Finding Eligible Subject Matter For Business Methods

September 19, 2017

Matthew H. Grady, Edward J. Russavage
(as published by Law360)

Contrary to popular belief, even after Alice Corp. v. CLS Bank International, business methods are still patentable. In fact, the label of “business method” is somewhat of a misnomer. Art units at the U.S. Patent and Trademark Office that examine such patent applications cover, for example, electronic commerce and many other technically grounded fields. In spite of the inherent technical features of these fields, practitioners have become frustrated with the USPTO’s refusal to recognize technical implementation in patent applications assigned to business method art units.

How difficult is it to obtain a patent in such business method units? The answer is it varies greatly from examiner to examiner and from art unit to art unit. Notably, patent applications assigned to the business method art units (those falling within the 3600 grouping) face the largest number of Alice rejections and some of the highest hurdles to reach grant. In this article, we discuss concrete and practical prosecution strategies that we have successfully employed before the USPTO, as well as strategies for preparing new cases to withstand heightened Alice scrutiny, even within these challenging business method units.

Background

In 2012, the U.S. Supreme Court started a line of cases that dramatically shifted the definition of patentable subject matter — effectively narrowing the types of ideas that the patent system can protect. For software and business methods, the line of cases culminated in the Alice decision that excludes any invention directed to an “abstract idea.” The decision helped to invalidate many issued patents, and increased rejections of pending applications at the USPTO.

The court’s two-step abstract idea test determines (1) if patent claims are “directed to” an abstract idea and, if so, (2) whether the claims recite “significantly more” than the abstract idea itself. Unfortunately, the court provided only the test, leaving what constitutes an “abstract idea” and when claims recite “significantly more” for another day.

The decision left the lower courts to define the boundaries of the test and the USPTO to determine implementation. Both have struggled, and since the Alice decision, only a handful of Federal Circuit cases have determined that a patent claims patent-eligible subject matter. Often, contradicting legal opinions and varying standards implemented by the USPTO have left uncertain what is available to patent. In the business method art units, the review has been even more stark, with the USPTO seemingly placing the burden on the applicant to prove beyond a doubt entitlement to eligible subject matter. Commentators identify plummeting allowance rates and protracted prosecution, which ultimately cause many applicants to abandon their ideas or bear increased costs of prosecuting their patent applications.

Although the challenges remain, recent cases provide greater insight into the scope of eligible subject matter, with additional examples that practitioners can use as guides. Further, the Patent Trial and Appeal Board continues to flesh out the responsibilities of the USPTO when applying the test for eligible subject matter.

Direction for New Applications

At least one case in late 2014 provided direction for obtaining meaningful patent protection. Although DDR Holdings LLC v. Hotels.com was not the widespread panacea that patentees and applicants were looking for, it did indicate that technical ideas are not necessarily abstract, and therefore can be patented. More recent cases in 2016 and 2017, including Enfish LLC v. Microsoft Corporation; TLI Communications LLC v. A.V. Automotive LLC; and Bascom Global Internet Services Inc. v. AT&T Mobility LLC, as well as follow-up guidance from the USPTO, helped further define the tests used for determining what can and cannot be patented.

The USPTO has adopted a conservative approach, placing the burden on the patent applicant to prove that a patent application does not claim an abstract idea. The burden seems even more significant when the application is placed in the 3600 art units. As a result, patenting software, especially software labeled as a business method, has become a more difficult and expensive process. However, the process is not impossible, even within the most difficult art units, if certain strategies are used.

Current authority instructs that technically based inventions — for example, inventions that target improvements in the functioning of a computer itself — are still eligible subject matter even when classified within the business method groups. Success in obtaining and defending patent claims becomes directly related to which ideas, and more specifically which technical features, the claims recite and how those features are characterized during prosecution. Further, the procedural approach during prosecution can play a large part in whether or not a patent results.

To obtain a patent under the current guidelines, care must be taken in defining and claiming the invention. Technical features that solve technical problems, such as those described within the Enfish case, should be carefully defined and described. Most software and business methods can be described as a collection of technical features, with some being more important (and more grounded in computer functionality) than others. A successful strategy includes capturing a collection of technical aspects, each of which may provide incremental value. The days of claiming an invention broadly without much technical detail are over.

For instance, applications should identify technical features that can be analogized to DDR, Enfish or Bascom where the invention is necessarily rooted in computer technology, provides new functions, or improves execution. Claims should also be focused on technical implementation to increase the chances of ending the abstract idea inquiry at step one, as discussed in the Enfish decision. If the technical implementation claimed is not “directed to” an abstract idea, the claim is eligible.

Even if the elements of the claim are known, a novel arrangement enabling new functionality can provide subject matter eligibility, as discussed in the Bascom case. Any application should call out how the various embodiments enable new functionality, improve execution or use fewer computational resources, among other improvements. Each of those improvements should be described, as different approaches speak to different examiners, and only prosecution will tell which ones will be identified as allowable.

