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Promises, Promises: Covenant Not to Sue for Patent Infringement Includes Downstream Users

by Karen Gover | Oct 31, 2024 | Patents

The US Court of Appeals for the Tenth Circuit affirmed that a district court did not err in applying ordinary rules of contract construction to a covenant not to sue and properly found that under the patent exhaustion doctrine, the covenant encompassed downstream users. Fuel Automation Station, LLC v. Energera Inc., Case Nos. 23-1123; -1358 (10th Cir. Oct. 21, 2024) (Carson, Rossman, Federico, JJ.)

Fuel Automation Station (FAS) and Energera compete in the manufacture of automated fuel delivery equipment and related services. Energera holds patents related to its fuel delivery equipment. In 2016 and 2018, Energera sued FAS, alleging that it infringed two of its patents. The parties resolved the suits with a single settlement agreement in 2019. The agreement described the scope of the patent rights at issue and provided mutual covenants not to sue.

Less than a year later, FAS contracted with a Canadian corporation to operate its fuel automation equipment. Energera sued the Canadian corporation for infringement of one of its patents. FAS intervened, then separately sued Energera seeking a declaration that the covenant not to sue authorized FAS to sell or lease its own equipment and, therefore, the patent exhaustion doctrine prohibited Energera from suing downstream users, such as the Canadian corporation. FAS also brought two breach of contract claims asserting that Energera violated the settlement agreement and its included covenant since it was prohibited from suing the Canadian corporation for downstream use or from suing or “otherwise engag[ing]” FAS in legal proceedings.

FAS moved for summary judgment on its declaratory judgment count, which the district court granted. However, the court denied both parties’ later motions for summary judgment on the issue of whether the settlement agreement covered the asserted patent, finding that an ambiguity in the agreement created genuine issues of material fact. A jury subsequently found that the agreement did cover the asserted patent and that Energera breached the covenant. Energera appealed.

After first determining that the district court’s summary judgment ruling was an appealable legal ruling on the issue of the scope of the covenant, the Tenth Circuit found that the district court correctly interpreted the covenant to include downstream users. In the covenant, Energera promised “not to sue [FAS] or otherwise engage [FAS] in any domestic or foreign legal or administrative proceeding” related to the Patent Rights. Citing dictionary definitions of “engage” in its analysis, the Tenth Circuit found that the term “otherwise engage” reasonably could show the parties’ intent to prohibit Energera from suing FAS’s downstream users. The Court then invoked the patent exhaustion doctrine, which it called “the brooding omnipresence in the sky of patent law.” The Court explained that if a patent holder promises not to sue an entity for patent infringement when the entity sells or leases an item, “the doctrine recognizes an inherent promise not to sue downstream users of those items.” Otherwise, the Court pointed out, no reasonable customer would want to buy or lease a patented item from an authorized seller.

As to whether the [...]

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What a Croc! False Claim That Product Feature Is Patented Can Give Rise to Lanham Act Violation

by Karen Gover | Oct 17, 2024 | Trademarks

The US Court of Appeals for the Federal Circuit reversed and remanded a grant of summary judgment on a false advertising claim, concluding that a cause of action under Section 43(a) of the Lanham Act can arise when a party falsely claims to hold a patent on a product feature and advertises that feature in a misleading way. Crocs, Inc. v. Effervescent, Inc., Case No. 2022-2160 (Fed. Cir. Oct. 3, 2024) (Reyna, Cunningham, JJ.; Albright, District J., sitting by designation).

Crocs, the well-known maker of molded foam footwear, sued several competitor shoe distributors for patent infringement in 2006. The case was stayed pending an action before the International Trade Commission but resumed in 2012 when Croc added competitor U.S.A. Dawgs as a defendant to the district court litigation. The case was stayed twice more, from 2012 to 2016 and 2018 to 2020. In between those stays, in May 2016, Dawgs filed a counterclaim against Crocs and 18 of its current and former officers and directors, alleging false advertising violations of Section 43(a) of the Lanham Act. 15 U.S.C. § 1125(a). The individual defendants were later dismissed from the action.

Dawgs claimed that Crocs deceived consumers and damaged its competitors by falsely describing its molded footwear material, which it calls “Croslite,” as “patented,” “proprietary,” and “exclusive.” Dawgs alleged that it was damaged by Crocs’ false advertisements and commercial misrepresentations because Crocs suggested that its competitors’ footwear material was inferior. Croslite is in fact not patented, as Crocs conceded.

