The Software IP Report

Early PG-Review Decision Shows Patent Examiners and PTAB Diverge on Alice Questions

By Charles Bieneman

Categories: Patent Eligibility, The Software IP Report, USPTO Post-Issue Proceedings

Patent claims directed to “storage container tracking and delivery” are patent-ineligible under 35 U.S.C. § 101, the Patent Trial and Appeal Board (PTAB) has held in a Final Written Decision in a Post-grant Review proceeding.  Netsirv and Local Motion MN v. Boxbee, Inc., PGR2015-00009 (Patent 8,756,166 B2) (PTAB Aug. 2, 2016).  I would not be surprised to see many more such results as PG-Review proceedings pick up steam.

Under step one of the two-part test of Alice Corp. Pty. Ltd. v. CLS Bank Int’l., 134 S. Ct. 2347 (2014), the PTAB found that the claims of the ’166 patent were directed to the abstract idea of bailment, “a long-prevalent economic practice.”  The Patent Owner argued that the claims did not “recite a ‘business practice known from the pre-Internet world.’”  The PTAB disagreed, saying that the claims fell into “the computer-as-a-tool category.”  That is, the claims took a well-known practice and recited performing it in a computer.

Turning to the second step of the Alice test, the PTAB found no meaningful limitations beyond the abstract idea.  The claims merely recited passing data; there was no technological innovation.  Further, there was no innovation in the nature of the data being transmitted; it was simply data known for bailment schemes.

Accordingly, the PTAB held that all claims of the ’166 patent were unpatentable under 35 U.S.C. § 101.  This does not seem to have been a difficult or borderline case – yet the USPTO allowed these claims just over two years ago. So how did the patent examiner and the PTAB reach opposite results?

The most apparent answer to this question is that the examiner allowed these claims just before the U.S. Supreme Court decided Alice.  Further, as USPTO file history for the ’166 patent shows, the patent examiner did reject the claims under 35 U.S.C. 101.  (It may or may not be relevant that the ’166 patent application was examined under the USPTO’s “Track One” prioritized examination program.)  But then the examiner withdrew the Section 101 rejection when, following an interview, independent method claim 1 was amended to make clear that all method steps were performed in a computer.  And practitioners will recall that, in the interregnum between Bilski and Alice, such amendment was almost always enough to overcome a Section 101 rejection (and sometimes will suffice even today).

Nonetheless, for several reasons, I think it fair to highlight this case as an example of how examiners and the PTAB can diverge in approaching Alice questions.  First, this case shows how examiners often take a mechanistic, “magic words” approach to resolving Section 101 rejections, and how this approach does not fly in the courts.  That is, making clear that every method step is performed “by a computer” will be of no moment at the PTAB or in federal court.

Second, at least since Bilski in 2010, the law of patent-eligibility has been changing so quickly that the USPTO simply cannot keep up with it.  One might view the present case of lesser significance because the ’166 patent was allowed before Alice.  That is a perilous view: these days, where claims are borderline patent-eligible, any patent examiner’s decision to allow (or not to allow) claims is likely to be revisited by the PTAB or a federal court applying a different analysis.  As more and more patents become subject to Post-grant Review, I am confident that more and better illustrations of this point will be coming along.