Hindsight and Patentability

tube of cream

In order to get patent claims allowed and issued at the U.S. Patent Office (USPTO), a patent examiner has to be persuaded that an invention is non-obvious. Each issued patent is supposed to protect something significantly better than what has been invented before. But how much better? That’s the controversial question!

In practice, about 50% of applications are rejected and end without any patent being issued. Many rejections are on the basis of this fuzzy notion and law of non-obviousness found at 35 U.S.C. 103. Everyone seems to have his own deeply-felt opinion on the topic.

Examiners are not allowed to use a patent application as a road map to reject really great technical break-throughs. A finding of non-obviousness (a rejection) cannot be found on the basis of hindsight. In 2013, the Federal Circuit, provided guidance on avoiding the use of hindsight in Leo Pharmaceutical Products, Ltd v. Rea, 726 F.3d 1346 (Fed. Cir. 2013).

First, a little background. U.S. Patent No. 6,753,013 was assigned to Leo Pharmaceuticals. This ‘013 patent claimed a “storage-stable” pharmaceutical composition comprising a vitamin D analog, a corticosteroid and at least one solvent component for topical treatment of skin conditions such as psoriasis.

Galderma R&D, as a third-party, challenged the patent in a re-examination proceeding. During re-examination, the examiner rejected the claims as being obvious over 3 prior art references. The rejection was upheld on appeal to the Patent Board of Appeals and Interferences (BPAI).

The following is guidance taken from the Federal Circuit opinion.

  • The Board erred by collapsing the obviousness analysis into a hindsight-guided combination of elements. The record, disclosed several reasons that a person of ordinary skill in the art would not have been motivated to try, let alone make, the claimed invention of the ’013 patent because no scientist investigated the issue of how shelf-stable the mixture was.
  • The record showed that Turi, Serup, and Dikstein (the 3 references) described compositions for the same therapeutic purpose, but did not include a motivation to combine them.
  • In the face of strong objective indicia of nonobviousness, the Board erred by using hindsight to determine that the addition of Serup’s or Dikstein’s vitamin D analog to Turi’s formulation would have been obvious.
  • Even though the patented formulation was one of the available alternatives, the numerous known combinations indicated that these disclosures would not have rendered the claimed invention obvious to try.
  • There was a considerable time lapse between the references and the submission of the patent application.
    • It took over a decade—after Dikstein’s disclosure of the benefits of combining vitamin D and corticosteroid treatments into one formulation—for Dikstein’s formulations to be tested for storage stability.
    • It was twenty-two years after Turi and fourteen years after Dikstein that the solution was created to meet the long felt and unsolved need for a combined treatment of vitamin D and corticosteroid.
  • The record showed “extensive experimental evidence” of unexpected results that contradicted the Board’s obviousness finding.
  • Objective indicia “can be the most probative evidence of nonobviousness in the record, and enables the court to avert the trap of hindsight.” Crocs, Inc. v. Int’l Trade Comm’n, 598 F.3d 1294, 1310 (Fed. Cir. 2010).
  • In this case, the objective indicia of nonobviousness were crucial in avoiding the trap of hindsight when reviewing a combination of known elements.

If you have a patent-related question, find me and let’s talk.

Flashback to 2007 – KSR and Obvious Rejections

While the courts have drifted away from it in some regards, the opinion from the U.S. Supreme Court in KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007) is still helpful in understanding the contours of rejecting patent claims on the basis of obviousness codified at 35 U.S.C. 103. The USPTO Board of Patent Appeals and Interferences (BPAI) still cites to this opinion when it rejects claims on the basis of obviousness. Here are a few of my favorite lessons and quotes from KSR.

The Court indicated there were three errors in the analysis by the Federal Circuit. First, the Federal Circuit erred by restricting its analysis only to the problem that the patentee was trying to solve. The Court states:

“The question is not whether the combination was obvious to the patentee, but whether the combination was obvious to a person with ordinary skill in the art. Under the correct analysis, any need or problem known in the field of endeavor at the time of the invention and addressed by the patent can provide a reason for combining the elements in the manner claimed.”

