This article appeared in The Intellectual Property Strategist, an ALM/Law Journal Newsletters publication that provides a practical source of both business and litigation tactics in the fast-changing area of intellectual property law, including litigating IP rights, patent damages, venue and infringement issues, inter partes review, trademarks on social media – and more.
The U.S. Constitution empowers Congress to create a patent system to promote the useful arts, and Congress has enacted laws to create a patent system that encourages innovation. Balancing that power, however, the courts in recent years have tried to reign in the scope of the patent right by limiting the scope of patent-eligible subject matter under 35 U.S.C. §101.
Section 101 specifies four categories of inventions or discoveries that are eligible for patent protection: processes; machines; manufactures; and compositions of matter. 35 U.S.C. §101. In its earlier decisions, the Supreme Court explained that “[i]n choosing such expansive terms … modified by the comprehensive ‘any,’ Congress plainly contemplated that the patent laws would be given wide scope[,]” and a categorical rule denying patent protection for “inventions in areas not contemplated by Congress … would frustrate the purposes of the patent law.” Diamond v. Chakrabarty, 447 U.S. 303, 308, 315 (1980). But in its subsequent ground-breaking decision in Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66 (2012), follow-up cases involving DNA — such as, Association for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576 (2013), and more recently, Ariosa Diagnostics, Inc. v. Sequenom, Inc., 788 F.3d 1371 (Fed. Cir. 2015), cert. denied, 136 S. Ct. 2511 (June 27, 2016) — the Supreme Court has changed course on the scope of patentability and generated substantial controversy and uncertainty. The resulting conflict between incentivizing invention and setting boundaries on eligible subject matter has resulted in uncertainty for all participants in the patent system.
Six Years After Mayo, Uncertainty Remains.
In the life sciences area, Alice/Mayo have created a “bumpy road ahead for pharmaceutical and diagnostic inventors in obtaining patent protection for their discoveries.” Megan Thobe, A Call To Action: Fixing The Judicially-Murkied Waters Of 35 U.S.C. §101, 50 Ind. L. Rev. 1023, 1048 (2017). “[T]he broad application of the newly created exceptions to patentability has damaged many innovators[,] … provoked uncertainty in entire industries[,] … [and] ‘seems to lead to the reduction ad absurdum that most biotechnology processes are patent-ineligible.’” Naira Rezende Simmons, Why The Supreme Court Should Use Ariosa v. Sequenom To Provide Further Guidance On 35 U.S.C. §101 Patent Eligibility, 16 Chi.-Kent J. Intell. Prop. 112, 115-116 (2016). The trend after Alice/Mayo has placed patent rights at risk, while reducing the incentives and capital needed for innovation. Paul R. Michel, The Impact of Bad Patents on American Business, Testimony, House Judiciary Committee at 5 (July 13, 2017). Uncertainty “is choking off funding for bio-tech firms just when they are on the cusp of breakthrough discoveries that would revolutionize human health and longevity.” Id. “[T]he law has created unacceptable chaos for inventors, innovators, business, and investors. Legal chaos is the exact opposite of what the U.S. economy needs.” Paul R. Michel, The Impact of Bad Patents on American Business, Supplemental Testimony, House Judiciary Committee at 18 (Sep. 12, 2017). And by excluding important and life-saving discoveries, the current Section 101 jurisprudence may chill innovation to the detriment of scientific development and public health needs. Bilski v. Kappos, 561 U.S. 593, 613 (2010) (Stevens, J., concurring).
After Mayo, courts struggled to apply Section 101, particularly in the life sciences. In Smart Sys. Innovations, LLC v. Chicago Transit Authority, 873 F.3d 1364, 1377 (Fed. Cir. 2017) (Linn, J., dissenting), Judge Linn lamented that the Section 101 test “is indeterminate and often leads to arbitrary results.” He cautioned that “the danger of getting the answers to these questions wrong is greatest for some of today’s most important inventions in computing, medical diagnostics, artificial intelligence, the Internet of Things, and robotics, among other things.” Id. at 1378; see also, BASCOM Global Internet Servs., Inc. v. AT&T Mobility LLC, 827 F.3d 1341, 1353 (Fed. Cir. 2016) (Newman, J., concurring) (“[T]he emphasis on eligibility has led to erratic implementation in the courts.”).
