated the claims based on obviousness. With respect to the USPTO instruction, we will have to wait and see how the examining corps and the PTAB interpret and apply the instructions to pending applications.”

Comments Semprevio: “The court could have used other, less confusing, means to achieve the same result in the specific case. It seems the intent was to clarify patentable subject matter jurisprudence; however, that is not what was achieved.”

Tibbetts applauds the court’s effort, if not the clarity of its guidance for future patents. “Overly broad business method claims are a problem in the system right now, and the Supreme Court was right to recognize that,” he says. “But because this is such an active area of law that is touching so many parts of our economy, it would have been helpful for the justices to provide more concrete guidance.” On the other hand, he concedes, “the court’s restraint stems from recognizing its own limitations and trying not to be too aggressive, which could be worse than uncertainty.”

And uncertainty there shall be. “Despite the hype, this decision is only a marginal change in the law due to the questions the Supreme Court left open,” Tibbetts says. “There is potential for a major shift as other courts dissect and interpret the court’s reasoning, but the court tried to prevent this by explicitly cautioning that interpreting its decision too broadly could ‘eviscerate’ patent law.”

Contact Tibbetts at andrew.tibbetts@wolfgreenfield.com; Eisenstein at 617-345-1000 or reisenstein@nixonpeabody.com; Semprevio at 404-247-4322 or psempre@emory.edu; Isaacs at 404-727-2296 or randi.b.isaacs@emory.edu; Lawson at 414-271-6560 or mslawson@michaelbest.com; Chan at 214-593-9110; and Lundberg at slundberg@slwip.com.


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