System-level components, architecture, protocols, user interfaces and other technically based features are still fair game for patenting, if described and claimed using technical features. Although there appear to be many ways to write better patents that hold up to the new standards, another significant challenge is how to successfully prosecute existing applications written under a different standard.

Saving Existing Cases

Many challenges exist when prosecuting existing cases with the USPTO, as they may be stalled, rejected or otherwise abandoned after an unsuccessful outcome. For some companies, this has resulted in lost investment, increased patent costs and frustration for those relying on obtaining such protection. Depending on the nature of the invention, closeness to the prior art and other factors, a custom prosecution approach may improve the chances of success.

For an existing case, one approach is focusing the claims to cover a technical feature described somewhere within the patent specification. Any evidence in the application that the invention improves technical functionality can greatly aid in prosecution. The technical feature need not be the best feature of the application, but it should be one that would allow you to push the case to allowance. Because one valid strategy is to delay prosecution until more favorable (and well-defined) guidelines exist for these types of cases, it makes sense to obtain what narrow protection is available currently, and pursue additional and perhaps broader coverage later in a continuation application.

Another approach that should be used in conjunction with technical elements involves actively interviewing cases at every opportunity. If possible, interviews should include the case supervisor to accelerate agreement on the issues. Although great care is needed in engaging supervisors, interviews have always been a key tool to advance prosecution, and have become even more important with the evolving nature of subject matter eligibility. This is especially true for applications within the business method unit. In such cases, it is vital to understand the examiner’s position so that an expedited result can be reached, thereby reducing prosecution costs. It is equally important to understand which cases the examiner, the supervisor and the art unit have allowed over subject matter rejections. If analytic tools on the examiner and art unit are unavailable, ask which cases have been allowed and why during the interview.

Yet another approach is to appeal cases. This approach can also be combined with the USPTO’s After Final Consideration Pilot program to expedite review. Although if delay is warranted, appeals can take years before a board decision is made. Many borderline cases where there is a question of law or close facts may benefit from the delay strategy. In some cases, appeal is warranted because the facts are too close, the examiner cannot agree on eligible subject matter or a supervisor has maintained the subject matter rejection (sometimes contrary to the working examiner). In these cases, the faster you can identify the need for appeal, the more you can reduce the legal costs incurred.

Further, recent PTAB decisions provide a road map for challenging weak subject matter rejections. For example, Ex Parte Stefik (2015-001222) reversed the examiner for failing to consider that methods of organizing human activity cannot also be generic computer functions. In another case, Ex Parte Pavlou (2015-004033), conclusory rejections that do not address the language of the claims were found insufficient to sustain a rejection. In Ex Parte Farnham (2015-001390), the rejection failed “to account for the particular details set forth in the claims.” Additional decisions by the PTAB charge examiners with establishing supported subject matter rejections, and further rejections that address not only the specific language of the claims, but the claims as a whole (Ex Parte Hafner (2015-002200)).

Successful approaches to determine the appropriate procedural path through the USPTO may also be found in statistical data. Commercial tools are available for reviewing particular examiners and art groups, identifying successful arguments that can be tailored to your application and vice versa. Because of the widely different allowance rates between art units and examiners (even within the same group), multiple filings on a common specification having different targeted claim sets may permit different applications to be assigned to different art units, even those outside of the business method units.

Success Stories

By using some of these approaches, we have successfully navigated the abstract idea landscape. In one case (US Patent 9,384,505), aggressive interviewing and increased technicality of the claims were used to obtain a patent in a business method unit of the USPTO typically having allowance rates in the single digits. A continuation application has been filed to focus on similar technical features with broader scope.

In another example, a patent application covering financial processing systems was languishing in the business method unit of the USPTO. Tying the claims directly to the hardware and circuit architecture coupled with aggressive interviews allowed the application to proceed to grant in an art unit having a very low allowance rate (US Patent 9,443,269). A subsequent continuation application now has allowable subject matter with broader claims (US Publication 2016-0379227).

Procedural options have also proved useful for pushing cases into allowable patents. In an e-commerce application assigned to the business method unit (US Publication 2011-0055008), an appeal was first filed to elevate the importance of the application in the eyes of the examiner. Interviews followed with the examiner and supervisor. The After Final Consideration Pilot program was invoked to push the application over the last hurdle to allowance.

In another example, US Patent 9,747,424 was secured after requesting an in-person interview with an After Final Consideration Pilot program request. Prior interviews had advanced the case over the art-based rejections, but the final hurdle was overcome by emphasizing the clients’ desire to hear the subject matter rejection explained in person and with the examiner’s supervisor.

Procedural filings and continuation applications become another tool in the prosecutor’s arsenal to overcome subject matter rejections.

Conclusion

Although software and business method patents have recently come under fire, there are valid approaches to successfully preparing and prosecuting these applications in the current environment. Using lessons learned from recent cases and PTAB decisions, and actively engaging examiners, clients can obtain the patent protection they need.