By Kevin E. Noonan —

As we have had the occasion to say before regarding subject matter eligibility, "[o]ne swallow does not a summer make, nor one fine day . . . ," but the Federal Circuit may have engendered a glimmer of hope that it will once again take up its mantle of patent law expertise regarding the proper judicial interpretation of Section 101, in its decision in Rapid Litigation Management Ltd. (formerly, Celsis Holdings, Inc.) v. Cellzdirect, Inc.

The case arose following summary judgment in the District Court that the claims were invalid under Section 101.  The invention was directed to methods for producing pure cultures of mature hepatocytes to be used "for testing, diagnostic, and treating purposes."  Hepatocytes in the prior art were disadvantageous for these purposes because they "can only be obtained from liver resections or non-transplantable livers of organ donors, and their lifespan is short" and consequently "[s]upply is thus erratic, making availability limited and unpredictable."  Cryopreservation was a known technique in the art that enabled hepatocytes to be preserved for later use, but the method had limitations.  These included damaging the hepatocytes and thus lowering yield as well as being "unsuitable for preparing multidonor hepatocyte pools" (which were desirable, inter alia, because "hepatocytes from different donors generally have different metabolic properties, [and] researchers desired to pool hepatocytes from various source livers to create a hepatocyte preparation approximating average liver cells").  The "conventional wisdom" was that "hepatocytes could be frozen only once and then had to be either used or discarded."

The inventors found, contrary to the art, that certain hepatocytes in a hepatocyte population could be frozen and thawed multiple times and retain viability.  This was the basis for the U.S. Patent No. 7,604,929 claiming methods for producing populations of multiply frozen hepatocytes; claim 1 is representative:

1.  A method of producing a desired preparation of multi-cryopreserved hepatocytes, said hepatocytes being capable of being frozen and thawed at least two times, and in which greater than 70% of the hepatocytes of said preparation are viable after the final thaw, said method comprising:
    (A) subjecting hepatocytes that have been frozen and thawed to density gradient fractionation to separate viable hepatocytes from non- viable hepatocytes,
    (B) recovering the separated viable hepatocytes, and
    (C) cryopreserving the recovered viable hepatocytes to thereby form said desired preparation of hepatocytes without requiring a density gradient step after thawing the hepatocytes for the second time, wherein the hepatocytes are not plated between the first and second cryopreservations, and wherein greater than 70% of the hepatocytes of said preparation are viable after the final thaw.

The commercial product produced by these methods, LiverPool^TM, comprises "multi-cryopreserved, pooled hepatocyte preparations" useful for "a variety" of research uses.

Original plaintiff Celsis In Vitro sued original defendant Life Technologies, Inc., which filed a summary judgment motion of invalidity under Sections 101 and 112.  The District Court granted summary judgment on Section 101 grounds (and did not reach the Section 112 issues), using the Supreme Court's Mayo/Alice "two-step" analysis.  According to the District Court, the claim was "directed to an ineligible law of nature" (the "discovery" that hepatocytes could be subjected to multiple freeze/thaw cycles) under step 1.  The District Court found the claim failed to recite an "inventive concept" under step 2 of the Mayo/Alice test because it simply "reapplied a well-understood freezing process").

(It may be by now past mentioning that the application of the Supreme Court's Mayo/Alice precedent would have more clarity and more predictability if the inferior courts (and the PTO) took the Supreme Court at its word and determined whether the "something more" in step 2 was novel and non-obvious.  For example, in this case subjecting hepatocytes to additional freeze/thaw cycles was novel because the prior art taught it could not be done, and for similar reasons the method was non-obvious (and certainly yielded unexpected results sufficient to overcome prima facie obviousness in any event).  Similar considerations would have produced similar results contrary to the District Court's decision in Ariosa v. Sequenom.)

Plaintiff appealed.

The Federal Circuit vacated and remanded, in an opinion by Chief Judge Prost joined by Judges Moore and Stoll.  In the Court's opinion, the inquiry need not extend past step 1 of the Mayo/Alice test, because the District Court erred in finding that the claims were directed to a law of nature.  On the contrary, according to the opinion "the claims are simply not directed to the ability of hepatocytes to survive multiple freeze-thaw cycles[; r]ather, the claims of the '929 patent are directed to a new and useful laboratory technique for preserving hepatocytes."  Viewed in this way, being a "constructive process," directed to achieving "a new and useful end" this "is precisely the type of claim that is eligible for patenting" according to the panel.  The opinion acknowledges that the inventors "discovered" the capacity for hepatocytes to undergo multiple cycles of freezing and thawing, "but that is not where they stopped, nor is it what they patented."  Quoting Judge Bryson's opinion in Myriad, this opinion states that "as the first party with knowledge of" the cells' ability, they were "in an excellent position to claim applications of that knowledge."