This uncertainty surfaced when the Federal Circuit was asked to re-hear Ariosa Diagnostics, Inc. v. Sequenom, Inc., 788 F.3d 1371 (Fed. Cir. 2015), which had invalidated patents claiming a method for detecting paternally-inherited fetal DNA in maternal blood. The court declined to re-hear the case, and three judges wrote separately to express concern. Judge Newman dissented because she found that the panel’s decision had improperly extended Supreme Court precedent. Ariosa Diagnostics, Inc. v. Sequenom, Inc., 809 F.3d 1282, 1294 (Fed. Cir. 2015) (Newman, J., dissenting). Judge Lourie concluded that “neither of the traditional preclusions of laws of nature or of abstract ideas ought to prohibit patenting of the subject matter in this case.” Id. at 1284. He noted that “the whole category of diagnostic claims is at risk [and] that a crisis of patent law and medical innovation may be upon us[.]” Id. at 1285. And Judge Dyk warned that the consequence of “a too restrictive test … may discourage development and disclosure of new diagnostic and therapeutic methods in the life sciences, which are often driven by discovery of new natural laws and phenomena.” Id. at 1287.
Moreover, since Alice/Mayo, there have been an avalanche of district court decisions resolving patent-eligibility on the pleadings. These determinations have invalidated hundreds of patents, each one a vested private property right, with no opportunity for fact finding, claim-construction briefing, expert testimony, trial by jury on disputed facts, or any of the other protections usually afforded before adjudicating validity. Paul R. Gugliuzza & Mark A Lemley, Can a Court Change the Law by Saying Nothing?, 71 Vanderbilt L. Rev. 765, 767-68 (2018). One study reports ineligibility determinations at the Federal Circuit, often by Rule 36 affirmance, in 92.3% of cases post-Alice. Id. at 768. The study concluded that “patentees are, in fact, overwhelmingly losing in the Federal Circuit on patentable subject matter. And they are overwhelmingly losing in decisions that affirm a finding of invalidity by the tribunal below.” Id. at 788.
Many district courts have expressed concern about determining eligibility on the pleadings. See, e.g., Verint Systems Inc. v. Red Box Recorders Ltd., 226 F. Supp. 3d 190, 192-93 (S.D.N.Y. 2016) (explaining “the current fad of ineligibility motions in patent cases has, in certain respects, gotten ahead of itself” and noting that “courts should make such determinations on a proper record”); Kaavo Inc. v. Amazon.com, Inc., Nos. 15-638-LPS-CJB, 15-640-LPS-CJB, 2016 WL 6562038, at 11 (D. Del. Nov. 3, 2016) (asking “how, on this record, would the Court be in a position to conclusively determine” whether, under the second step of Alice that the claim involved merely “conventional activities?”); Invue Sec. Prods. Inc. v. Mobile Tech, Inc., No. 3:15-cv-00610-MOC-DSC, 2016 WL 1465263, at 2 (W.D.N.C Apr. 14, 2016) (noting that numerous courts have declined to rule on eligibility at the pleading stage, “finding claim construction and additional factual development necessary to resolution of the invalidity question”). As one commentator aptly stated, when eligibility is decided without sufficient factual evidence, “[c]ourts are improperly resolving these cases in a vacuum, substituting their own perspective for that of the skilled artisan and ignoring critical fact issues.” Raymond A. Mercado, Resolving Patent Eligibility And Indefiniteness in Proper Context: Applying Alice and Aristocrat, 20 Va. J. L. & Tech. 240, 250 (2016).
