In Alice Corp. v. CLS Bank International, the Supreme Court set forth a new framework for evaluating patent eligibility under 35 U.S.C. § 101 of claims involving “abstract ideas.”1 Following the Alice decision, a wave of cases challenging the validity of patents under § 101 swept through federal courts and the Patent Trial and Appeal Board (Board) at the United States Patent and Trademark Office (USPTO).2 Much has been written about the Alice decision and its impact on patent litigation and the validity of many existing patents. For purposes of this discussion, Alice can be briefly summarized as extending the two-part framework of Mayo Collaborative Services v. Prometheus Laboratories, Inc.3 regarding nature-based products to the analysis of subject matter eligibility for inventions containing an “abstract idea.”4 Particularly, to determine subject matter eligibility, each patent claim must be analyzed to (1) “[d]etermine whether the claim is directed to a law of nature, a natural phenomenon, or an abstract idea (judicial exceptions),” and (2) “[d]etermine whether any element, or combination of elements, in the claim is sufficient to ensure that the claim amounts to significantly more than the judicial exception.”5
The initial step of the Alice framework may appear to be a mere identification step leading, in most instances, to the thorough examination performed in step two. Indeed, the USPTO’s 2014 Guidance following the Alice decision instructed patent examiners that “[a] claim is directed to a judicial exception when a law of nature, a natural phenomenon, or an abstract idea is recited (i.e., set forth or described) in the claim,” and “[s]uch a claim requires closer scrutiny.”6 However, in the past few months, the Federal Circuit has emphasized the vitality of the first step and the necessity to consider whether the claim as a whole is directed to a judicial exception.7 The Board has also applied closer scrutiny in evaluating Alice’s first step in recent Post-Grant Review (PGR) and Covered Business Method Review (CBMR) decisions.8
II. Recent Federal Circuit Guidance
In Enfish, the Federal Circuit reviewed a district court’s summary judgment that the claims in Enfish’s database patents were invalid under § 101.9 Specifically, the Federal Circuit explained that there were two key differences between the claimed “self-referential” table and conventional database tables: (a) the claimed table could store different entity types (i.e. things such as documents, people, or companies) in a single table rather than having an independent table for each entity type and (b) the claimed table defined columns by using identifiers of the rows.10 Nevertheless, the district court held the claims were directed to “the concept of organizing information using tabular formats,” but the Federal Circuit warned that “describing the claims at such a high level of abstraction and untethered from the language of the claims all but ensures that the exceptions to § 101 swallow the rule.”11 Rather, the appellate court stated “the ‘directed to’ inquiry” is based on whether the claim’s “character as a whole is directed to excluded subject matter.”12
The Federal Circuit explained Alice did not prescribe that “all improvements in computer-related technology are inherently abstract” necessitating analysis under step two, but rather that step one “asks whether the focus of the claims is on the specific asserted improvement in computer capabilities” or “a process that qualifies as an ‘abstract idea’ for which computers are invoked merely as a tool.”13 The appellate court examined the differences between the claimed “self-referential” table and conventional database structures and the teaching in the patent’s specification of the benefits achieved by the claimed solution, e.g., “increased flexibility, faster search times, and smaller memory requirements.”14 Regardless of whether the claimed table could be implemented on a general purpose computer, the Federal Circuit held that such a table as recited in the claims was “a specific type of data structure designed to improve the way a computer stores and retrieves data in memory” i.e., “a specific implementation of a solution to a problem in the software arts.”15 Since the claim did not qualify under step one, the court did not reach step two.16
Following Enfish, the Federal Circuit examined another district court’s decision on summary judgment that a patent was directed to a patent-ineligible law of nature in Rapid Litigation.17 The appellate court summarized the claims as essentially comprising the steps of: (a) after liver cells had been frozen and thawed, separating viable ones from non-viable ones, (b) recovering the viable cells, and (c) refreezing the recovered viable cells.18 The district court held the claims were directed “to an ineligible law of nature: the discovery that [liver cells] are capable of surviving multiple freeze-thaw cycles.”19 In contrast, the Federal Circuit found that the claims were not so simple, but were instead directed “to a new and useful laboratory technique for preserving” liver cells.20
As in Enfish, the Federal Circuit explored the improved results achieved with the claimed technique as opposed to conventional techniques, e.g., the preserved liver cells “can be thawed and used later without unacceptable loss of viability” and “samples from single donors can be pooled together to create a composite preparation that can be refrozen for later use,” which was not possible with conventional techniques.21 The Federal Circuit further explained “[t]his type of constructive process, carried out by an artisan to achieve ‘a new and useful end,’ is precisely the type of claim that is eligible for patenting,” and the claims “recite processes to achieve a desired outcome, e.g., methods of producing things, or methods of treating disease. That one way of describing the process is to describe the natural ability of the subject matter to undergo the process does not make the claim ‘directed to’ that natural ability.”22 The Federal Circuit went on to determine that even if the claims were considered “directed to” a judicial exception, they nevertheless would be patent eligible under step two of the Alice/Mayo framework.23
III. Application of Step One by the Board
In the wake of Enfish and Rapid Litigation, the USPTO has clarified and supplemented its guidance regarding § 101 for its examiners.24 Independently, recent institution decisions by the Board have underscored the importance of Alice’s initial step.