The panel then distinguishes these claims from the claims recently at issue before the court in In re BRACA1- & BRCA2-Based Hereditary Cancer Test Patent Litigation ("Myriad III"), Sequenom, and Genetic Technologies, Ltd.  v. Merial.  The opinion characterizes each of these cases as ones where the natural law is used to "identify" genetic information (Genetic Technologies) or cffDNA (Sequenom) or genetic mutation (Myriad III), in the latter case expressly characterizing the claim as comprising an "abstract mental process."  In contrast, according to the opinion, "[t]he end result of the '929 patent claims is not simply an observation or detection of the ability of hepatocytes to survive multiple freeze-thaw cycles"; rather, the claims result in "a better way of preserving hepatocytes."  These claims are like "thousands of others" reciting methods to produce a desired outcome, such as "to produc[e] things or . . . treat[] diseases."  The panel recognizes that interpreting claims as the District Court was persuaded to do (wherein the claim "describe[s] the natural ability of the subject matter to undergo the process") does not mean the claim is "'directed to' that natural ability."  Otherwise, according to the panel:

[W]e would find patent-ineligible methods of, say, producing a new compound (as directed to the individual components' ability to combine to form the new compound), treating cancer with chemotherapy (as directed to cancer cells' inability to survive chemotherapy), or treating headaches with aspirin (as directed to the human body's natural response to aspirin).

Turning to claim 5, which further recites pooling hepatocytes from multiple donors (which was deemed to not be possible in the prior art) the panel is even more vigorous in defending its eligibility, because it "results in a preparation that is both new and vastly more useful for research than hepatocyte preparations made by conventional methods" (thus incorporating elements of utility into the subject matter eligibility calculus).  The panel rejects defendants' reliance on the Supreme Court's Funk Bros. v. Kalo Inoculant precedent on the basis that the Court ruled on product claims, and expressly stated that "it was not "presented [with] the question whether the methods of selecting and testing the non-inhibitive strains are patentable."  Thus, the panel avoids the question of whether claims to the composition would be patent eligible under Funk Bros. (regardless of the differences between mixing to strains of bacteria in a bag (as in Funk Bros.) and manipulating hepatocytes that do not occur in such a state in nature to produce a mixture that would appear to satisfy the requirement in Diamond v. Chakrabarty of being "a product of human ingenuity 'having a distinctive name, character [and] use.'")

The panel relies on firmer limitations on subject matter eligibility precedent by citing the portions of the Supreme Court's opinion in Myriad that expressly stated that "[i]t is important to note what is not implicated by [the] decision," specifically methods as before the panel in this case.  The panel draws the analogy directly, stating that "[h]ere, the inventors developed an innovative method of manipulating hepatocytes, a particular kind of liver cell which, prior to this invention, had been very difficult to preserve for future use. [] The claims are thus distinguishable from those held unpatentable in Myriad."  Similarly the panel distinguished the claims in Sequenom, because the panel in that case held the claims were "directed to" the cffDNA itself despite reciting a method for detecting such DNA and making a diagnosis on the basis of that detection.

The panel then considers the claims' satisfaction of step 2 of the Mayo/Alice test, and relying on Diamond v. Diehr (as cited in Mayo and Alice) finds that the claims "'improve[] an existing technological process,' [and thus] are sufficient to 'transform[] the process into an inventive application' of the patent-ineligible concept":  "The claimed method is patent eligible because it applies the discovery that hepatocytes can be twice frozen to achieve a new and useful preservation process" says the panel, citing Mayo's reliance on Diehr that "an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection."

Finally, the opinion addresses the argument that the steps of the method were "well-understood, conventional and routine" by stating that it is not the case that "all process claims that employ only independently known steps will be unpatentable" but that the claims must be considered "as a whole," i.e., "both individually and as a 'ordered combination.'"  Again relying on Diehr, the opinion states that "a new combination of steps in a process may be patentable even though all the constituents of the combination were well known and in common use before the combination was made."  Here, subjecting hepatocytes to multiple freeze-thaw cycles was not "routine and conventional" according to the Court (a conclusion supported by the prosecution history of the '929 patent (and reexamination) and the Examiners' conclusions to that effect therein).

