After Two Years,Alice Is Still Stifling Life Sciences Patents;But the Tide May Be Shifting at the Federal Circuit

The Four Horsemen

Alice is the Fourth Horseman in the quartet of recent Supreme Court decisions defining and negatively impacting patent eligibility stemming from 2010's In re Bilski, in which the Supreme Court rejected the machine-or-transformations test for determining patent eligibility and found commodity trading methods ineligible. ⁷ Next came Mayo, where the Court laid down the two-step framework for its patentable subject matter test, and invalidated claims to adjusting medication dosage. ⁸ Then, in Myriad, the Mayo test was implemented to invalidate claims to naturally occurring gene sequences. ⁹ Finally, Alice confirmed the two-part test and applied it to the realm of business methods and software. In each case, the highest court of the land found the claims ineligible for patent protection.

The Mayo/Alice framework contains two steps to distinguish patents that claim patent-ineligible subject matter from those that claim patent-eligible applications. The first step queries whether the claim under the microscope is “directed to” a law of nature, natural phenomenon, or abstract idea. If it is, the second step looks for an “inventive concept”—whether the additional claim elements, both individually and as an ordered combination, transform the claim to a patent-eligible concept. Is there something “significantly more” than the patent-ineligible concept itself, and more than an ineligible concept plus “well understood, routine, conventional activity already engaged in by the scientific community.” ¹⁰

Alice was seen as a needed bulwark against the rising throngs of patent trolls, particularly in the business method and software markets. Since the executive and legislative branches have not taken concrete actions to limit the surge of patent trolls, Alice was heralded by the tech market as a godsend. And soon after, the courts and the Patent Trial and Appeals Board (PTAB) of the USPTO began striking down overbroad patents; anecdotal evidence suggested that the mere threat of an Alice motion under § 101 would reinvigorate settlement negotiations between parties, while offering parties litigating against non-practicing entities (NPE) a sword with which to defend themselves.

Numerous observers decried Alice as the final nail in the coffin for ingenuity and invention, especially in the tech arena, but happily, not all inventive activity and patent prosecution has ground to a halt. However, neither has there been a sharp drop in the past two years in the numbers of patent infringement actions filed. Unified Patents reported that patent disputes grew 13% in 2015 over 2014 (counting both district court cases and inter partes reviews [IPRs] initiated), and that NPE-litigation comprised 66.9% of U.S. district court cases filed in 2015, compared to 61% in the year prior. ¹¹ Still, since the Alice decision and the implementation of the America Invents Act (AIA), there are indications that dubious patent actions are being terminated at an earlier point in litigation, and that settlement awards to NPEs are lower than in the past.

Now that the Supreme Court has laid down the rules, it is left to the Federal Circuit to interpret the Four Horsemen and clarify uncertainties in § 101, as it has in these four recent decisions to allow patentable claims.

Enfish LLC V. Microsoft Corp.

After all the doom and gloom of the first year and a half post-Alice, the first of these current decisions was a welcome one. In Enfish LLC v. Microsoft Corp., the Federal Circuit found software-related claims eligible for patent protection for only the second time since Alice issued. The court vacated summary judgment granted by the District Court for the Central District of California, which held all claims of U.S. Patents 6,151,604 and 6,163,775 invalid as patent ineligible under § 101.

The lower court had found the claims at issue failed at step one of the Mayo/Alice framework, because they were directed to the abstract idea of “storing, organizing and retrieving memory in a logical table,” or more plainly, “the concept of organizing information using tabular formats.” ¹² Instead, the Federal Circuit held 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.” ¹³ The court went on to find the claims to be directed “to a specific improvement to the way computers operate, embodied in the self-referential table,” referencing specific benefits of the claimed invention over conventional databases, “such as increased flexibility, faster search times, and smaller memory requirements.” ¹⁴

Significantly, the court focused the inquiry on step one of the test, rather than the previously dominant inquiry into step two:

We do not read Alice to broadly hold that all improvements in computer-related technology are inherently abstract and, therefore, must be considered at step two. Indeed, some improvements in computer-related technology when appropriately claimed are undoubtedly not abstract, such as a chip architecture, an LED display, and the like. Nor do we think that claims directed to software, as opposed to hardware, are inherently abstract and therefore only properly analyzed at the second step of the Alice analysis. Software can make non-abstract improvements to computer technology just as hardware improvements can, and sometimes the improvements can be accomplished through either route. We thus see no reason to conclude that all claims directed to improvements in computer-related technology, including those directed to software, are abstract and necessarily analyzed at the second step of Alice, nor do we believe that Alice so directs. Therefore, we find it relevant to ask whether the claims are directed to an improvement to computer functionality versus being directed to an abstract idea, even at the first step of the Alice analysis. ¹⁵

By finding the claims were not directed to an abstract idea, the court short-circuited the two-step Mayo/Alice process. Further, the Federal Circuit also dismissed contentions that it is dispositive if the invention is able to run on a general-purpose computer or if the improvement is not defined by reference to “physical” components. ¹⁶ Enfish provided a clear signal that features that improve the operation of the computer can bring claims out of the abstract. These features are computer-implemented methods that enhance the performance of the computer.