Crocs argued in its motion for summary judgment that Dawgs failed as a matter of law to state a cause of action under Section 43(a) because the alleged advertising statements were directed to a false designation of authorship of the shoe products and not to their nature, characteristics, or qualities, as Section 43(a)(1)(B) requires. The district court agreed. Applying the Supreme Court’s 2003 decision in Dastar Corp. v. Twentieth Century Fox Film Corp. and the Federal Circuit’s 2009 decision in Baden Sports, Inc. v. Molten USA, Inc., the district court granted summary judgment to Crocs. It reasoned that falsely claiming to have “patented” something is similar to a false claim of authorship or inventorship, not to the types of false advertising prohibited by the Lanham Act. Dawgs appealed.

Dawgs argued that the district court’s application of Dastar and Baden to the circumstances of its case was inapposite, and the Federal Circuit agreed. In Dastar, the petitioner copied a television series in the public domain, made minor changes, and sold it as a video set, passing it off as its own. The Supreme Court held that a false claim of authorship does not give rise to a cause of action under the Lanham Act. Similarly, in Baden, the Federal Circuit found that a basketball manufacturer’s false suggestion that it was the author of the “innovative” “dual-cushion technology” in its basketballs did not give rise to a false advertising claim under the Lanham Act.

In this case, however, the Federal Circuit reasoned that Croc’s false [...]

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Stay Focused: New Point of View of Patent Eligibility

by Cecilia Choy, Ph.D. | Sep 19, 2024 | Patents

The US Court of Appeals for the Federal Circuit reversed and remanded a district court’s decision that the asserted claims were patent ineligible under 35 U.S.C. § 101, finding that the district court improperly characterized the claims at an “impermissibly high level of generality.” Contour IP Holding LLC v. GoPro, Inc., Case Nos. 22-1654; -1691 (Fed. Cir. Sept. 9, 2024) (Prost, Schall, Reyna, JJ.)

Contour owns two patents related to portable point-of-view (POV) video cameras. The patents disclose a hands-free POV action sports video camera configured for remote image acquisition control and viewing. The key embodiment describes “dual recording” where the camera generates video recordings “in two formats, high quality and low quality.” The lower quality file is streamed to a remote device for real-time adjustment of bandwidth limiting video parameters while the higher quality version of the recording is saved for later viewing.

In 2015, Contour sued GoPro, alleging that several GoPro products infringed the asserted patents. In 2021, Contour again sued GoPro, alleging that several newer products infringed the same patents. In 2021, after the district court granted partial summary judgment that GoPro’s accused products infringed the claims in the first lawsuit, GoPro filed a motion in the second lawsuit challenging the claims as patent ineligible under 35 U.S.C. § 101. GoPro relied heavily on the Federal Circuit’s 2021 decision in Yu v. Apple in its arguments for ineligibility. The district court initially denied the motion, but when GoPro raised the issue again at summary judgment, the district court agreed with GoPro and found the claims patent ineligible under § 101.

At step one of the Alice eligibility test the district court found that the claims were directed to the abstract idea of creating and transmitting video at two different resolutions and adjusting the video’s settings remotely. At Alice step two, the district court found that the claim recited only functional, result-oriented language without indicating that physical components behaved in any way other than their basic generic tasks. Contour appealed.

The Federal Circuit reversed, finding that when read as a whole, the claim was directed to a specific means that improved a relevant technology and required “specific, technological means – parallel data stream recording with the low-quality recording wirelessly transferred to a remote device – that in turn provide a technological improvement to the real time viewing capabilities of a POV camera’s recordings on a remote device.”

The Federal Circuit found that the district court’s decision was based on an “impermissibly high level of generality” that led to its incorrect conclusion that the claims were related to an abstract idea. The Court also disagreed with GoPro’s argument that Yu was dispositive in this case, explaining that in Yu, there was no dispute that the “idea and practice of using multiple pictures to enhance each other has been known by photographers for over a century.” The Court determined that Contour’s claim enabled a POV camera, with its dual recording capability, to operate differently than it otherwise [...]

