United States: A Novel Outcome at the International Trade Commission: Patent Claims Invalidated Under Alice in the 100-Day Pilot Program

On August 22, 2016, Administrative Law Judge David Shaw of the International Trade Commission ("ITC" or "Commission") issued his final initial determination ("the ID") in Certain Portable Electronic Devices and Components Thereof, Inv. No. 337-TA-994. The ID invalidated all of the asserted claims for lack of patentable subject matter under 35 U.S.C. § 101 and terminated the investigation. This decision resulted from an early evidentiary hearing, conducted by order of the Commission within 100 days of its Notice of Institution. 81 Fed. Reg. 29307 (May 11, 2016). The Notice of Institution ordered ALJ Shaw to conduct an early "pilot program" evidentiary hearing to determine whether US Patent No. 6,928,433 ("the '433 patent") claimed patent eligible subject matter in light of Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 134 S. Ct. 2347, 2351 (2014) ("Alice"). As a result, the ID came a mere 104 days after institution of the investigation, and 152 days from the filing of the complaint.

If the Commission declines to review the ID, this would mark only the second time an ITC investigation has been terminated after an early evidentiary hearing under the pilot program (the only other pilot program hearing resulted in a finding that the complainant had standing and the investigation continued). This would also mark only the fourth time that a patent has been invalidated due to Alice at the ITC.

This ID underscores two important points. First, the 100-day pilot program is a very rare but powerful tool at the ITC and, second, the Commission may be willing to order early disposition for potentially dispositive issues such as Alice-based validity challenges if the claims of asserted patents are not selected with sufficient care. This case is instructive for ITC practitioners on both points.

100-Day Pilot Program

In June 2013, the Commission initiated the 100-day pilot program, designed to test whether the early disposition of dispositive issues in ITC investigations would "limit unnecessary litigation, saving time and costs for all parties involved." See  Pilot Program Will Test Early Disposition of Certain Section 337 Investigations. In these cases, the Commission would require the presiding ALJ to: (1) order discovery taken early on a potentially dispositive issue, such as the existence of a domestic industry (which is a mandatory showing by any complainant seeking relief in the ITC under section 337); (2) if necessary, conduct an early hearing on the potentially dispositive issue; and (3) issue an initial determination within 100 days of institution. Id. Some believed that the utilization of the pilot program would or should be limited to threshold jurisdictional issues, such as domestic industry, importation, and/or standing.

Since its initiation in 2013, the Commission has ordered the pilot program on only three occasions. Before the 994 Investigation, previous occurrences of the pilot program had been limited to determining whether a complainant had the requisite domestic industry or standing to assert the patents in question. See, e.g., Certain Products Having Laminated Packaging, Laminated Packaging, and Components Thereof, Inv. No. 337-TA-874, Initial Determination on the Economic Prong of the Domestic Industry Requirement (U.S.I.T.C. July 5, 2013) (ALJ Essex); Certain Audio Processing Hardware and Software and Products Containing Same, Inv. No. 337-TA-949, Notice of Commission Determination Not to Review an Initial Determination (U.S.I.T.C. July 13, 2015) (affirming finding of ALJ that complainant had standing to bring the investigation). The 994 Investigation marks the first time the Commission has utilized the 100-day pilot program to determine the validity of the patents being asserted, here under the rubric of Alice.

Through the 994 investigation, the Commission has indicated that it is now willing to adjudicate additional issues in the 100-day pilot program beyond just predicate jurisdictional questions. Though infrequently utilized in its three-year existence, the Commission has demonstrated a commitment to early adjudication of dispositive issues (albeit in rare circumstances), and has proposed rules for a permanent, rather than pilot, early disposition program at the ITC. See  19 CFR Parts 201 and 210. Proposed in September of 2015, the Commission has yet to take action on the new rules, but could act any time because the comment period is over.

Now that the 100-day program appears here to stay and that the Commission has demonstrated the willingness to use it for additional dispositive issues (and at least one ALJ has found a patent invalid in the program), proposed respondents may consider advancing other potentially dispositive issues for the 100-day program. However, it should be noted that use of the program is extremely rare, even on request by proposed respondents—the Commission has rejected a number of pre-institution requests that the pilot program be imposed. See, e.g., Certain Computing or Graphics Products, and Components Thereof, Inv. No. 337-TA-925, Doc. ID 539464, Letter to Commissioner Regarding Complaint Being Appropriate for Early Determination in Pilot Program (Aug. 4, 2014).

However, respondents may have little to lose by requesting the 100-day program—at worst the request is rejected and the investigation is instituted per usual. And if the request is granted, even if the complainant overcomes the issue at an early hearing, the target date of the investigation will very likely be longer than normal. In the 949 investigation (the only investigation yet to survive the pilot program), the ALJ ordered a 19-month target date – far longer than the usual 15 or 16-month target date. Of course, because all relief in the ITC is prospective in nature, time is on the respondents' side.