In a coda the panel reassured that it was uncontested that the claims did not preempt the natural law (noting that defendants had already "engineered around the patent") and thus this Supreme Court concern was not implicated in its decision.

In addition to the aforesaid glimmer, it should be noted that the patent-eligible claims here share another similarity to the claims in Diehr not shared by the claims in Mayo or Sequenom or Genetic Technologies or in Myriad III (at least for some of the claims):  these claims are related to methods for producing a tangible thing (hepatocyte cultures), not diagnostic information.  This distinction remains the one constant between those claims invalidated under Section 101 under recent Supreme Court precedent.  Only cases like Funk Bros. and American Fruit Growers v. Brogdex involve patent ineligible tangible products, and in these cases the products were pre-existing (and as noted by the panel did not include method claims).  The question remains unanswered whether the tangible/intangible distinction is at the root of the Supreme Court's disaffection with diagnostic methods claims, and perhaps it will take a case that squarely puts this distinction before the Court before we will ever find out.

Rapid Litigation Management Ltd. v. Cellzdirect, Inc. (Fed. Cir. 2016)
Panel:  Chief Judge Prost and Circuit Judges Moore and Stoll
Opinion by Chief Judge Prost

Federal Circuit Concurrence — Decide Patentability with Patent-Eligibility

By Joseph Herndon —

The Federal Circuit earlier today vacated a District Court's order dismissing BASCOM's complaint and remanded for further proceedings.  BASCOM sued AT&T Inc. for patent infringement of U.S. Patent No. 5,987,606, and the U.S. District Court for the Northern District of Texas held that BASCOM failed to state a claim upon which relief can be granted because the claims of the '606 patent are invalid as a matter of law under 35 U.S.C. § 101.  The District Court followed the two-step approach for analyzing patent-eligibility including an abstract idea analysis followed by a search for an inventive concept.

However, the Federal Circuit vacated that decision, and instead found that the claims are patent-eligible.  Judge Newman's concurring opinion also proposes a possible improvement to the way in which patent-eligibility challenges should be handled that looks to handle "inventive concepts" as a patentability analysis instead of a patent eligibility analysis.

Looking at the patent-in-suit, the '606 patent (filed in 1997) describes that some websites contain information deemed unsuitable for some users, and corporations had the need to prevent their employees from accessing websites with certain types of information, such as "entertainment oriented sites," while allowing them to continue to access "technical or business sites," and parents had the need to prevent their families from accessing websites containing "sexually explicit or other objectionable information."  The computer industry responded to this need by developing a software tool that allowed control over the type of information received over the Internet.  The software tool inspected a user's request to access a website and applied one or more filtering mechanisms:  exclusive filtering ("black-listing") which prevents access to all sites on a predetermined list of Internet sites; inclusive filtering ("white-listing") which allows access only to a predetermined list of Internet sites; and word-screening or phrase-screening which prevents access to web site pages which contain any word or phrase on a predetermined list.

According to the '606 patent, filtering software was first placed on local computers, such that each local computer had its own tool for filtering websites (or other Internet content) requested by the operator of the computer.  But to overcome some of the disadvantages of installing filtering software on each local computer, the '606 patent describes a filtering system that avoids being modified or thwarted by an end-user, and avoids being installed on and dependent on individual end-user hardware and operating systems or tied to a single local area network or a local server platform by installing the filter at the ISP server.  The claimed filtering tool retains the advantage of a filtering tool that is located on each local computer, and individuals are able to customize how requests for Internet content from their own computers are filtered instead of having a universal set of filtering rules applied to everyone's requests.

To summarize, the claimed invention of the '606 patent includes an ISP server that receives a request to access a website, associates the request with a particular user, and identifies the requested website.  The filtering tool then applies the filtering mechanism associated with the particular user to the requested website to determine whether the user associated with that request is allowed access to the website.  The '606 patent describes its filtering system as a novel advance over prior art computer filters, in that no one (in the 1997 timeframe) had previously provided customized filters at a remote server.