Second, the Federal Circuit erred by looking only to the prior art that solved the same problem as faced by the patentee. The Court states:

“Common sense teaches, however, that familiar items may have obvious uses beyond their primary purposes, and in many cases a person of ordinary skill will be able to fit the teachings of multiple patents toogether like pieces of a puzzle.”

Third, the Federal Circuit erred by ignoring proof that certain techniques are “obvious to try.” The Court states the following – which speaks directly to software patents:

“When there is a design need or market pressure to solve a problem and there are a finite number of identified, predictable solutions, a person of ordinary skill has good reason to pursue the known options within his or her technical grasp. If this leads to anticipated success, it is likely the product not of innovation but of ordinary skill and common sense. In that instance the fact that a combination was obvious to try might show that it was obvious under § 103.”

The Court indicates that other fields may be consulted; one may refer to non-analogous art to show obviousness. If a person of ordinary skill would “recognize that . . . [a known technique] would improve similar devices in the same way, using the [same] technique” for the invention in dispute would render the invention obvious for purposes of patentability.

Public policy is a concern. The Court states,

“Granting patent protection to advances that would occur in the ordinary course without real innovation retards progress and may, in the case of patents combining previously known elements, deprive prior inventions of their value or utility.”

Finally, the Court states, a patent for a combination that only unites “old elements with no change in their respective functions . . . obviously withdraws what is already known into the field of . . . [patent] monopoly and diminishes the resources available to skillful men.” The combination of familiar elements is “likely to be obvious when it does no more than yield predictable results.” Nearly all software is designed to produce predictable results. As long as there is an “apparent reason to combine the known elements in the fashion claimed” then the claim to known elements is obvious.

Federal Circuit rejects Claims as Invalid under 35 U.S.C. 101 — Ultramercial v. Hulu

On November 14, 2014, the Federal Circuit rejected claims of U.S. Patent No. 7,346,545 as not being directed to patent eligible subject matter. See Ultramercial, Inc. v. Hulu, LLC, __ F.3d __ (Fed. Cir. Nov. 14, 2014) (LOURIE, Mayer (concur), O’Malley) (C.D. Cal.: Klausner). The short version — the Federal Circuit affirms a Rule 12(b)(6) dismissal of the lawsuit because the patent claims recite an abstract idea, “an abstraction . . . having no particular concrete or tangible form.”

The long version is more interesting to patent lawyers. Claim 1 is representative of all the claims in dispute (emphasis added):

1. A method for distribution of products over the Internet via a facilitator, said method comprising the steps of:

a first step of receiving, from a content provider, media products that are covered by intellectual-property rights protection and are available for purchase, wherein each said media product being comprised of at least one of text data, music data, and video data;

a second step of selecting a sponsor message to be associated with the media product, said sponsor message being selected from a plurality of sponsor messages, said second step including accessing an activity log to verify that the total number of times which the sponsor message has been previously presented is less than the number of transaction cycles contracted by the sponsor of the sponsor message;

a third step of providing the media product for sale at an Internet website;

a fourth step of restricting general public access to said media product;

a fifth step of offering to a consumer access to the media product without charge to the consumer on the precondition that the consumer views the sponsor message;

a sixth step of receiving from the consumer a request to view the sponsor message, wherein the consumer submits said request in response to being offered access to the media product;

a seventh step of, in response to receiving the request from the consumer, facilitating the display of a sponsor message to the consumer;

an eighth step of, if the sponsor message is not an interactive message, allowing said consumer access to said media product after said step of facilitating the display of said sponsor message;

a ninth step of, if the sponsor message is an interactive message, presenting at least one query to the consumer and allowing said consumer access to said media product after receiving a response to said at least one query;
a tenth step of recording the transaction event to the activity log, said tenth step including updating the total number of times the sponsor message has been presented; and

an eleventh step of receiving payment from the sponsor of the sponsor message displayed.

This method can be summarized as follows:

“get a media product that is protected by legal rights and make it available for sale, restrict access to it until a consumer watches an advertisement, record evidence of the transaction, and receive payment from a sponsor of the advertisement.”

