The United States Patent and Trademarks Office (USPTO) has released an updated set of Eligibility Examination Guidelines to provide guidance to examiners on when to reject claimed inventions as ineligible abstract ideas. These guidelines give a sense of what computer-implemented subject matter the USPTO considers to be ineligible for patent protection.

Developing guidelines was difficult for the USPTO as the courts have provided little explanation of when patent claims are invalid for defining ineligible abstract ideas, or even what abstract idea means, and the USPTO lacks the authority to craft its own definitions. The USPTO is largely limited to telling examiners that patent claims cover abstract ideas if they cover subject matter that is similar to what the courts have determined to be abstract ideas. Given the absence of general concepts or principles for identifying the kinds of abstract ideas that are not eligible for patent protection, practitioners and applicants need to be aware of all of the Federal Circuit and Supreme Court case law on patent subject matter eligibility, and to craft patent claims with arguments in mind as to why the subject matter covered by the claims is materially different from subject matter determined to be ineligible in any of this case law.

The original 2014 Interim Guidance on Patent Subject Matter Eligibility¹ document (“the Guidance”) defines steps to be taken by an Examiner to assess subject matter eligibility.  Steps 2A and 2B apply the two-part analysis from Alice² and Mayo³. In step 2A the Examiner determines whether the claim is directed to a statutory exception to patent protection: a law of nature, natural phenomenon or an abstract idea. If not, then the claim is eligible for protection (although the Examiner must still determine whether the claim meets the other requirements for patentability, such as novelty and non-obviousness). If the claim is directed to a law of nature, natural phenomenon or an abstract idea, then step 2B applies and the Examiner determines whether the claim as a whole represents “significantly more”.  Claims that do not cover significantly more than a law of nature, natural phenomenon or abstract idea are ineligible for patent protection and are to be rejected under 35 U.S.C. § 101.

The posting of the Guidance in 2014 provoked much comment and criticism, some critics alleging that under the Guidance virtually nothing was eligible for patent protection. The July 2015 Update on Subject Matter Eligibility⁴, (“the Update”) responds to these comments and criticism.

The Update provides an updated set of subject matter examples, and also divides the case law into different categories of abstract ideas, which are useful both as a credible attempt to organize the case law, and to provide insight into the USPTO’s perspective on this case law and arguments they may find persuasive.  It also provides reassurance that the USPTO is addressing criticism that under the current rules post-Alice⁵ there is not a clear path forward for software patent applications because of the difficulties encountered with subject matter objections. The Update makes it clear that examiners should not determine a claimed concept to be an abstract idea unless the claimed concept is similar to at least one concept that either the Federal Circuit or the Supreme Court have identified as an abstract idea. In other words, applicants should be able to avoid having their claims rejected, at least in the USPTO, on subject matter eligibility grounds by defining concepts in the claims that differ sufficiently from claim concepts invalidated on these grounds by the Federal Circuit or the Supreme Court.

Of course, much will depend on how aggressive and creative examiners are in determining that claimed concepts they are considering are similar to a concept determined to be an abstract idea by the courts. Further, the Update makes it clear that this determination of similarity does not require evidence: examiners can ground such a rejection by merely explaining, clearly and specifically, why the claimed concepts are similar to concepts determined to be abstract ideas by the courts, and are thus ineligible for patent protection.

New Examples

In the Update, several new examples are provided in addition to those found in the original Guidance document and include:

21.  Transmission of Stock Quote Data – modeled after the claims at issue in Google Inc. v. Simpleair, Inc.⁶, (Claim 1 ineligible, Claim 2 eligible).
22.  Graphical User Interface for Meal Planning – based on Dietgoal Innovations LLC v. Bravo Media LLC⁷ (Claim 2 ineligible).
23.  Graphical User Interface for Relocating Obscured Textual Information (Claims 1,4 eligible, Claims 2-3 ineligible).
24.  Alerting System for a Catalytic Chemical Process --  based on Parker v. Flook⁸ (Claim 1 ineligible).
25.  Temperature Control of Rubber Molding --  based on Diamond v. Diehr⁹ (Claims 1-2 eligible).  Claim 1 is the actual claim 1 from Diamond v. Diehr, Claim 2 is a hypothetical claim in the form of computerized instructions.
26.  Exhaust Gas Recirculation in an Internal Combustion Engine – based on technology from U.S. Pat. 5,533,489 (Claim 1 eligible).
27.  A method of loading System Software (BIOS) into a computer – based on technology from U.S. Pat. 5,230,052 (Claim 15 eligible).

