Why the USPTO's Interim §101 Guidelines Need to be Updated . . . Quickly

Since the release of the USPTO's Interim Guidelines for Patent Subject Matter Eligibility, §101 rejections have become almost de rigueur in the USPTO for many software and business-method applications. Instead of settling issues of patentable subject matter at the PTO, the level of uncertainty in the examining corps has gotten progressively worse. One of the perceived problems is that the Guidelines give little deference to post-Alappat cases, and only sparingly cover caselaw after State Street. Some of the quotations of caselaw in the Guidelines are taken out of context, and some citations are simply wrong. Since examiners are increasingly relying on these Guidelines, it appears that another round of sua sponte "USPTO caselaw" is being generated at the Office. Oddly enough, this was precisely the reason why Ex Parte Lundgren became such a big issue: examiners were erroneously interpreting caselaw and concluding that claims had to be within the "technological arts" in order to be patentable. The BPAI expressly ruled that this was incorrect.

The Financial Services Industry Intellectual Property Association (FSIIPA) has provided comments to the USPTO which detail many of these concerns, and provide useful examples of the errors contained in the guidelines:

For example, the Guidelines quote the core holding of State Street – that the § 101 categories are no longer central, rather § 101 focuses on "the essential characteristics of the subject matter, in particular, its practical utility" – in an off-hand way at page 15. However, the Guidelines are nearly silent on applying this holding, consigning it to an Annex at page 39. The Guidelines then depart from State Street, mentioning "categories" 150-200% as often as they mention State Street, AT&T, or "utility," and grafting a number of additional requirements onto § 101, above "practical utility."

As a second example, though Annex III of the Interim Guidelines states that the Freeman-Walter-Abele test is improper for determining eligibility under § 101, and Freeman-Walter-Abele is never mentioned by name, Freeman-Walter-Abele reasoning and case law pervades the Interim Guidelines. For example, in § IV(C)(2)(b) at page 20, the Interim Guidelines states as follows:

In determining whether the claim is for a "practical application," the focus is not on whether the steps taken to achieve a particular result are useful, tangible and concrete, but rather that the final result achieved by the claimed invention is "useful, tangible and concrete." The claim must be examined to see if it includes anything more that a § 101 judicial exception.

Though using different words, this is remarkably similar to – and somewhat narrower than – the Freeman-Walter-Abele test, in its focus on "anything more." Further, the Guidelines rely almost exclusively on Freeman-Walter-Abele era, pre-Alappat standards for an application of law to facts to determine what that "anything more" might be. Finally, the Guidelines cite no authority for the idea that "useful, tangible and concrete" steps cannot contribute patentability – and this statement is clearly wrong. If the Guidelines maintained focus where Alappat, AT&T, and State Street direct it, on "useful, concrete and tangible" and "practical utility" (as properly construed – see § II.C at page 10 of this letter) this discussion would simply never arise.

Because of this anachronism, and failure to recognize the shift in the standard for application of the law to the facts, the Interim Guidelines lead to wrong conclusions. If an examiner were to apply the Interim Guidelines to the facts of Alappat, State Street and AT&T, the examiner would very likely find all three claims to be unpatentable.

The comments also provide some well-reasoned suggestions to the PTO in response to their Request for Comments (including the suggestion that the Guidelines actually be binding on examiners), and further provide rebuttals to questions posed by the PTO that many practitioners would agree are based on faulty legal and scientific reasoning. One noteworthy question asked by the Office asks whether patentable subject matter must "necessarily" produce a useful concrete and tangible result, and not merely be "capable of" of producing such a result. The FSIIPA answers as follows:

The distinction between "capable of" producing a "useful, concrete and tangible result" and "necessarily" producing it is not cognizable under the law. A brief review will demonstrate that 95% or more of apparatus claims are drafted in "device for…" or "device capable of ..." or "device designed to..." form, and almost never in "device that is this very second accomplishing…" The Guidelines cite no current case law that supports a "necessarily" vs. "capable of" distinction, and the PTO lacks the authority to create new substantive law. Merck & Co. v. Kessler, 80 F.3d 1543, 1550, 38 USPQ2d 1347, 1351 (Fed. Cir. 1996) (the PTO does "NOT … have authority to issue substantive rules," emphasis the court’s).

"Capable of" or "device for" claims are absolutely crucial to effective patent protection, to catch infringements such as the following:

• situations involving imports and exports

• parts designed for a particular purpose, but not assembled

• divided infringement, where no single party practices an entire claim – for example, in telecommunications, or in business transactions that require a buyer, a seller, and a financing source.

• infringement without knowledge of the patent, and other "technical" limits on induced and contributory infringement – well-drafted patents sidestep these limits by claims drafted in "device for…" or "device capable of…" form as opposed to "device performing" or "device that necessarily performs" claims

• replaceable or repairable parts

• known products made by new processes

The proposed test is also simply impractical. Some algorithms reach a useful result on some inputs, but other inputs confound the algorithm - a useful result is not "necessarily" achieved, but the algorithm is nonetheless useful. Likewise, insurance is issued solely because it is "capable" of reaching a result – even though everyone involved hopes it never happens.

A claim directed to "capable of" a useful result is one instance where disclosure in the specification is sufficient to impart "useful, concrete and tangible" character
to a claim.

Read more from the FSIIPA here.

Read other comments posted on the USPTO site here