As a result of Supreme Court decisions over the past decade addressing the exceptions to patent-eligibility, such as natural laws, natural phenomena or products, or abstract ideas, a patent owner must now carefully consider whether the defense that the subject matter is patent-ineligible can be raised, prior to suing an alleged patent infringer. This question of what subject matter is patent-eligible continues to be a rapidly evolving area of patent law.

In Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S.Ct. 1289 (2012) (Mayo), the Supreme Court set forth a two-prong test for patent-eligibility. First, is the claim directed to a judicial-exception? If yes, then is any element, or combination of elements, in that claim sufficient to ensure that it amounts to significantly more than the judicial-exception? To answer yes, the element(s) must be, among other things, more than “well-understood, routine, conventional activity” already engaged in by practitioners in the field. Empirically, patent owners are likely to be more successful by addressing the first prong and showing that the claim is not even directed to a judicial exception, rather than the second prong and showing that it amounts to significantly more than a judicial exception. For example, in McRO, Inc. v. Bandai Namco Games America Inc., 837 F.3d 1299 (Fed. Cir. 2016), the claims were directed to “generating automated lip-synchronization and associated facial expression for 3D animated characters” to improve computer animation. The district court held that the claims were directed to a patent-ineligible abstract idea. The Federal Circuit disagreed, holding that the claims were not even directed to a judicial exception. According to the Court, the claims were “directed to a patentable, technological improvement over the existing … animation techniques … in a process specifically designed to achieve an improved technological result in conventional industry practice.” Recently, in Berkenheimer v. HP, Inc., 881 F.3d 1360 (Fed. Cir. February 8, 2018), the Federal Circuit addressed the question of when elements, or a combination of elements are more than “well-understood, routine, conventional activity” to satisfy the second prong of Mayo. In view of Berkenheimer, the U.S. Patent and Trademark Office (USPTO) issued a memorandum on April 19, 2018 with guidance on how the decision would inform this inquiry during patent examination. The invention in Berkenheimer related to digitally processing and archiving files in a digital asset management system. According to the specification, the invention purported to improve computer functionality by improving system efficiency and reducing storage requirements. In a summary judgment motion, the district court found certain claims patent-ineligible as directed to an abstract idea. The Federal Circuit agreed that some claims were patent-ineligible, because they did not actually capture the purported inventive concepts or improvements. The Federal Circuit further explained: “[w]hile patent eligibility is ultimately a question of law, the district court erred in concluding there are no underlying factual questions… Whether something is well-understood, routine, and conventional … is a factual determination.” Consequently, the Federal Circuit reversed the summary judgement of invalidity for some of the claims and remanded for further fact finding, because those claims “contain limitations directed to the arguably unconventional inventive concept described in the specification.” The court also clarified that “[w]hether a particular technology is well-understood, routine, and conventional goes beyond what was simply known in the prior art.”

In the USPTO Guidance based on Berkenheimer, Examiners are instructed when formulating a rejection for lack of subject matter eligibility, that a conclusion of an element as well-understood, routine, and conventional activity must be based on a factual determination that is explicitly supported in writing. And merely finding that the element is found in the prior art is not sufficient. The Guidance also elaborates that the analysis as to whether an element is well-understood, routine, and conventional is the same as the analysis as to whether an element is so well-known that it need not be described in detail in the specification to satisfy the written description requirement. Thus, a specification (or a statement made during prosecution) shows that an element is well-understood, routine, and conventional when it describes that element “as well-understood or routine or conventional (or an equivalent term), as a commercially available product, or in a manner that indicates that [it is] sufficiently well-known that the specification does not need to describe the particulars of [it] to satisfy” the written description requirement. In addition to considering whether a defense that the subject matter is patent-ineligible can be raised. A patent owner wishing to enforce a patent must now also consider revised and expanded post-grant procedures in the USPTO established by the Leahy–Smith America Invents Act (AIA) of 2011 that can be used to invalidate a patent. One such procedure is Inter Partes Review (IPR), which replaces inter partes reexamination; IPR is a trial proceeding conducted by the USPTO Patent Trial and Appeal Board (PTAB). A third-party, such as an alleged infringer, can request an IPR to review whether a patent claim is invalid as lacking novelty or obvious based on published prior art. A final determination by the PTAB will be issued within 1 year to eighteen months after an IPR is instituted. Given its speed and lower cost relative to litigation, IPR is a powerful tool to defend against or to preempt a claim of infringement. Through the end of 2017, the PTAB has received nearly 8,000 petitions challenging patents in AIA reviews and had issued just over 1,900 final decisions. 81 percent of those decisions found at least one patent claim invalid. Recently in Oil States Energy Services LLC v. Greene’s Energy Group LLC, case number 16-712 (April 24, 2018), in a 7-2 opinion, the Supreme Court rejected a constitutional challenge to the AIA and the authority of the PTAB. In this case, Oil States Energy Services LLC appealed an IPR decision invalidating its hydraulic fracturing patent. Oil States argued that only federal courts, not executive branch tribunals such as the PTAB, can invalidate a patent. Justice Thomas, wrote the opinion for the Court, which concluded IPRs are simply a way for the USPTO, of which the PTAB is a part, to review its own decision to grant a patent. Justice Neil Gorsuch, joined by Chief Justice John Roberts, dissented and rejected the Court’s holding that because the USPTO issues patents, it also has the authority to revoke them. Justice Gorsuch wrote: “Just because you give a gift doesn’t mean you forever enjoy the right to reclaim it.”

Notably, the Court emphasized the narrowness of its decision and the questions left open. Per Justice Thomas, the Court “emphasize[s] the narrowness of [its] holding,” and “address[es] only the precise constitutional challenges … raised here” Justice Thomas noted that the company did not raise issues of whether the PTAB could review patents issued before passage of the AIA or whether the PTAB’s processes violate due process. In addition, he concluded that the “decision should not be misconstrued as suggesting that patents are not property for purposes of the Due Process Clause or the Takings Clause.”

Expect patent owners to accept the Court’s invitation for future challenges to attempt to chip away at IPRs.