For their part, complainants should know that bringing a complaint with any noticeable defect risks being placed in a 100-day early disposition schedule, even though this risk is demonstrably tiny and comparatively unlikely. Even if the issue is ultimately traversed by the complainant, a delay of more than three months can have adverse consequences when time is of the essence, such as where an infringed patent is nearing expiration, or where the unfair importation of infringing articles is causing material competitive harm to the protected domestic industry.


In the ID, ALJ Shaw ruled that the asserted claims of the '433 patent were ineligible under §101, in light of Alice. The '433 patent, entitled "Automatic Hierarchical Categorization of Music by Metadata," discloses "an efficient user interface for a small portable music player." Certain Portable Electronic Devices and Components Thereof, Inv. No. 337-TA-994, Final Det. at 6, 24 n.5 (Aug. 19, 2016).

The ALJ determined under the first of two steps in the Alice analysis that the asserted claims were directed to an abstract idea. ALJ Shaw noted that, under this first step, the Federal Circuit has contrasted claims "directed to an improvement in the functioning of a computer with claims 'simply adding conventional computer components to well-known business practices'...or 'generalized steps to be performed on a computer using conventional computer activity.'" Id. at 28 (quoting TLI Commc'ns LLC v. AV Auto., LLC, 823 F.3d 607, 611 (Fed. Cir. 2016) (citing Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1335 (Fed. Cir. 2016))). Referencing the specification, the ALJ concluded that the portable media player, storage medium, and display elements are all "generic components for which there are no particularized limitations" and merely provide a "generic environment in which to carry out the abstract idea of organizing media tracks." Id. at 34. The ALJ found, in view of Enfish, that there was "no specific asserted improvement...[i]n fact, there is nothing 'specific' at all about the limitations of claim 1...[i]nstead, the asserted claims are directed to application of the abstract and well-known idea of a hierarchically navigated user interface itself to the portable media player computing environment." Id. at 34, 39. And comparing the '433 Patent to another patent recently held ineligible at the ITC, "the '433 patent...recites an electronic device...on which a method is performed, but describes the device itself only in functional terms." Id. at 37 (citing Certain Activity Tracking Devices, Inv. No. 337-TA-963, Order No. 40 at 22-23 (March. 3, 2016)).

At the second step of the Alice analysis, having determined that the asserted claims were directed to an abstract idea, the ALJ held that there was no inventive concept to transform the abstract idea into something patent eligible. To reach this conclusion, the ALJ focused on the lack of evidence that "accessing a track" through a hierarchy or "playing a plurality of tracks associated with the selected subcategory" are inventive concepts. Id. at 45. Again referencing the specification, the ALJ noted that the patent itself acknowledges that playing tracks or a group of tracks (e.g., an album) is routine, reinforced by the fact that there are no flowcharts or computer codes provided in the patent for those activities. Id. at 45-46. Distinguishing the '433 patent from the patents previously held eligible by the Federal Circuit, the ALJ held that there were no non-conventional or non-generic arrangements of elements, and that "applying a well-known abstract idea in a particular technological setting, as the '433 patent claims do, cannot render a claim patent-eligible." Id. at 47-48 (distinguishing BASCOM Global Internet Servs., Inc. v. AT&T Mobility LLC, et al., No. 2015-1763, 2016 U.S. App. LEXIS 11687 (Fed. Cir. June 27, 2016) and DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014)). This decision marks only the fourth time that the ITC has invalidated patents based on § 101.

ALJ Shaw's ID in the 994 investigation is consistent with developing Alice jurisprudence. Specifically, patent claims that merely recite well-known methods tied to generic computer components will likely be found to be not patent eligible. In addition, the ID follows a growing trend in the wake of Enfish which finds courts placing increased emphasis on step one of the Alice test. This case underscores that practitioners should pay close attention to both steps of the Alice analysis, and also teaches that it is critical to carefully select asserted claims with an eye toward Alice-based vulnerability. Some observers anticipated such vulnerability of the claims asserted in the 994 investigation when the complaint was filed, and believe this explains why the case was placed in the 100-day program.


Following this result in the 994 investigation, the manner in which the Commission handles future requests for early disposition under Alice will be closely watched. The Alice invalidity defense is not available at inter partes review, and in any event, the Commission has expressed an unwillingness to stay investigations due to IPRs. In light of those restrictions, future proposed respondents may request early disposition in view of Alice with increasing frequency, now that the Commission has shown a willingness to resolve Alice questions in early stages of an investigation. However, it is likely that the 100-day program will continue to rarely be utilized by the Commission, even on request by the proposed respondents. In addition, prevention may be the best cure, as avoiding Alice questions altogether can be accomplished by carefully selecting claims prior to assertion.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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James Wodarski
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