In each example, the Update evaluates the hypothetical claims based on steps 2A and 2B, and discusses how an Examiner might determine patent eligibility for patent claims covering an analogous technology.

Example #25 – Diamond v Diehr

An interesting example in the Update is #25, since it introduces hypothetical claims modeled after the technology in the 1981 case Diamond v. Diehr, 450 U.S. 175 (1981).  This case dealt with a patent involving a computerized process controlling a rubber molding press. The invention offered significant advantages over the prior art at the time, as it enabled in situ temperature monitoring and automatic recalculation of the optimal cure time. This calculation involved using the temperature inputs and the Arrhenius equation, long used to calculate the cure time of rubber molding processes.

The reasoning in the Update for Diamond v Diehr differs from the reasoning provided by the Supreme Court. In the 1981 decision, the Supreme Court obliquely refers to the machine or transformation test in determining subject matter eligibility:

“A mathematical formula, as such, is not accorded the protection of our patent laws, Gottschalk v. Benson, 409 U. S. 63 (1972), and this principle cannot be circumvented by attempting to limit the use of the formula to a particular technological environment. Parker v. Flook, 437 U. S. 584 (1978). Similarly, insignificant post-solution activity will not transform an unpatentable principle into a patentable process.  To hold otherwise would allow a competent draftsman to evade the recognized limitations on the type of subject matter eligible for patent protection. On the other hand, when a claim containing a mathematical formula implements or applies that formula in a structure or process which, when considered as a whole, is performing a function which the patent laws were designed to protect (e.g., transforming or reducing an article to a different state or thing), then the claim satisfies the requirements of § 101. Because we do not view respondents' claims as an attempt to patent a mathematical formula, but rather to be drawn to an industrial process for the molding of rubber products, we affirm the judgment of the Court of Customs and Patent Appeals.”¹⁰

In example #25, according to the Update, Claim 1 from Diamond v. Diehr involves a repeated calculation of the Arrhenius equation, a mathematical relationship held to be representative of a law of nature, and therefore Step 2A is met. Next, analyzing the claim as a whole using the Guidelines, the combination of steps taken together amount to significantly more than just the abstract idea of the Arrhenius equation (Step 2B).  Thus, claim 1 in Diamond v Diehr is patent eligible, satisfying the “significantly more” step of the test.

The USPTO may have seen fit to rewrite the justification for this case to bring it into accord with the Alice framework. The Court in Diamond v Diehr determined that the structure claimed, considered as a whole, was the kind of structure and performed the kind of function the patent laws were designed to protect. In making this determination, the Court refers to the machine or transformation test to establish the patentability of the claimed invention. However, after the decision of the Supreme Court in Bilski, the machine or transformation test is no longer the definitive test, although it remains a helpful indicator of subject matter eligibility.

Categories of abstract ideas outside the scope of patentable subject matter

The US courts have provided little explanation of when and why patent claims are invalid for covering abstract ideas. Since the USPTO lacks the authority to create its own definitions, and it is difficult, perhaps impossible, to discern principles from the case law, the USPTO has instead focused its efforts on helping examiners to determine if the concepts defined in claims are similar to what the courts have determined to be abstract ideas, and are thus invalid. The Guidelines and Update construct several different categories of ineligible abstract ideas based on the case law.  Each category covers many different examples, taken from the case law, of concepts defined in patent claims that have been invalidated by either the Federal Circuit or the Supreme Court as abstract ideas. Clearly, patent applicants should do whatever they can to define their inventions using claim language and concepts that fall outside these categories.

These categories are the closest the USPTO gets to general concepts or principles for subject matter eligibility. These categories include the set of “judicial descriptors” associated with software based subject matter that has been identified by precedent in the Federal Circuit and the Supreme Court as patent ineligible, including

1. “Fundamental economic practices” including concepts dealing with the economy and commerce including contracts, legal obligations and business relations.
   1. Mitigating settlement risk -- Alice¹¹.
   2. Mitigating hedging risk -- Bilski¹².
2. “Certain methods of organizing human activity” including concepts dealing with personal and intrapersonal activities including relationships, transactions involving people, social activities and behaviour.
   1. Managing human behaviour, specifically meal planning -- Dietgoal¹³.
   2. Advertising, marketing and sales – Ultramercial¹⁴.
3. “An idea ‘of itself’” i.e. an idea standing on its own including a bare concept, plan or scheme, and
   1. Methods of comparing data that could be done mentally -- Cybersource¹⁵.
   2. Concepts relating to organizing, storing, and transmitting information – Cyberfone¹⁶.
4. “Mathematical relationships/formulas” including algorithms, mathematical relationships, formulae and calculations.
   1. Converting binary coded decimal values to pure binary values -- Benson¹⁷.
   2. A mathematical formula for hedging – Bilski¹⁸.

