United States: Highlights Of The U.S. Patent Office's Update To Its 2019 Subject Matter Eligibility Guidance

Last Updated: November 6 2019
Article by Ryan N. Phelan

PTABWatch Takeaway: In mid-October 2019, the Patent Office updated its subject matter eligibility guidance published in January 2019. The update does not change the guidance, but simply offers clarifications invited by public responses to the January guidance.

On October 17, 2019, the U.S. Patent and Trademark Office (USPTO) issued a 22-page an Update ("October PEG Update") to its 2019 Revised Patent Subject Matter Eligibility Guidance ("2019 PEG"). The 2019 PEG, originally released on January 7, 2019, marked a shift in the U.S. Patent Office's review process, generally leading to increased allowance of patent applications facing scrutiny under 35 U.S.C § 101 (subject matter eligibility) in view of the U.S. Supreme Court's decision in Alice Corp. Pty. Ltd. v. CLS Bank Int 'l, 573 U.S. 208, 215-17 (2014) ("Alice"). The October PEG Update does not change the 2019 PEG. Instead, it provides additional clarification as to its application and scope.

The USPTO provided the October PEG Update in response to public comments to its 2019 PEG. The 2019 PEG changed the procedure by which examiners are to assess patent eligibility. Specifically, the 2019 PEG split step 2A of the USPTO's subject matter eligibility analysis into two prongs (Prong One and Prong Two). The Step 2A analysis determines whether a given invention is "directed to" a patent ineligible abstract idea. An overview of the 2019 PEG, including a description of how the USPTO now analyzes claims for subject matter eligibility under the Patent Office's newly revised step 2A, may be found in our previous postings here and here.

The October PEG Update clarifies the following five aspects of the 2019 PEG analysis:

  1. Evaluating whether a claim "Recites" a Judicial Exception;
  2. The Groupings of Abstract Ideas Enumerated in the 2019 PEG;
  3. Evaluating whether a Judicial Exception is Integrated into a Practical Application;
  4. The Prima Facie case and the Role of Evidence with Respect to Eligibility Rejections; and
  5. The application of the 2019 PEG in the Patent Examining corps.

The below sections provide highlights of each aspect.

(I) Evaluating whether a claim "Recites" a Judicial Exception

Under Step 2A Prong One of the 2019 PEG, an examiner is required to determine whether a claim "recites" a judicial exception (i.e., an abstract idea, a law of nature, or a natural phenomenon). The October PEG Update clarifies that a claim "recites" a judicial exception when the judicial exception is "set forth" or "described" within the claim. The October PEG Update provided two examples as to the meaning of these terms:

  • "set forth": Generally, a judicial exception is "set forth" in a claim if the judicial exception is expressly found in the claim. For example, the claims in Diamond v. Diehr, 450 U.S. 175 (1981), clearly stated a mathematical equation in a repetitively calculating step of the claims, such that the claims "set forth" an identifiable judicial exception.
  • "described": Generally, a judicial exception is "described" in a claim where the judicial exception is not necessarily found in the claim, but is nonetheless implied. For example, the patent claims in Alice "described" the concept of intermediated settlement without ever explicitly using the words "intermediated" or "settlement."

Thus, according to the October PEG Update, a judicial exception that is "described" in a claim would have broader implication than one that is "set forth."

(II) The Groupings of Abstract Ideas Enumerated in the 2019 PEG (Step 2A, Prong One)

The October PEG Update clarifies that the USPTO has shifted away from a previous case-comparison approach that required examiners to analyze subject matter eligibility of claims in view of Supreme Court and Federal Circuit decisions to determine whether a claim directs to an "abstract idea."

Instead, the October PEG Update emphasizes that examiners should, under Step 2A, Prong One, determine whether the claim falls into one (or more) of three enumerated groupings of abstract ideas (as provided below).