The Federal Circuit’s Current Approach
The first step of the Section 101 inquiry is to determine whether the claims are “directed to” a natural law or phenomenon. At this step, one “cannot simply ask whether the claims involve a patent-ineligible concept, because essentially every routinely patent-eligible claim involving physical products and actions involves a law of nature and/or natural phenomenon — after all, they take place in the physical world.” Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1335 (Fed. Cir. 2016). This first step is a “meaningful one” because “a substantial class of claims are not directed to a patent-ineligible concept.” Id. At the second step, even claims that are directed to a natural law are nonetheless patent eligible where the “patent in practice amounts to significantly more than a patent upon the [natural law] itself.” Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347, 2355 (2014). The Supreme Court cautioned that courts should “tread carefully in construing this exclusionary principle lest it swallow all of patent law.” Alice, 134 S.Ct. at 2354 (2014); Mayo, 132 S.Ct. at 1293 (“[T]oo broad an interpretation of this exclusionary principle could eviscerate patent law.”).
In Mayo, the patent involved methods for measuring certain metabolites in blood, the levels of which correlated with the likelihood that a particular dosage of a thiopurine drug could cause harm or prove ineffective. 566 U.S. at 72. The Supreme Court held that the patent claimed ineligible subject matter because the claims identified an element existing in nature, involved known methods to detect that element, and the purpose was already known in the art. Id. at 79-80. Following Mayo, the Federal Circuit decided PerkinElmer, Inc. v. Intema Ltd., 496 F. App’x 65 (Fed. Cir. 2012), where the claims recited using two measurements to determine whether a fetus is at an increased risk for Down’s syndrome, the measurements used “the screening markers through whatever known method they wish,” and such measurements were, separately, “previously used” exactly as recited in the claims. PerkinElmer, 496 F. App’x at 71, 72. Here, too, the court found the claims were directed to ineligible subject matter. And in Ariosa, the Federal Circuit held that the claims were directed to ineligible subject matter because the claims involved a method to detect paternally-inherited fetal DNA using techniques that “w[ere] well-understood, routine, and conventional activity in 1997.” 788 F.3d at 1377.
But in Rapid Litigation Management Ltd. v. CellzDirect, Inc., 827 F.3d 1042, 1047 (Fed. Cir. 2016), the Federal Circuit found the claimed methods patent-eligible because it determined they were sufficiently innovative. In this case, the inventors discovered the natural phenomenon that hepatocytes are capable of surviving multiple freeze-thaw cycles, but the court concluded that this discovery “is not where they stopped, nor is it what they patented.” Id. at 1048. Rather, it found the inventors claimed applications of that knowledge: “They employed their natural discovery to create a new and improved way of preserving hepatocyte cells for later use.” Id. “That each of the claims’ individual steps (freezing, thawing, and separating) were known independently in the art does not make the claim unpatentable. … ‘[A] new combination of steps in a process may be patentable even though all the constituents of the combination were well known and in common use before the combination was made.’” Id. at 1051. In Exergen Corp. v. Kaz USA, Inc., 725 F. App’x 959 (Fed. Cir. 2018), the Federal Circuit similarly held a method for measuring body temperature patent-eligible. While the method measured a condition existing in the body using techniques known in the art, they not had previously been used for that purpose. Id. at 964. Noting the extensive and expensive research involved, the court held the inventor’s adaptation of known methods for that unconventional purpose is patent-eligible. Id. at 966. And, in Vanda Pharmaceuticals Inc. v. West-Ward Pharmaceuticals, 887 F.3d 1117 (Fed. Circ. 2018), the patentee showed that while there was a relationship among the claimed drug for treating schizophrenia, a gene controlling metabolism of that drug, and a side effect of the drug if not properly metabolized, the claims were not solely directed to a patent-ineligible concept. The Federal Circuit agreed, holding that the invention — assaying a bodily sample to detect the genotype and assessing proper dosage levels of the drug — was not directed to a natural law because the invention applied that natural relationship. Id. at 1135-1136.