It is difficult to find recent cases where software related patents have survived subject matter eligibility analysis by the Federal Circuit or the Supreme Court. Given the numerous examples of ineligible subject matter in the Update and Guidelines combined with the rejection statistics¹⁹ from the USPTO and invalidation statistics²⁰ at the Federal Circuit, it is reasonable to ask whether any claims have recently survived challenge on subject matter eligibility grounds.  One example outside of the scope of software subject matter is Myriad²¹, where the Supreme Court allowed claims for complementary DNA.

While the Supreme Court invalidated all of the claims in both Bilski and Alice; there is one case related to software subject matter that has survived scrutiny, at least at the level of the Federal Circuit:  DDR Holdings v Hotels.com²².

DDR Holdings v Hotels.com²³

The Guidelines discuss this case. This is the first Court of Appeal for the Federal Circuit case to uphold the validity of a software subject matter patent since Alice.  In this patent, the claims were directed to managing the look and feel of an e-commerce website to provide “store within a store” functionality.

The claims in DDR covered a software solution to a problem, which, according to the judgment but not the dissent, was unique to the internet. The claims dealt with the problem of retaining website visitors at an ecommerce site and offered a solution anchored in software that addressed a challenge unique to the web.  Specifically, in the prior art a user clicking on an advertisement would be taken away from the host website to the advertising merchant. The claimed invention involves presenting a hybrid page generated by the host website to include a composite of the host website and advertising merchant’s product information. The decision was based, at least in part, on the grounds that the claimed concept lacked a non-technological analog.

Takeaways

When drafting new applications for software-based inventions, it is important to keep in mind the judicial descriptors of ineligible subject matter, and to draft the claims to avoid categorization under any of these judicial descriptors if at all possible. However, it is also important to keep in mind that this area of law is in flux, and will almost certainly see significant change over the next few years. In particular, the categories of ineligible subject matter constructed by the USPTO may evolve or grow in number over the next few years as more cases are decided. Eventually, as the courts grapple with more and more cases, clear principles may start to emerge from the present chaos. One day, it may again be possible to rely on general principles to distinguish patent eligible subject matter from ineligible subject matter. At present, that day seems far distant, and for the foreseeable future it will be even more important to keep up-to-date on the latest Federal Circuit and Supreme Court precedent, mostly to know what kinds of subject matter to avoid claiming, but also to keep an eye out for the occasional beacons of hope, such as a DDR.

 is a partner, lawyer and patent agent in Bereskin & Parr's Patent Group in the Mississauga Region. He is active with the Intellectual Property Institute of Canada (IPIC) and has contributed extensively to patent education in Canada. is a JD candidate at Osgoode Hall School and was a summer student in Bereskin & Parr's in Toronto. Twitter: .

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These claims were rejected by the Canadian Intellectual Property Office (“CIPO”) for lacking statutory subject matter, i.e. for failing to meet the definition of “invention” as defined in s.2 of the Patent Act.  CIPO’s Patent Appeal Board (“PAB”) in its rejection adopted a “form and substance” approach that focused on “what had been discovered”, and held that business methods were an excluded category of patentable subject matter.  The PAB also held that inventions must meet a technological threshold and a physicality requirement wherein inventions are either a physical object or an act or series of acts performed by a physical agent which causes a change of character or condition in a physical object.

In its ruling, the Court of Appeal rejected the form and substance approach and sent the application back to CIPO for examination, with directions that the Commissioner of Patents carry out a purposive construction of the claims when considering whether the claims are statutory.  The Court of Appeal also held that the technological test was unhelpful, that there was no categorical exclusion of business methods as statutory subject matter, and that patentable subject matter must be something with physical existence  or something that manifests a discernible effect or change.  CIPO completed its examination and found that the claims possessed patentable subject matter; CA 2,246,933 issued on January 17, 2012.