# Subject Matter Groupings (Abstract Ideas) Description/Example(s)
(a) Mathematical Concepts
  • mathematical relationships, mathematical formulas or equations, mathematical calculations
(b) Certain Methods of Organizing Human Activity
  • fundamental economic principles or practices (including hedging, insurance, mitigating risk)
  • commercial or legal interactions (including agreements in the form of contracts
  • legal obligations
  • advertising, marketing or sales activities or behaviors; business relations)
  • managing personal behavior or relationships or interactions between people (including social activities, teaching, and following rules or instructions)
(c) Mental Processes
  • concepts performed in the human mind (including an observation, evaluation, judgment, opinion), e.g., even with the aid of pen and paper
  • concepts merely using a computer as a tool

If an examiner determines that a claim recites an abstract idea, but falls outside the enumerated grouping, the examiner is required to bring the application to the attention of their Technology Center (TC) Director.

(III) Evaluating whether a Judicial Exception is Integrated into a Practical Application

If a claim "recites" a judicial exception (e.g., an abstract idea), then under Step 2A, Prong Two an examiner must next determine whether the claim is nonetheless eligible because the claim integrates the judicial exception into a "Practical Application." If it does, then the claim is not abstract.

The October PEG Update clarifies that a claim "integrates a judicial exception into a Practical Application" (and, is thus not abstract) when the claim exhibits one or more of the following:

  • Improvements to the functioning of a Computer or to Any Other Technology or Technical Field: Additional claim elements reflect an improvement in the functioning of a computer, or an improvement to another technology or technical field. See also MPEP 2106.04(a) and 2106.05(a).
  • Particular Machine: Implementing the judicial exception with a particular machine or manufacture. See also MPEP 2106.05(b).
  • Particular Transformation: Effecting a particular transformation or reduction of an article. See also MPEP 2106.05(c).
  • Other Meaningful Limitations: For a claim that is directed to a judicial exception to be patent-eligible, it must include additional features to ensure that the claim describes a process or product that applies the exception in a meaningful way, such that it is more than a drafting effort designed to monopolize the exception. See also MPEP 2106.05(e).
  • Particular Treatment: Applying or using a judicial exception to effect a Particular Treatment or Prophylaxis for a Disease or Medical Condition. See USPTO's June 2018 Vanda Memorandum.

Importantly, the October PEG Update emphasizes that the examiner must consider the claim "as a whole," when making the determination as to integration of a "practical application."

From a policy perspective, the October PEG Update clarifies that the above tests ensure that a given claim, when properly considered as a whole, "integrates [the] judicial exception into a practical application [that] will apply, rely on, or use the judicial exception in a manner that imposes a meaningful limit on the judicial exception, such that the claim is more than a drafting effort designed to monopolize the judicial exception."

With respect to the above tests, demonstrating a "practical application" via an "improvement" is often times a best practice for overcoming a 35 U.S.C § 101. The October PEG Update clarifies several important points that may be useful to a patentee during prosecution. First, the specification need not explicitly set forth the improvement, but it must describe the invention such that the improvement would be apparent to one of ordinary skill in the art.

Second, while the claim itself must reflect the improvement (e.g., the components or steps of the invention that provide the improvement described in the specification), the claim itself does not need to explicitly recite the improvement described in the specification (e.g., "thereby increasing the bandwidth of the channel").

Third, the improvement analysis under the 2019 PEG differs somewhat from prior guidance. Previously, a patentee needed to demonstrate an improvement over conventional technology. The October PEG Update clarifies, however, that a patentee may show subject matter eligibility demonstrating that an invention improves the relevant existing technology although it may not be an improvement over well-understood, routine, conventional activity.

Finally, the improvement must be to the technology itself, i.e., to the functioning of a computer or an improvement to other technology or technical field. Arguments directed to an "improvement" in a user experience or a business process is not enough. For example, the October PEG Update provided Trading Technologies Int'l v. IBG LLC as an example, where the Federal Circuit determined that the claim-at-issue simply provided a trader with more information to facilitate market trades, which improved the business process of market trading but did not improve computers or technology, and, therefore lacked subject matter eligibility.