For example, the Board denied institution of a CBMR proceeding in HP Inc. v. Big Baboon, Inc., finding that the petitioner did not sufficiently identify the abstract idea.25 The Board explained that patent owner had previously sued multiple parties for infringement of its business-to-business Web commerce patent, and the petitioner sought CBMR of certain claims of the patent under various grounds including patent-ineligibility under § 101.26 The Board agreed with the petitioner that the patent was a covered business method patent and proceeded to the Alice inquiry.27
The petitioner asserted that the claims were broadly “directed to the abstract economic concept of gathering information from across a business and using the information to make decisions.”28 The Board, however, observed that a challenged claim “merely recites ‘providing . . . business automation software, [sic] ‘identifying multiple modules of the software,’ and producing a ‘software configuration’” as well as “producing a ‘workscope/workflow structured display of complex database records,’ which constitutes ‘an integrated decision-making environment for a particular business function.’”29 The Board thus concluded that the challenged claim did not recite any “gathering” steps.30 According to the Board, even if gathering information were abstract, the petitioner did “not address sufficiently the specific language” of the claim.31 The Board explicitly did not decide whether the claim was directed to an abstract idea, because the petitioner failed to meet its burden of identifying an abstract idea related to the claim language.32
While the Board did not explicitly cite Enfish, it reached the same observation, i.e., in identifying the abstract idea under step one of the Alice analysis, a patent challenger must not oversimplify the claim to a point that it no longer reflects the claim’s language. Moreover, the Board has demonstrated that it will not sua sponte search for the abstract idea, because it is the petitioner’s burden to sufficiently identify it.
In similar fashion, in PeroxyChem LLC v. Innovative Environmental Technologies, Inc., the Board refused to institute PGR proceedings on the ground of § 101.33 The Board explained the patent’s claims were related “to oxidation and biological attenuation of organic compounds in soil and groundwater” and included introducing trivalent metals with persulfate to activate and control a reaction with persulfate to treat the compounds in a single treatment.34 The petitioner asserted that the claims included only one conventional step, introducing trivalent metals with persulfate, and the rest of the claim recited natural phenomena.35
However, according to the Board, even if the claims recited natural phenomena, that recitation alone would not render the claim ineligible.36 The Board continued that the “claim as a whole . . . is directed a method of practically combining the reactions to remove soil and groundwater contaminants,” i.e., an application of natural phenomena to a “new and useful end.”37 As such, “no challenged claim as a whole is directed to any natural phenomena.”38
Akin to Rapid Litigation, the Board thus concluded that when natural phenomena are recited as part of a larger claimed process, that process as a whole can remain patent eligible if it produces a new and useful result. And, as in HP, the petitioner was denied an opportunity to contest validity under § 101 because it did not sufficiently address the “directed to” inquiry under step one of the Alice/Mayo test and failed to consider the claim as a whole.
IV. Practical Implications
In sum, the Federal Circuit has clarified that the first step of the Alice analysis must consider not just whether a judicial exception is recited in some part of the claim but whether the “essence of the whole” claim is a patent-ineligible concept.39 The Board has likewise placed the burden of identifying the abstract idea squarely on the petitioner and emphasized that the petitioner must address not just portions of the claim but the claim language as a whole when asserting what a claim is “directed to.”
Petitioners must be cognizant of these obligations under the first inquiry of the Alice/Mayo framework in determining their overall strategy for CBMR and PGR petitions. Practitioners familiar with these types of trials are no doubt aware of the strict word limits for petitions.40 While these word limits encourage practitioners to be concise, petitioners must nevertheless resist the temptation to be overly brief in addressing step one. The Board and Federal Circuit have demonstrated that step one is not a mere formality on the road to step two, and petitioners must devote adequate space in the petition to “sufficiently” address the “specific language” of the claim as a whole in explaining that such a claim is “directed to” a judicial exception.41
On the other hand, patent owners should take into consideration the increased scrutiny that the Board and the Federal Circuit have applied under step one. Even where a claim may arguably be directed to a judicial exception and the petitioner presents a strong case under step two, a patent owner may be able to cut off the Board’s analysis under step two if the petitioner has failed to sufficiently identify the judicial exception or address the claim as a whole under step one. Though statistics regarding the success rate of claims challenged under § 101 favor petitioners,42 these recent developments at the Board and the Federal Circuit provide opportunities for patent owners to attack insufficient petitions.