Previously, on instruction from the U.S. Supreme Court, the Federal Circuit judges determined that the claims were patent-eligible even in light of Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. ___, 132 S. Ct. 1289 (2012) (which requires something “significantly more” than an abstract idea). However, after the June 2014 decision in Alice Corp v. CLS Bank, and again on instruction from the U.S. Supreme Court, the Federal Circuit judges changed their mind and issued the third Ultramercial opinion. Insights from this opinion are provided below.

In Alice, both the method and system claims were patent ineligible.

  • On appeal, questions concerning patent-eligible subject matter under 35 U.S.C. 101 are reviewed without deference to the trial court.
  • There is a two-step procedure for determining patent-eligible subject matter. First, the court must decide whether the claims are directed to one of the patent-ineligible concepts (e.g., laws of nature, natural phenomena, and abstract ideas). Second, the court must decide if the claims contain 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.” (quote to Mayo Collaborative Services).
  • Quoting Mayo, 132 S. Ct. at 1297-98, a “claim that recites an abstract idea must include ‘additional features’ to ensure ‘that the [claim] is more than a drafting effort designed to monopolize the [abstract idea].'” The “additional features” must be more than “well-understood, routine, conventional activity.”
  • Any novelty in implementation of the abstract idea is a factor to be considered only in the second step of the Alice analysis. Op. at 10.
  • The claimed sequence of steps above in claim 1 comprise only “conventional steps, specified at a high level of generality,” which is insufficient to supply an “inventive concept,” citing to Alice Corp. v. CLS Bank International, 573 U.S. ___, 134 S. Ct. 2347, 2357 (2014).
  • Steps such as consulting and updating an activity log represent insignificant “data-gathering steps,” citing Cybersource Corp. V. Retail Decisions, Inc., 654 F.3d 1366, 1370 (Fed. Cir. 2011). This sounds like anything in a claim that merely and generically searches or writes to a database is patent ineligible without “something more.” Such would “add nothing of practical significance to the underlying abstract idea.” Op. at 11.
  • Even though some of the eleven steps of claim 1 were not previously employed in the relevant art is not enough — standing alone — to confer patent eligibility upon the claims.
  • The claims of the ‘545 patent are not tied to any particular or novel machine or apparatus, and thus the Bilski machine-or-transformation test tends to confirm that the claims at issue recite patent ineligible subject matter.

In the opinion, the Federal Circuit again disclaimed any per se rule against software patents: “we do not purport to state that all claims in all software-based patents will necessarily be directed to an abstract idea. Future cases may turn out differently.” Op. at 10.

In a lengthy concurring opinion, Judge Mayer emphasizes three points:

  1. whether claims meet the demands of 35 U.S.C. § 101 is a threshold question that must be addressed at the outset of every patent litigation;
  2. no presumption of eligibility attends the section 101 inquiry; and
  3. the decision in Alice Corporation v. CLS Bank International, 134 S. Ct. 2347, 2356–59 (2014) sets out a technological arts test for patent eligibility.

The first question is similar to a jurisdictional inquiry. Judge Mayer states, “The Supreme Court has thus dictated that section 101 imposes ‘a threshold test’ [under Bilski] . . . that must be satisfied before a court can proceed to consider subordinate validity issues such as non-obviousness . . . or adequate written description.” See In re Comiskey, 554 F.3d 967, 973 (Fed. Cir. 2009). A preliminary inquiry “conserves scarce judicial resources,” provides a “bulwark against vexatious infringement suits,” and protects the public by “weeding out those patents that stifle innovation and transgress the public domain.”

Second, no presumption of validity applies to section 101. Judge Mayer states, because “the PTO has for many years applied an insufficiently rigorous subject matter eligibility standard, no presumption of eligibility should attach when assessing whether claims meet the demands of section 101.” However, since this is a concurring opinion, it is best not to rely too heavily on this line of argument when challenging claims for ineligible subject matter.