On March 8, 2013, CIPO released two new practice notices, namely titled “Examination Practice Respecting Purposive Construction” and “Examination Practice Respecting Computer-Implemented Inventions”.  In these Practice Notices, CIPO recognize that the technological test is no longer to be applied in the consideration of statutory subject matter, and that the portions of its practice manual referring to “contribution”, “field of technology”, “technological solution to technological problem” are no longer applicable in view of the Amazon.com decision.  The Practice Notices state that statutory subject matter must be based on the essential elements of the claim, as determined through purposive construction.  Practice Notice 2013-03 also states that when a computer is found to be an essential element of a construed claim, the claimed subject matter will generally found to be statutory.

The Practice Notices also provide detailed instructions for CIPO examiners on how to conduct their purposive construction.  Particularly, the Practice Notices state that examiners should interpret each claim: using a fair, balanced, and informed approach; having identified the problem and solution; in the context of the application as a whole; to determine which elements of the claim solve the identified problem; and by focusing on one solution at a time.  The Practice Notices specify that guidance to identify the problem and solution is to be found in the description, and that this identification occurs when construing the promise of the invention (i.e. its utility).  The Practice Notices explain that essential elements are those essential to the operation of the solution; however, not every element that has a material effect is necessarily essential for the operation of the invention.  If a claim is missing any of the identified essential elements, the claim may be rejected for lacking utility; if the claim contains more than the identified essential the claim may be considered to contain “superfluous elements”.

Practice Notice PN 2013-02 acknowledges that the Supreme Court of Canada decisions and respecting purposive construction continue to guide the courts.   However, this Practice Notice then notes that Whirlpool was an impeachment proceeding and was not directed to patent examiners in the course of examination to determine whether applications for patents should be granted, and states that CIPO “considers that the application of the principles of purposive construction discussed in Free World Trust and Whirlpool to the examination of a patent application must take into account the role of the patent examiner and the purpose and context of the examination”.  In support of its position CIPO relies on as recognizing that the language of patent claims construed by judges in an impeachment proceeding is fixed, whereas “during examination of an application the language of the claims may change from that initially proposed by the applicant for a number of reasons”.

CIPO’s reliance on Genencor as justification to not be strictly bound to the purposive construction principles set out in Whirlpool and Free World Trust is problematic.  While the Trial Division Court in Genencor did state that it was not appropriate to expect a Re-examination Board in conducting a re-examination to have the same burden mandated on the Courts for an impeachment proceeding, that statement was made in the context of what standard the Board should be subjected to when assessing the substantive merits of an application. The Court in Genencor pointed out that the Board would not have the same access to expert testimony and other resources, and thus the Board should be subject only to a standard of reasonableness on factual determinations related to the patent.  However, Genencor did not state that CIPO is entitled to only be reasonable and not necessarily correct on applying the law governing patent construction. The Court of Appeal in Amazon.com clearly held that patent construction is a question of law, and the Commissioner’s patent construction is reviewable on the standard of correctness.  It follows then that the Commissioner must correctly apply the purposive construction principles defined in Whirlpool and Free World Trust.

The Supreme Court of Canada in Whirlpool and Free World Trust held that claim language must be read in an informed and purposive way, and that the claims language will, on a purposive construction, show that some elements of the claimed invention are essential while others are non-essential.  The Court then explained that the identification of claim elements as essential or non-essential is made according to the following principles: (i) on the basis of common knowledge of the worker skilled in the art to which the patent relates; (ii) as of the date the patent is published; (iii) having regard to whether or not it was obvious to the skilled reader that a variant of a particular element would not make a difference to the way in which the invention works; or (vi) according to the intent of the inventor that a particular element is essential irrespective of its practical effect. For an element to be considered non-essential and thus substitutable, it must be shown either (i) that on purposive construction of the words of the claim it was clearly not intended to be essential, or (ii) that at the date of publication of the patent, the skilled addressee would have appreciated that a particular element could be substituted without affecting the working of the invention.

There is no mention of the third and fourth Whirlpool and Free World Trust purposive construction principles in the Practice Notices.   The Practice Notices’ approach to determining essential elements of a claim appear to completely disregard the inventor’s intentions about whether an element is essential, and fail to ask whether it would be obvious one skilled in the art that an element has no material effect on the way in which the invention works.  By directing examiners to use a problem-solution approach to identify essential elements of an invention from the specification, then to determine whether those essential elements are present in the claims, the Practice Notices appear to be contrary to the principles affirmed in Free World Trust and other cases that claim language should have primacy and each of the components of a claim is presumed to be essential unless the contrary is indicated in the patent.   The failure of the Practice Notices to direct examiners to apply all the principles of purposive construction set out in Whirlpool and Free World Trust produces an incorrect legal framework for patent construction that would not permit an examiner to reasonably apply the facts when determining whether a claimed subject matter meets the definition of invention.  For example, it is conceivable that under the direction of the Practice Notices, an examiner may reject a claimed invention as lacking statutory subject matter by finding all statutory elements of the invention to be inessential, even though those statutory elements are expressed claimed, the application document indicates that the inventor intended the statutory elements to be essential, and even though it would not be obvious to one skilled in the art that one or more of those elements had no material effect on the way the invention worked.