In each of these cases, the decision turned largely on the court’s evaluation of whether the claimed inventions were sufficiently innovative given the state of the art. But until very recently, the Federal Circuit had failed to address the problem that factual disputes cannot be resolved on the pleadings or on summary judgment.
In Berkheimer v. HP Inc., 881 F.3d 1360, 1369 (Fed. Cir. 2018) and Aatrix Software, Inc. v. Green Shades Software, Inc., 882 F.3d 1121, 1128 (Fed. Cir. 2018), however, the court made clear that the question of whether something is well-understood, routine, and conventional to a skilled artisan at the time of the patent is a factual determination. The court denied rehearing en banc in these cases, but issued two concurrences and one dissent from the denial of rehearing. Berkheimer v. HP Inc., No. 2017-1437, 2018 WL 2437140 (Fed. Cir. May 31, 2018); Aatrix Software, Inc. v. Green Shades Software, Inc., No. 2017-1452, 2018 WL 2436813 (Fed. Cir. May 31, 2018). (Chief Judge Prost and Judges Wallach, Chen and Hughes joined only the per curiam order and expressed no specific views.)
A plurality of the court — Judges Moore, Dyk, O’Malley, Taranto, and Stoll — found that underlying factual issues permeate the eligibility analysis and any factual disputes prevent a court from declaring patents ineligible on the pleadings or on summary judgment. Berkheimer, 2018 WL 2437140, at 1-4. They analogized Section 101 to other validity challenges and concluded that “[w]hile the ultimate question of patent eligibility is one of law, it is not surprising that it may contain underlying issues of fact.” Id. at 1. This group emphasized the importance of evaluating patent eligibility from the “perspective of the ordinarily skilled artisan” as opposed to the perspective of a “reasonable judge.” Id. at 1, n.1. And, they highlighted Aatrix, where dismissal on the pleadings was improper because the patentee’s complaint included “concrete allegations … that individual elements and the claimed combination are not well-understood, routine, or conventional activity.” Id. at 3. Accordingly, they declined to “adopt a result-oriented approach to end patent litigation at the Rule 12(b)(6) stage that would fail to accept as true the complaint’s factual allegations and construe them in the light most favorable to the plaintiff, as settled law requires.” Id. at 3.
Judges Lourie and Newman espoused the view that the Alice/Mayo two-step test is overly-complicated and ill-advised. Id. at 4-6. They urged that “steps that utilize natural processes, as all mechanical, chemical, and biological steps do, should be patent-eligible, provided they meet the other tests of the statute, including novelty, nonobviousness, and written description.” Id. at 5. And, while they recognized that “[a] claim to a natural law itself should not be patentable,” they asserted that “claims to using such processes should not be barred at the threshold of a patentability analysis by being considered natural laws, as a method that utilizes a natural law is not itself a natural law.” Id. After Alice/Mayo, what began “as a simple §101 analysis” is now “a complicated multiple-step consideration of inventiveness (‘something more’), with the result that an increasing amount of inventive research is no longer subject to patent.” Id.
One judge, Judge Reyna, advocated eliminating any consideration of factual issues from the Section 101 analysis, arguing that eligibility is a “threshold test” and an “issue of law.” Id. at 6-11. He interpreted step 2 of the Alice test as an inquiry that “is predominately a legal question focused on the claims” and contended that “the claim ha[s] to supply a ‘new and useful’ application of the idea in order to be patent eligible.” Id. at 7 (emphasis in original, citation omitted).
Thus, the problem still remains that the Section 101 analysis is complex and replete with potentially disputed facts that may not be resolved on the pleadings or summary judgment. How the courts will resolve Section 101 challenges to life sciences inventions in the future remains to be seen.
In Part Two, next issue, the authors examine efforts by the USPTO to provide clarity for patent-eligible subject matter.
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 silico 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.