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The Conversation Continues: Some Post-Patent-Termination Royalties Are Acceptable

by Kathleen Lynch | Sep 12, 2024 | Patents

For the second time in less than two weeks, a circuit court decided an appeal hinging on the Brulotte rule, which holds that patent royalties are impermissible when based on payments for the use of expired patents. Like the US Court of Appeals for the Ninth Circuit, the Fourth Circuit upheld a royalty agreement that purported to require payments after patent expiration. Ares Trading S.A. v. Dyax Corp., Case No. 23-1487 (4th Cir. Aug. 14, 2024) (Krauser, Porter, Chung, JJ.)

Dyax is a biotechnology company engaged in “phage display” research – a laboratory process used to identify antibody fragments for use in developing medications. Dyax holds multiple patents related to phage display, including licenses to patents owned by Cambridge Antibody Technology (CAT). Dyax and Ares entered a licensing agreement. Dyax’s main obligation was to use its phage display technology to identify antibody fragments and then provide those fragments to Ares so that Ares could incorporate them into commercial medications, including one called Bavencio. In exchange, Ares agreed to pay Dyax at various research milestones and pay royalties for identified products, including Bavencio. Although Bavencio was first sold in 2017, the last CAT patent expired in 2018.

After learning of the Brulotte rule, Ares tried to renegotiate its contract obligations. When renegotiation attempts failed, Ares sued Dyax, seeking multiple related declaratory judgments revolving around its argument that its royalty obligations to Dyax were unenforceable under Brulotte. Dyax countersued on six claims, including for declaratory judgment that Brulotte did not apply. The district court found the royalty obligation enforceable and not in violation of Brulotte. Ares appealed.

Ares asked the Fourth Circuit to reconsider the applicability of the Brulotte rule and to relatedly find that Dyax had breached the covenant of good faith and fair dealing. The Fourth Circuit first examined its own jurisdiction in the context of the Federal Circuit’s exclusive jurisdiction over patent appeals. Of the 10 total claims and counterclaims, nine arose under Massachusetts contract law. According to the Fourth Circuit, these were not “substantial” patent law claims and thus regional circuit appellate jurisdiction was appropriate.

The Fourth Circuit next turned to the Brulotte prohibition on post-termination royalties and found no violation because “Ares’ royalty obligation is not calculated based on activity requiring post-expiration use of inventions” covered by Dyax or CAT patents. The Court emphasized the policies underpinning the federal patent regime and the Brulotte rule, particularly the importance of inventions entering the public space once a patent expires to allow continued innovation and general use of the once-patented invention. The Court also explained its understanding of the nuances of Brulotte, as informed by the Supreme Court’s 2015 decision in Kimble v. Marvel. For instance, a court’s inquiry must focus on post-expiration use, so where “royalties are not calculated based on activity requiring post-expiration use, they do not hinder post-expiration use ‘on their face’ and Brulotte is not implicated.” In the present case, this was a key delineation because the Fourth Circuit found that Ares’ [...]

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Some Post-Expiration Patent Royalty Payments May Be OK

by Kathleen Lynch | Sep 5, 2024 | Patents

The US Court of Appeals for the Ninth Circuit reversed a district court’s finding that a contract impermissibly allowed for patent royalties after the patent expired because the post-termination royalty payments were allocated to non-US patents. C.R. Bard, Inc. v. Atrium Med. Corp., Case No. 23-16020 (9th Cir. Aug. 23, 2024) (Friedland, Mendoza, Desai, JJ.) (per curiam).

C.R. Bard held one US and one Canadian patent covering a type of vascular graft. In 2011, Bard and Atrium entered a licensing agreement to settle a patent dispute. Under the terms of the agreement, Atrium agreed to pay Bard a 15% royalty on covered US sales until 2019 (when the US patent expired) and a 15% royalty on covered Canadian sales until 2024 (when the Canadian patent expired). The contract also included a quarterly royalty minimum. Through 2019, as the contract contemplated, Atrium paid royalties on its US and Canadian sales. Because of a US Food and Drug Administration delay, Atrium had lower than expected sales and never exceeded the quarterly minimum royalty.

Atrium eventually refused to continue making royalty payments, which after 2019 covered only Canadian sales (likewise never exceeding the quarterly minimum). Bard sued for breach of contract in 2021. Atrium argued that the royalty provision was unenforceable under Brulotte v. Thys, a 1964 US Supreme Court decision holding that collecting royalties for patent use after a patent’s expiration constitutes patent misuse. The district court determined that the “clear and primary purpose” of the parties’ contractual minimum royalty was to compensate Bard for US sales of the patented product. The district court therefore agreed with Atrium. Bard appealed.

