Analysis of Preliminary Examination Instructions in View of the Supreme Court Decision in Alice v. CLS Bank

On June 25, just six days after the Supreme Court decided Alice Corp. v. CLS Bank, the USPTO  issued its Preliminary Examination Instructions (“Guidance”) in view of the case. Subsequently, the Office asked for public comments on the Guidance.  Over forty companies, associations, law firms and individuals submitted comments, including myself. This series of posts is based on the comments I submitted to the Office.

In my view, the Guidance does not correctly interpret the Supreme Court’s decision and does not provide specific guidance to the 7,000 examiners who will have to implement them on a daily basis. The Court’s decision was not written as a manual for how examiners are to evaluate patent applications, and so simply quoting and paraphrasing the decision (along with scrupulous footnoting) is not sufficient to provide a cohesive, workable framework for the examination of patent applications, particularly for computer implemented inventions. The core problem remains that examiners will be left to their own subjective evaluation and opinion of the patent eligibility of the claims before them. Already, the patent community is observing very different approaches from different examiners. This lack of uniformity leads to increased costs and delays in the examination of patents, as well as increased uncertainty by innovators as to the eligibility of their inventions in technologies that have been traditionally considered patent eligible.

In this series of posts, I provide a framework for interpreting the Court’s decision in a way that is consistent with the overall approach to § 101 that the Court has adopted.

Alice and the Mayo Two Step Test of Patent Eligibility

The core holding of Alice is to establish a uniform two step test for patent eligibility that applies to all of the judicial exceptions to § 101:

First, we determine whether the claims at issue are directed to one of those patent-ineligible concepts.

If so, we then ask, “[w]hat else is there in the claims before us?” To answer that question, we consider the elements of each claim both individually and “as an ordered combination” to determine whether the additional elements “transform the nature of the claim” into a patent-eligible application.

We have described step two of this analysis as a search for an ” ‘inventive concept’ “ –i.e., an element or combination of elements that is “sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.  Alice, 132 S.Ct. at 2355 (internal citations to Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289,omitted).

The Guidance accurately captures this framework:

  • First determine whether the claim is directed to one of the four statutory categories of invention, i.e., process, machine, manufacture, or composition of matter. If the claim does not fall within one of the categories, reject the claim as being directed to non-statutory subject matter.
  • Second, if the claim does fall within one of the statutory categories, determine whether the claim is directed to a judicial exception (i.e., law of nature, natural phenomenon, and abstract idea) using Part 1 of the two-part analysis detailed below.
  • Third, determine whether the claim is a patent-eligible application of an exception using Part 2.

First and foremost, the two steps of Mayo, what the Guidance calls Part 1 and Part 2, are real tests. This means there are three possible outcomes under Mayo for claims directed to one of the four statutory categories:

  1. Claim does not recite a patent ineligible concept. Outcome: no rejection under § 101.
  2. Claim recites a patent ineligible concept. Proceed to step two.
  3. Claim recites an “inventive concept.” Outcome: no rejection under § 101.
  4. Claim does not recite an “inventive concept.” Outcome: Rejection under § 101.

The Federal Circuit’s decision in Buysafe v. Google, confirms this interpretation:

In simultaneously rejecting a general business method exception to patent eligibility and finding the hedging claims invalid, moreover, Bilski makes clear that the recognition that the formation or manipulation of economic relations may involve an abstract idea does not amount to creation of a business-method exception. The required section 101 inquiry has a second step beyond identification of an abstract idea. If enough extra is included in a claim, it passes muster under section 101 even if it amounts to a “business method.” Buysafe, slip op. at 7.

In other words, not every claim recites a patent ineligible concept, and not every claim that does recite a patent ineligible concept automatically fails to recite an inventive concept. Examiners must be careful to treat each step of the Mayo test separately.

What The Supreme Court Means by Abstract Ideas

For the first step of the Mayo test, the Guidance states “determine whether the claim is directed to an abstract idea,” and then provides an accurate, almost verbatim paraphrase of the Court’s text in Alice. The Guidance provides, without any elaboration, four examples of abstract ideas mentioned in Alice:  fundamental economic practices, methods of organizing human activities, “an idea of itself” (sic), and, mathematical relationships/formulas. The Guidance concludes this part with the simplistic instruction “If an abstract idea is present in the claim, proceed to Part 2 below.”  The Guidance does not explain what the Court actually means by “abstract idea.” While the Guidance does paraphrase the Court saying “an invention is not rendered ineligible simply because it involves an abstract concept,” there is no overarching explanation that would allow examiners to distinguish between permissible and impermissible abstract ideas, let alone the other judicial exceptions.

First, it is clear that the Court is not using the phrase abstract ideas in its normal sense, as one would in general discussion. A typical dictionary definition defines abstract as an adjective meaning “expressing a property, quality, attribute or relation viewed apart from the other characteristics inhering in or constitution an object” or “relating to or involving general ideas or qualities rather than specific people, objects, or actions.” This is clearly not how the Court is using the term abstract idea. Rather, the Court has announced that abstract ideas is special legal term—like willful infringement or written description—and has nothing to do with the general linguistic, philosophical or common uses of the phrase:

In any event, we need not labor to delimit the precise contours of the “abstract ideas” category in this case. It is enough to recognize that there is no meaningful distinction between the concept of risk hedging in Bilski and the concept of intermediated settlement at issue here. Both are squarely within the realm of abstract ideas as we have used that term. Alice, 134 S. Ct. at 2357).