The legislative history is frequently misquoted as to the expansiveness that some judges have given to patentable subject matter. The full legislative statement is instructive to clarify what is proper patent eligible subject matter under section 101. The committee report reads: “A person may have ‘invented’ a machine or a manufacture, which may include anything under the sun that is made by man, but it is not necessarily patentable under section 101 unless the conditions of the title are fulfilled.” H.R. Rep. No. 1923, 82d Cong., 2d Sess., at 6 (1952).

Third, Judge Mayer reminds us that, “Alice articulated a technological arts test for patent eligibility.” In Alice, the asserted method and system claims were patent ineligible because they did not “improve the functioning of the computer itself” or “effect an improvement in any other technology or technical field.” The technological arts test prohibits claims which are “overly broad,” in proportion to the technological dividends they yield. See Mayo, 132 S. Ct. at 1301. To satisfy the technological arts test, “claims must harness natural laws and scientific principles” but must be limited by the precise set of instructions for achieving the technological objective articulated by the inventors.

It seems that the Federal Circuit, by following the lead of the U.S. Supreme Court, is trying to do its part to raise the bar on patent eligible subject matter by separating “entrepreneurial” innovations (non-technical advances in business law and the social sciences) from ‘technological” innovations. After all, patents are supposed to promote science and the useful arts.

The U.S. Patent Office is Forgiving about Small Entity Status

Small entity status gives individuals and companies substantial discounts on many government fees associated with patent filings.

In the mid-1990s, there were district court decisions in which a patentee faced negative legal consequences for erroneously or improperly claiming small entity status. See (1) Haden Schweitzer Corp. v. Arthur B. Myr Industries, Inc., 901 F. Supp. 1235, 36 U.S.P.Q.2d 1020 (E.D. Mich. 1995) (failure to pay maintenance fee in the correct amount results in intervening rights under 35 U.S.C. 41(c) 2)); and (2) DH Technology, Inc. v. Synergstex International, Inc., 937 F. Supp. 902, 40 U.S.P.Q.2d 1754 (N.D. Cal. 1996) (failure to timely pay issue fee in the correct amount results in patent lapse under 35 U.S.C. 151).

In light of the uncertainty that existed in the mid-1990s concerning the consequences of erroneously claiming small entity status, the Office advised applicants and patentees at that time that they could avoid this uncertainty by not claiming small entity status unless it was absolutely certain that the applicant or patentee is entitled to small entity status (i.e., resolving any doubt, uncertainty, or lack of information in favor of payment of the full fee). See Changes to Patent Practice and Procedure, 62 FR 53131, 53135 (Oct. 10, 1997).

However, in 1998, the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) reversed the district court’s decision in DH Technology and held that an applicant may correct an erroneous payment of patent fees in the small entity amount under 37 CFR 1.28 without penalty, such as patent lapse, as long as small entity status was established in good faith and the small entity fees were paid in good faith. See DH Tech. v. Synergystex Int’l, 154 F.3d 1333, 1343, 47 U.S.P.Q.2d 1865, 1872 (Fed. Cir. 1998). Thus, subsequent to 1998 and the Federal Circuit’s decision, the only patent applicants or patentees who face negative legal consequences from erroneously claiming small entity status are those applicants who have no basis for making a good faith claim to small entity status.

37 C.F.R. 1.317 provides the following, “If the issue fee paid is the amount specified in the notice of allowance, but a higher amount is required at the time the issue fee is paid, any remaining balance of the issue fee is to be paid within three months from the date of notice thereof.”

37 C.F.R. 1.28(c) states: “[i]f status as a small entity is established in good faith, and fees as a small entity are paid in good faith, in any application or patent, and it is later discovered that such status as a small entity was established in error, or that through error the Office was not notified of a loss of entitlement to small entity status as required by Sec. 1.27(g)(2), the error will be excused upon compliance with the [requirements of 37 CFR 1.28(c)].”

Accordingly, the U.S. Patent Office is pretty forgiving as to procedures and at least as to paying fees once a patent has issued. The policy behind the leniency is to allow patent owners to focus on the substance of their patents, and not on the procedures to keep patents viable. If you have questions about the requirements for small entity status, please see a patent attorney.