The '606 patent contains two groups of claims:  a first group that is limited to individual-customizable filtering on a remote ISP server, and a second group that is further limited to a hybrid filtering scheme implemented on the ISP server comprised of a master-inclusive list, an individual-customizable set of exclusive lists, and an individual-customizable set of inclusive lists.  For the individually customizable filtering claims, BASCOM points to claim 1 as instructive:

1.  A content filtering system for filtering content retrieved from an Internet computer network by individual controlled access network accounts, said filtering system comprising:
    a local client computer generating network access requests for said individual controlled access network accounts;
    at least one filtering scheme;
    a plurality of sets of logical filtering elements; and
    a remote ISP server coupled to said client computer and said Internet computer network, said ISP server associating each said network account to at least one filtering scheme and at least one set of filtering elements, said ISP server further receiving said network access requests from said client computer and executing said associated filtering scheme utilizing said associated set of logical filtering elements.

For the hybrid filtering scheme claims, BASCOM points to claim 23, which depends on claim 22, as instructive:

22.  An ISP server for filtering content forwarded to controlled access network account generating network access requests at a remote client computer, each network access request including a destination address field, said ISP server comprising:
    a master inclusive-list of allowed sites;
    a plurality of sets of exclusive-lists of excluded sites, each controlled access network account associated with at least one set of said plurality of exclusive-lists of excluded sites; and
    a filtering scheme, said filtering scheme allowing said network access request if said destination address exists on said master inclusive-list but not on said at least one associated exclusive-list, whereby said controlled access accounts may be uniquely associated with one or more sets of excluded sites.

23.  The ISP server of claim 22 further comprising:
    a plurality of inclusive-lists of allowed sites, each controlled access user associated with at least one of said plurality of inclusive-lists of allowed sites, said filtering program further allowing said network access request if said requested destination address exists on said at least one associated inclusive-list.

Step One — Abstract Idea

At the District Court, AT&T argued that the claims were directed to the abstract idea of "filtering content," "filtering Internet content," or "determining who gets to see what," each of which is a well-known "method of organizing human activity" like the intermediated settlement concept that was held to be an abstract idea in Alice.  AT&T analogized the idea of filtering content to a parent or librarian forbidding children from reading certain books, and argued that performing the filtering on the Internet does not make the idea non-abstract.

BASCOM responded by arguing that the claims of the '606 patent are not directed to an abstract idea because they address a problem arising in the realm of computer networks, and provide a solution entirely rooted in computer technology, similar to the claims at issue in DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014).  But the District Court agreed with AT&T, as did the Federal Circuit.  Specifically, the Federal Circuit found that claim 1 is directed to filtering content, which is an abstract idea because it is a longstanding, well-known method of organizing human behavior, similar to concepts previously found to be abstract.

Step Two — Inventive Concept

In its search for an "inventive concept," the District Court first determined that no individual limitation was inventive because each limitation, in isolation, was a well-known, generic computer component or a standard filtering mechanism.  The District Court then determined that the limitations in combination were not inventive either because filtering software, apparently composed of filtering schemes and filtering elements, was well-known in the prior art and using ISP servers to filter content was well-known to practitioners.  The District Court also noted that the absence of specific structure for the generic computer components raises the likelihood that such claims could preempt every filtering scheme under the sun.

The Federal Circuit agreed with the District Court that the limitations of the claims, taken individually, recite generic computer, network, and Internet components, none of which is inventive by itself.  However, the Federal Circuit disagreed with the District Court's analysis of the ordered combination of limitations.

The Federal Circuit stated that the District Court's analysis in this case looks similar to an obviousness analysis under 35 U.S.C. § 103, except lacking an explanation of a reason to combine the limitations as claimed.  But the inventive concept inquiry requires more than recognizing that each claim element, by itself, was known in the art.  As is the case here, an inventive concept can be found in the non-conventional and non-generic arrangement of known, conventional pieces.

The Federal Circuit found that the inventive concept described and claimed in the '606 patent is the installation of a filtering tool at a specific location, remote from the end-users, with customizable filtering features specific to each end user.  This design gives the filtering tool both the benefits of a filter on a local computer and the benefits of a filter on the ISP server.  BASCOM explained that the inventive concept rests on taking advantage of the ability of at least some ISPs to identify individual accounts that communicate with the ISP server, and to associate a request for Internet content with a specific individual account.  According to BASCOM, the inventive concept harnesses this technical feature of network technology in a filtering system by associating individual accounts with their own filtering scheme and elements while locating the filtering system on an ISP server.

The Federal Circuit provided a caveat that, "[o]n this limited record, this specific method of filtering Internet content cannot be said, as a matter of law, to have been conventional or generic."

The Federal Circuit noted that (i) the claims do not merely recite the abstract idea of filtering content along with the requirement to perform it on the Internet, or to perform it on a set of generic computer components, and (ii) the claims do not preempt all ways of filtering content on the Internet.