Putting abstract ideas in quotes, and then stating “as we have used that term” indicates that the Court is using this term to mean something specific and distinctive from its ordinary dictionary meaning. For the Court, the abstract ideas of concern are necessarily “building blocks” and “fundamental” to culture or the “modern economy,” are “the basic tools of scientific and technological work.”

 “We have “repeatedly emphasized this . . . concern that patent law not inhibit further discovery by improperly tying up the future use of ” these building blocks of human ingenuity.” Id., at 2355.

“Accordingly, in applying the §101 exception, we must distinguish between patents that claim the ” ‘buildin[g] block[s]‘ ” of human ingenuity and those that integrate the building blocks into something more.” Id.

“The Court [in Bilski] explained that ” ‘[h]edging is a fundamental economic practice long prevalent in our system of commerce.” Id., at 2356.

“Like the risk hedging in Bilski, the concept of intermediated settlement is ” ‘a fundamental economic practice long prevalent in our system of commerce.’ Id.

The emphasis of the Court is on concepts that are fundamental and essential to an area of science or commerce.  Let us call these Abstract Ideas with a capital A and a capital I.  The notation here is consistent with the underlying emphasis of the Court on Justice Breyer called “big ideas,” basic to a given domain in science or commerce. “Business methods are similarly often closer to “big ideas,” as they are the basic tools of commercial work.” Bilski, 130 S. Ct. 3218, 3255 (Stevens, J. concurring). For example, in Bilski the claim was plainly on the “fundamental economic practice” of hedging, something “long prevalent in our system of commerce and taught in any introductory finance class”—that is something fundamental to cultural domain of finance. In Benson, the Court believed that the claims covered the basic algorithm for converting binary coded decimal to binary, something that appeared fundamental to the domain of computer science and mathematics.

Similarly, in Mayo, the Court believed that Prometheus’s claim covered a so-called “law of nature,” something fundamental to the domain of medicine and biology. In Alice, the Court stated that “on their face” the claims are “drawn to concept of intermediated settlement, i.e., the use of a third party to mitigate settlement risk,” which is also a “fundamental economic practice,” again core to cultural domain of contracts.  Alice, 134 S. Ct.at 2356. The Court then links the “fundamental” notion to the “building block” notion: “The use of a third-party intermediary (or ‘clearing house’) is also a building block of the modern economy.” Id. And as if the more narrow use of abstract ideas as being “fundamental practices” is not plain enough, the Court repeats it just one page later to defeat Alice’s argument that abstract ideas must be “pre-existing, fundamental truths” that exist independently of human action: “Although hedging is a longstanding commercial practice, it is a method of organizing human activity, not a ‘truth’ about the natural world . . . the Court [in Bilski] grounded its conclusion that all of the claims at issue were abstract ideas in the understanding that risk hedging was a ‘fundamental economic practice.’” Id. at 2357 (internal citations omitted).

These kinds of Abstract Ideas are not the ordinary types of abstract ideas that are essential to every invention—something that the Court explicitly discusses:

At the same time, we tread carefully in construing this exclusionary principle lest it swallow all of patent law. Mayo, 566 U. S., at ___ (slip op., at 2). At some level, “all inventions . . . embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.” Id., at ___ (slip op., at 2). Thus, an invention is not rendered ineligible for patent simply because it involves an abstract concept. Id., at 2354.

Thus, the Court is not talking about merely broad patent claims that “involve” an abstract concept, since every claim is an instance of some class of concept. Rather, the focus is on claims that on “on their face” recite fundamental concepts that are critical to further innovation (“human ingenuity”) in a particular known domain. This interpretation follows from the Court’s primary rationale for Section 101, preemption:

We have described the concern that drives this exclusionary principle as one of pre-emption. See, e.g., Bilski, supra, at 611-612 (upholding the patent “would pre-empt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea”). Laws of nature, natural phenomena, and abstract ideas are ” ‘ “ the basic tools of scientific and technological work.” ‘ ” Myriad, supra, at ___.”  Id., at 2354.

Patents on “building blocks of human ingenuity” “would risk disproportionately tying up the use of the underlying” ideas, and are therefore ineligible for patent protection.” Id. (internal quotations and citations omitted).

The Court realizes that every patent preempts and blocks in some degree, because that is what patent claims do. The disproportionate risk of preemption only comes from patents that claim Abstract Ideas in the sense of fundamental building blocks, not just run-of-the-mill abstract ideas that underlie all inventions.  A patent claim is ineligible only when the claim directly recites this kind of fundamental, building block Abstract Idea (Mayo, step 1), and preempts all, or least a broad range, of implementations of the idea (Mayo step 2). The ordinary type of preemption that comes from patent claims is an accepted part of the patent system—that is the whole point of claims, to define the metes and bounds of the invention so that others are preempted from making, using, and selling what’s inside the bounds.

Since every claim preempts, and since every claim rests up some abstract idea, the Abstract Idea exception would “swallow all of patent law” if it were interpreted too simplistically.

Alice, 134 S. Ct. at 2354. Indeed, an overly formulistic approach risks precluding inventors from obtaining “pioneering patents” that set forth the basic technology in new fields, a result that the Court certainly did not intend. Limiting Abstract Ideas to fundamental building blocks of known areas of science and commerce provides the start of an objective way of evaluating which claims are potentially ineligible, and reduces the risk of the unintended consequences.

More by | Robert Sachs Robert Sachs , Law.com Contributor
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