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Ball in Federal Circuit’s Court on Patent Eligibility Clarity(1)

Jan. 30, 2020, 11:30 AMUpdated: Jan. 30, 2020, 5:30 PM

The Federal Circuit may be the last hope for clarity on what inventions are eligible for patents—if the judges can agree on what the rules should be.

The nation’s patent appeals court is split 7–5 on whether U.S. Supreme Court precedent limits how much it can say about Section 101 of the Patent Act, which involves eligibility. Eight separate opinions in a recent order denying full court review of an eligibility case show its deep divisions.

Judges on the U.S. Court of Appeals for the Federal Circuit may be starting to realize that it’s time for the court to fix the problem on a case-by-case basis, attorneys say. Practitioners increasingly are looking to the Federal Circuit after the Supreme Court’s spate of denials of patent eligibility petitions, including three on Jan. 27, and a lack of movement in Congress on legislation to revise Section 101.

“The Federal Circuit judges don’t have any choice at this point,” patent attorney Christopher Loh of Venable LLP in New York said.

The next oral arguments the week of Feb. 3 and decisions on eligibility could provide some insight into whether the judges are willing to push ahead to clear up confusion about the law.

There are six cases on the oral argument calendar that raise eligibility questions. Five are tech cases involving software patents and the other involves a branded drug patent.

Some attorneys worry the court is so splintered on eligibility that compromise will be hard to achieve.

“It may involve going to places where existing precedent hasn’t gone,” Alex Moss, a staff attorney at the Electronic Frontier Foundation, said. “Clarifying the law may mean jettisoning some of its precedents or some of its suggestions along the way.”

‘Poster Child’

One case to watch is American Axle & Manufacturing Inc. v. Neapco Holdings LLC, according to David O. Taylor, who teaches patent law at SMU Dedman School of Law in Dallas.

A three-judge panel invalidated an automobile drive shaft patent for covering a natural law in October 2019. Taylor called the decision a “poster child for how the current test for patent eligibility is being applied to reach rather absurd results.”

The patent owner is asking for full court rehearing, with backing from retired chief judge Paul Michel, a dozen law professors and a biotech trade group. Taylor joined the professors’ amicus brief.

There’s a better chance for rehearing en banc in this case in light of the most recent cert denials in eligibility cases, Taylor said.

Divided Court

There’s no guarantee that rulings in upcoming patent eligibility cases will offer the clarity that practitioners crave.

Seven of the court’s 12 judges signaled in an order denying rehearing in Athena Diagnostics Inc. v. Mayo Collaborative Services LLC that they aren’t happy with recent Supreme Court eligibility rulings culminating in Alice Corp. v. CLS Bank. But they say the precedent binds their hands. Five others argued the Federal Circuit has read too much into the Supreme Court’s cases and made too many inventions ineligible.

Judge Kara F. Stoll’s dissent, which Judge Evan J. Wallach joined, was the most forthright about the Federal Circuit’s role in the confusion. The court’s bright-line rule that diagnostic claims are ineligible “is based on an over-reaching and flawed test” and the court should “correct its erroneous rule,” she wrote.

“In my view, by consistently bypassing en banc review of a critical issue that goes to the heart of this court’s jurisdiction, we are abdicating our responsibility,” Stoll said.

Judge Pauline Newman said in her dissent in the same case that the court has “mistakenly enlarged” the Supreme Court’s eligibility holdings. Under her reading, the Federal Circuit doesn’t need to wait for the Supreme Court to provide clarity—it can read the high court’s precedent differently to reach more consistent results and uphold more patents.

Stoll, Newman, and the other dissenters may be able to sway judges in the majority to their side the next time an eligibility case is up for full court rehearing.

But patent attorney Steven Daniels of Dickinson Wright PLLC in Austin questions whether that’s likely to happen. “There doesn’t seem to be a true leader who can drive a consensus, which is unfortunate,” he said.

‘Gun Shyness’

Loh pointed out that there’s no guarantee the Supreme Court will continue to be hands off if the Federal Circuit acts now. The Federal Circuit could start making moves on eligibility and the Supreme Court could wait a few years and then wipe it all out.

Amelia Rinehart, associate dean and professor at the University of Utah Law School in Salt Lake City, said the court’s “gun shyness” may be due to being overturned by the Supreme Court in the past.

Meanwhile, the unsettled state of eligibility law has “wreaked havoc on patent owners,” Daniels said.

Software inventors in particular face uncertainty in seeking patents, because the technologies are constantly evolving. Life science claims have fared better, but the case law makes a distinction between medical diagnostics, which generally aren’t patent-eligible, and methods of treatment, which are.

Whether a given invention will get the Federal Circuit’s blessing all depends on what panel hears a case, Daniels said. “It’s like playing Russian roulette,” he said.

(Updated with additional reporting. Previous version corrected time element in fifth paragraph.)

To contact the reporter on this story: Perry Cooper in Washington at pcooper@bloomberglaw.com

To contact the editors responsible for this story: Rebecca Baker at rbaker@bloomberglaw.com; Keith Perine at kperine@bloomberglaw.com

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