The Federal Circuit seemed to focus on the "technical aspects" of the claimed invention and stated that while filtering content on the Internet was already a known concept, the patent describes how its particular arrangement of elements is a technical improvement over prior art ways of filtering such content (e.g., prior art filters were either susceptible to hacking and dependent on local hardware and software, or confined to an inflexible one size-fits-all scheme).

The Federal Circuit analogized DDR to the present case in which the '606 patent is claiming a technology-based solution (not an abstract-idea-based solution implemented with generic technical components in a conventional way) to filter content on the Internet that overcomes existing problems with other Internet filtering systems.  The Federal Circuit stated that by taking a prior art filter solution (one-size fits-all filter at the ISP server) and making it more dynamic and efficient (providing individualized filtering at the ISP server), the claimed invention represents a "software-based invention[ ] that improve[s] the performance of the computer system itself."

Thus, while the claims of the '606 patent are directed to the abstract idea of filtering content, BASCOM adequately alleged that the claims pass step two of Alice's two-part framework.

In a concurring opinion, Judge Newman stated that she agreed with the Court that the claims of the BASCOM patent are patent-eligible, but wrote separately to urge a more flexible approach to the determination of patent eligibility, "for the two-step protocol for ascertaining whether a patent is for an 'abstract idea' is not always necessary to resolve patent disputes."  Judge Newman stated that there is no good reason why the District Court should be constrained from determining patentability, instead of eligibility based on "abstract idea," when the patentability/validity determination would be dispositive of the dispute.  Judge Newman noted inefficiencies with an initial evidentiary procedure for determination of eligibility at trial and appeal, followed by another cycle of patentability litigation when eligibility is found, when an initial decision directed to patentability may resolve or moot any issue of eligibility.  Initial determination of eligibility often does not resolve patentability, whereas initial determination of patentability issues always resolves or moots eligibility.

Judge Newman specifically proposed returning to the letter of Section 101, where eligibility is recognized for "any new and useful process, machine, manufacture, or composition of matter," and if any of these classes is claimed so broadly or vaguely or improperly as to be deemed an "abstract idea," this could be resolved on application of the requirements and conditions of patentability.  This determination would avoid resolving an undefined "inventive concept" applied to eligibility.

Judge Newman's opinion would be welcomed because determining what satisfies § 101 is unpredictable today, whereas, guidelines for determining what satisfies § 102, § 103, and § 112 are well-established.  Judge Newman wrote that a new and useful process or machine or manufacture or composition of matter is not an abstract idea, and if the claims are deemed to be so broad as to be abstract, application of the requirements of patentability is a direct path to resolution of validity disputes.  More specifically, Judge Newman stated:

Claims that are imprecise or that read on prior art or that are unsupported by description or that are not enabled raise questions of patentability, not eligibility.  35 U.S.C. § 112(a) requires a written description in "full, clear, concise, and exact terms," and § 112(b) requires "claims particularly pointing out and distinctly claiming the subject matter" of the invention.  The process, machine, manufacture, or composition of Section 101 must comply with Section 112.  Subject matter that complies with Section 112 averts the generality or vagueness or imprecision or over-breadth that characterize abstract ideas.  These are conditions of patentability, not of eligibility.  The "conditions and requirements of this title" weed out the abstract idea.

As support for this proposition, Judge Newman noted that in arguing "inventive concept" for the § 101 challenge here, both sides presented arguments that would also be relevant to patentability.  But in the District Court, the only issue that was finally decided was that of eligibility.  Thus, remand is the appropriate next step.  However, direct resolution of patentability would lead to increased efficiency, and savings in cost and time.

Judge Newman concluded by stating that "when evidence of patentability is needed or presented to resolve a challenge to eligibility of claims to a new method or machine or manufacture or composition, the District Court and the parties should have the flexibility to resolve patentability at this threshold," and "[i]f the claims are unpatentable, any issue of abstractness, however defined, is mooted.  And if the subject matter is patentable, it is not an abstract idea."  Judge Newman thus urged that expediency should be an available response to challenges on the ground of "abstract idea."

BASCOM Global Internet Services, Inc. v. AT&T Mobility LLC (Fed. Cir. 2016)
Panel: Circuit Judges Newman, O'Malley, and Chen
Opinion by Circuit Judge Chen; opinion concurring in the result by Circuit Judge Newman