(IV) The Prima Facie case and the Role of Evidence with Respect to Eligibility Rejections

To reject a claim for lacking subject matter eligibility, the 2019 PEG requires an examiner to establish a prima facie case, considering the claim as a whole (for Step 2A, Prong Two and Step 2B), and providing analysis and evidence under each step (i.e., Step 1, Step 2A, Prongs One and Two, and Step 2B) of the 2019 PEG.

First, under Step 2A, Prong One, an examiner must identify "what is recited" (i.e., "set forth" or "described") in the claim and "explain[] why" it is considered to be an exception. There is no requirement, however, for the examiner to provide further support, such as publications or an affidavit or declaration under 37 CFR 1.104(d)(2), for the conclusion that a claim recites a judicial exception.

Next, under Step 2A, Prong Two, the examiner should "identify" any additional elements recited in the claim beyond the judicial exception and "evaluate" the integration of the judicial exception into a practical application "by explaining" that 1) there are no additional elements in the claim; or 2) the claim as a whole, looking at the additional elements individually and in combination, does not integrate the judicial exception into a practical application using the considerations set forth in the 2019 PEG.

Finally, under Step 2B, the examiner should "explain why" the additional elements, taken individually and in combination, do not result in the claim, as a whole, amounting to significantly more than the exception. For instance, when the examiner has concluded that certain claim elements recite well-understood, routine, conventional activity in the relevant field, the examiner must expressly support such a rejection in writing with one of the four options specified in Section III.A. of the Berkheimer Memorandum.

Only after an examiner has established a prima facie case, with the proper analysis and evidence as provided above, does the burden shift to the applicant to demonstrate subject matter eligibility of the claim. See also MPEP § 2106.07.

In addition, if an applicant amends a claim, examiners should determine the amended claim's broadest reasonable interpretation and again perform the subject matter eligibility analysis to determine whether a prima facie case exists as to the amended claim.

(V) The application of the 2019 PEG in the Patent Examining corps

The October PEG Update emphasizes that, while the 2019 PEG does not constitute substantive rulemaking and does not have the force and effect of law, the 2019 PEG does constitute Office guidance and, accordingly, USPTO personnel are expected to follow it. This applies to examiners and, presumably, to administrative patent judges (APJs).

Nonetheless, the October PEG Update provides a cautionary statement as to the application of the PEG 2019 during appeals. In particular, during an appeal to the Patent Trial and Appeal Board (PTAB), an applicant may rely upon the 2019 PEG in support of his or her argument that a rejection under § 101 is in error. However, the October PEG Update emphasizes that it is the rejection under § 101, and not any alleged failure to comply with the procedure aspects of the 2019 PEG, that is reviewed by the PTAB.

Thus, the October PEG Update recognizes the limitations of the 2019 PEG as guidance (and not substantive law).

Because of this, the October PEG Update encourages Applicants, before appealing to the PTAB, to employ other courses of action available, such as engaging an examiner to obtain prompt resolution of any outstanding subject matter eligibility rejection or issues of compliance with the 2019 PEG. These may include requesting an interview, contacting the Supervisory Patent Examiner, or filing pre-appeal brief review request to address subject matter eligibility concerns.

New Examples 43 to 46 The October PEG Update also provided four new examples (Examples 43 to 46) demonstrating application of the 2019 PEG to hypothetical inventions. The hypothetical inventions provide examples of patent eligible, and patent in-eligible, claims reciting various technologies including a method for treating kidney disease, a dosage unit comprising denveric acid, a controller for use in injection molding, and a computerized system for livestock management.

New Case Spreadsheet The October PEG Update also provided an updated case law chart that lists selected eligibility cases from the U.S. Supreme Court and the U.S. Court of Appeals for the Federal Circuit. The case law chart seems akin to the "quick reference" sheet that the Office used prior to the PEG 2019 Guidance.

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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