Given that CIPO examiners do not have the benefit of expert witnesses, cross-examination, and other resources of a Court in an impeachment hearing, it is reasonable that CIPO be held to a standard of reasonableness when making factual determinations in a patent application.  However, it is clear that examiners must correctly apply the law when making reasonable factual determinations. By omitting fundamental principles of purposive construction set out in Whirlpool and Free World Trust, the CIPO examination practice respecting purposive construction appear to be incorrect at law.

is a partner in , and is head of the office’s Intellectual Property Department and co-chair of the office's Technology Industry Group. Brian practices exclusively in the area of intellectual property with an emphasis on patent matters.

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In Bancorp, the Court has ruled that patents outlining a software system that administers and tracks the value of life insurance policies (, ) are invalid. The Court of Appeals ruled that the patents do not include a computer as an integral part of the patent as claimed and that the process described could be conducted, albeit less efficiently, manually. Without a foundation that includes a computer, the process claimed in the patent becomes an abstract process, which fails the criteria established by the United States Supreme Court in . With the Bancorp ruling the Court has singled out business process patent claims that misidentify a computer as being integral to the patent, otherwise known as , as probably unpatentable, potentially culling the number of software patents that will pass through the U.S. Patent and Trademark Office.

The Bancorp case highlights two interesting trends in software patents. First, the Court has maintained the distinction between software that is strictly algorithm-based, processes that are made more efficient by running on a computer, which would therefore be abstract and not patentable, and function-based, processes that build on top of the functionality provided by a computer to provide a new innovative product, which would be patentable. The Court was careful to note “that ‘inventions with specific applications or improvements to technologies in the marketplace are not likely to be so abstract’ as to be ineligible for patent protection”. This opinion is consistent with judgements over the past years, as seen in and . Although consistent, these decisions do not draw a clear dividing line between algorithm and function-based software. As a result, there is no principled way to determine when software transitions from a mathematical base into a functional base. Some that it never does. This confusion could benefit from a business process patent version of test; can an average software developer recreate the patented process, or would he/she need a computer to complete the task? This test could potentially provide a practical definition to the two distinct views of software; however one would cringe at the thought of a developer trying to manually imitate the process of creating a image based on a visually pleasing guideline created by an algorithm (the patent claim in question in the Research Corporation Technologies v Microsoft Corporation case). Realistically, the Courts will probably keep the distinction undefined and allow policy to further define it.

The second trend of interest concerns the increasing limitations being placed on process patent eligibility by both the United States Court of Appeals for the Federal Circuit and the United States Supreme Court. This was not always the case. At one point the Court of Appeals had been a “”, including business patents, leading to a large number of software patent applications. This view of eligibility for business patents existed from 1994, with the decision, until 2008 and the Federal Court’s decision in . The Bilski decision signalled a change for the Court of Appeals and both courts have since supported more stringent qualifications for business process patents. The recent United State Supreme Court’s of the Ultramercial v Hulu ruling (previously by IP Osgoode) continues this trend.

This Bancorp decision is unlikely to modify the view of Canadian courts concerning software patents. The Canadian Patent Act explicitly lists abstract theorems as ineligible for patent protection. states that a patent will not be granted “for any mere scientific principle or abstract theorem”. The decoupled relationship between Canadian and U.S. views of business process patents might mitigate any effect this holding might have on Canadian law. While the U.S has a long history of case law and approved business process patents, until the recent ruling late last year there was doubt to whether software patents were legal in Canada. The lack of support from the courts south of the border should be noted however, and could indicate stricter Canadian eligibility requirements in the future.

The holding in this case could go a long way in damming the of software patents seen in the U.S. over the past 15 years. This will no doubt make who argue against granting software patents very happy, but there is still that the idea of allowing patented innovation to occur in the medium of software will “”.

Mark Bowman is a JD candidate at Osgoode Hall Law School.

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