Can Enfish enable patentees to succeed in a scheme where diagnostics, no matter how unexpected, merely exploit laws of nature? In both Ariosa and Genetic Technologies, the court found that the claims were directed to laws of nature in step one, and in the step two analysis, the claimed methods failed to provide sufficient inventive concept to transform the claim into an eligible concept. The court noted in Genetic Technologies that, “a claim directed to a newly discovered law of nature … cannot rely on the novelty of that discovery for the inventive concept necessary for patent eligibility; instead, the application must provide something inventive, beyond mere ‘well-understood, routine, conventional activity.’” ¹⁷ Genetic Technologies issued this past April; Enfish came on its heels one month later. Can medical diagnostics be then depicted as specific improvements to the way a machine or computer works, that machine or computer being either a diagnostic machine, such as a high-throughput screening machine, or even the human machine?

Bascom Global Internet V. AT&T Mobility LLC

Following up on Enfish, the Federal Circuit issued its decision in Bascom the next month. The patent at issue, U.S. Patent No. 5,987,606, described a system for filtering Internet content that can be installed at a location remote to end users, but allowed customized filtering features for each end user. The District Court for the Northern District of Texas granted AT&T's motion to dismiss, finding that the claims were directed to the abstract idea of “filtering content” because “content provided on the Internet is not fundamentally different from content observed, read, and interacted with through other mediums like books, magazines, television, or movies.” Further, the district court found that the claims lacked an “inventive concept” because all of the limitations in isolation and in combination recited well-known, generic computer components or a standard filtering mechanism that was well known in the art. Finally, the district court found that the absence of specific structure for the generic computer components “raises the likelihood that such claims could preempt every filtering scheme under the sun.” ¹⁸

In reversing the lower court, the Federal Circuit found in step one that “filtering content is an abstract idea because it is a longstanding, well-known method of organizing human behavior, similar to concepts previously found to be abstract.” ¹⁹ Still, the court endorsed the view expressed in Enfish that practical improvements to the capabilities of a computer are a key consideration in finding the claims are directed to a non-abstract idea. However, in Bascom, the court said, “This case, unlike Enfish, presents a “close call[ ] about how to characterize what the claims are directed to. … We therefore defer our consideration of the specific claim limitations' narrowing effect for step two.” ²⁰

In step two, the court found that the district court conflated obviousness with patent eligibility, making the step-two test subjective and without the limitations and protections in an obviousness determination:

However, we disagree with the district court's analysis of the ordered combination of limitations. In light of Mayo and Alice, it is of course now standard for a § 101 inquiry to consider whether various claim elements simply recite “well-understood, routine, conventional activit[ies].” The district court's analysis in this case, however, looks similar to an obviousness analysis under 35 U.S.C. § 103, except lacking an explanation of a reason to combine the limitations as claimed. The inventive concept inquiry requires more than recognizing that each claim element, by itself, was known in the art. As is the case here, an inventive concept can be found in the non-conventional and non-generic arrangement of known, conventional pieces. ²¹

The court concluded the inventive concept of the '606 patent “is the installation of a filtering tool at a specific location, remote from the end-users, with customizable filtering features specific to each end user.” Similar to Enfish, this invention is based in software technology, but reinforces the idea that a technical solution to a problem of a technical nature can be patent eligible, even when the claimed elements are already known in the art. The parallels to the patent-ineligible medical diagnostics of Ariosa and Genetic Technologies are clear, and perhaps there will be ways to recharacterize those methods as “non-conventional and non-generic arrangement[s] of known, conventional pieces,” as both technologies were significant improvements over the prior art. Unfortunately, it may be that interpreting Mayo as it stands will require a finding that the conventional steps used in developing diagnostics lead to no inventive concept.

Rapid Litigation Management Ltd. V. Cellzdirect, Inc.

While the Federal Circuit decisions in Ariosa and Genetic Technologies brought a cold wind to DNA-based diagnostics, the Court vacated the decision of the District Court for the Northern District of Illinois granting summary judgment of invalidity of U.S. Patent 7,604,929, a method of preserving hepatocytes using multiple freeze-thaw cycles, where the prior art only contemplated a single freeze-thaw. The '929 inventors developed an improved process of preserving hepatocytes, generally comprising the steps of: (A) subjecting previously frozen and thawed cells to density gradient fractionation to separate viable cells from non-viable ones; (B) recovering the viable cells; and (C) refreezing the viable cells. The claims specify that the resulting hepatocyte preparation can be thawed and used immediately, exhibiting acceptable viability after the second thaw.

The lower court granted summary judgment, finding the claims invalid as directed to a natural law, that being the cells' ability to endure multiple freeze-thaw cycles. In vacating that decision, the Federal Circuit disagreed, noting the claims are not directed to the ability of hepatocytes to survive multiple freeze-thaw cycles, but rather, the claims of the '929 patent are “directed to a new and useful laboratory technique for preserving hepatocytes. This 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 a patent.” ²² Thus, the claims were patent eligible: “This new and improved technique, for producing a tangible and useful result, falls squarely outside those categories of inventions that are ‘directed to’ patent-ineligible concepts.” ²³

The court did not stop there, but went further, finding the claims would still be patent eligible under step two of the Mayo/Alice framework, because they covered an invention that offered a significant improvement over the prior art, which taught away from repeated freeze-thaws (which was known to damage the hepatocytes). Considering the invention as a whole, the process was not routine or conventional and deserved patent protection.

The court explained that “patent eligibility does not turn on ease of execution or obviousness of application” of the claimed invention, but that unpredictability and teaching away were key to its findings. ²⁴ Life sciences practitioners will take away that message and apply it to both patent eligibility and to obviousness determinations, as well as the idea of examining the claims as a whole, and combining conventional steps in unconventional ways. ²⁵ This decision is a shot-in-the-arm for patent applicants developing non-diagnostic biotechnology.

McRO Inc. V. Bandai Namco Games America Inc.

Highlighting the fact-specific nature of § 101 determinations and the importance of claim construction, the Federal Circuit reversed the Central District of California decision in McRO last month. The patents-in-suit (U.S. Patent Nos. 6,307,576 and 6,611,278) describe motion capture technology that provides a process for automatically animating lip synchronization and facial expressions of animated characters, such as in video game development, a process previously performed by artists by hand. In its decision, the Federal Circuit held “that the ordered combination of claimed steps, using unconventional rules that relate sub-sequences of phonemes, timings, and morph weight sets, is not directed to an abstract idea and is therefore patent-eligible subject matter under § 101. Accordingly, we reverse.” ²⁶ It is notable that the court followed the Enfish precedent, finding the claims do not even meet step one of Mayo/Alice. Also interesting in this case is the fact that the claimed improvement lies in software used on a general-purpose computer that did not improve the capabilities of the computer. Instead, the invention is used with computers to achieve an end previously only achievable by a human process—in contrast to Bilski and Alice, where computers were used both in the prior process and in the claimed automated process.

The lower court found that claim 1 of the '567 patent is “drawn to the [abstract] idea of automated rules-based use of morph targets and delta sets for lip-synchronized three-dimensional animation,” which the Federal Circuit disagreed with, noting, “We have previously cautioned ‘that courts must be careful to avoid oversimplifying the claims’ by looking at them generally and failing to account for the specific requirements of the claims. Here, the claims are limited to rules with specific characteristics … The specific, claimed features of these rules allow for the improvement realized by the invention.” ²⁷

The district court found the claims ineligible because the invention's rules would cover all rules for automating animation and would thus preempt the field of using rules for animating lip synchronization and facial expression. The Federal Circuit admitted that the rules were broadly claimed, but found they were limited to rules with common characteristics, calling it a genus, and noting, “genus claims create a greater risk of preemption … [but] this does not mean they are unpatentable.” The limitations of the claimed genus “prevent preemption of all processes for achieving automated lip-synchronization of 3-D characters,” said the court, continuing its analysis by focusing on “whether the claimed genus of rules preempts all techniques for automating 3-D animation that rely on rules.” The answer was no, because there “has been no showing that any rules-based lip-synchronization process must use rules with the specifically claimed characteristics” and that “alternative rules-based methods of animating lip synchronization and facial expressions” could be developed. ²⁸

While McRO should have immediate effects in the software world, raising hopes for inventions implemented by general computers to be patent eligible, it is possible that the preemption analysis will have repercussions for the life sciences. Imagine that genetic testing or personalized medicine technology could be developed that does not preempt all uses for the underlying gene sequences or biological markers, a potential boon for diagnostics and other life sciences technology.

Conclusion

David Kappos, the former Director of the USPTO who has advocated for the abolishment of § 101, has said:

The problem with Alice is overly broad application that arbitrarily untethers patent protection from the merits of a given invention. Building the next dating app is a fundamentally different endeavor from creating a safer air-traffic control system or a disease detection and prevention algorithm. ²⁹

Alice did come out of the software genre, and did not appear intended to address biotechnology patents at the time; yet, in combination with Mayo, Alice has become the litmus test for patent eligibility. These four cases, issued at a rapid monthly pace, offer hope that some equilibrium is coming to the § 101 determination.

On the other side of the coin, this past June, the Supreme Court denied certiorari to Sequenom Inc., ³⁰ letting stand the controversial Federal Circuit decision that the revolutionary prenatal genetic test claimed was patent ineligible. The single question presented by Sequenom was:

Whether a novel method is patent-eligible where:

(1) a researcher is the first to discover a natural phenomenon;

With its refusal to reconsider the broad Mayo test confirmed by Alice, the Supreme Court is clearly not ready to re-examine the Four Horsemen. As the current administration and Congress are ending their tenures, it will certainly be some time before any of these bodies take up the problems of patent ineligibility, leaving the Federal Circuit to continue to advance the law in this area. The fact that the court's decision in Rapid Litig. Mgmt. v. CellzDirect was issued after the denial of certiorari to Sequenom suggests that the Federal Circuit has tired of waiting for the Supreme Court to narrow the overbroad language in the Four Horsemen and rein in the Mayo/Alice test.