The Ninth Circuit undertook to determine whether the terms of the parties’ contract constituted patent misuse under Brulotte. The Ninth Circuit first explained that in Brulotte, the Supreme Court considered a contract between the owner of multiple patents related to picking hops and farmers who made seasonal license payments to use machines incorporating those patents. The Supreme Court found patent misuse because the license amount did not decrease as patents incorporated into the machines expired, which indicated that the farmers were paying to use expired patents.

Despite pushback, the Supreme Court refused to overturn Brulotte in 2015 when it decided Kimble v. Marvel. That case involved a patent holder’s license allowing Marvel to incorporate patented web-shooting technology into a Spiderman toy. In Kimble, the Ninth Circuit had ruled that the license agreement was invalid under Brulotte because it required Marvel to continue to pay a royalty fee after the patent expired. The Ninth Circuit noted, however, that an ongoing license after the expiration of a patent may be permissible if the license contemplates both patented and non-patented features, as long as the terms of the royalty adjust when the patent expires. For instance, a license covering both a patented invention and a trade secret may continue past the life of the patent, as long as the royalty rate diminishes after the patent expires. This reflects that the royalty is [...]

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Later-Filed, Earlier-Expiring Patent Not an ODP Reference

by Alexander P. Ott | Aug 29, 2024 | Patents

Addressing invalidity due to obvious-type double patenting (ODP) based on later-filed-related patents, the US Court of Appeals for the Federal Circuit reversed a district court’s application of In re Cellect (Fed. Cir. 2023) and held that the later-filed, earlier-expiring continuation patents were not available as ODP references against the earlier-filed, later-expiring patent. Allergan USA, Inc. v. MSN Labs Private Ltd., Case No. 24-1061 (Fed. Cir. Aug. 13, 2024) (Lourie, Dyk, Reyna JJ.)

In 2015, the US Food and Drug Administration approved a new drug application for a drug sold by Allergan to treat the symptoms of irritable bowel syndrome. In 2019, Sun Pharma filed an abbreviated new drug application (ANDA) seeking to market a generic version of the drug. Allergan then sued Sun Pharma and MSN Labs for infringement of four patents related to the drug. One of the patents, which claims a compound of the drug, had been granted almost three years of patent term adjustment (PTA) and was followed by two more patents from continuation applications in the same patent family. The other three patents all claimed tablet forms of the drug. The claims of one of the patents recited that a glidant was optional while the claims of the other two patents did not require a glidant at all.

The US District Court for the District of Delaware held a three-day bench trial and concluded that the asserted claim of the compound patent was invalid under the ODP doctrine and that the claims of the three tablet patents were invalid for lack of written description. On the issue of ODP, the district court found Allergan’s “first-filed, first-issued” distinction “immaterial.” The district court stated that “[w]hen analyzing ODP, a court compares patent expiration dates, rather than filing or issuance dates.” Allergan appealed.

The Federal Circuit reversed on both issues. The Court held that the claims of the later-filed, earlier-expiring continuation patents were not available as ODP references against the first patent because the purpose of the ODP doctrine is to prevent patentees from obtaining a second patent to effectively extend the life of the first patent. The Federal Circuit explained that the district court misread Cellect as binding it to solely consider expiration dates in the ODP analysis. The Court explained that Cellect only controls to the extent that it requires a court to consider the later-filed patent’s expiration date (i.e., the expiration date after the addition of PTA) in its ODP analysis, not the expiration date that it would have shared with the reference patents in the absence of a PTA award. The panel majority emphasized that it does not follow that the later-filed patent must be invalidated by the earlier-filed reference patents simply because it expires later. The majority noted that “Cellect does not address, let alone resolve, any variation of the question presented here – namely, under what circumstances can a claim properly serve as an ODP reference – and therefore has little to say on the precise issue before us.”

The Federal Circuit also [...]

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Patent by Secret Process: Perils of Pre-Patent Profiting

by Connor S. Romm | Aug 22, 2024 | America Invents Act, Patents

The US Court of Appeals for the Federal Circuit affirmed the International Trade Commission’s (ITC) determination that the asserted process patents were invalid under the America Invents Act (AIA) because products made using the patented process were sold more than one year before the patents’ effective filing dates. Celanese International Corporation, et al. v. International Trade Commission, Case No. 22-1827 (Fed. Cir. Aug. 12, 2024) (Reyna, Mayer, Cunningham, JJ.)

Celanese owns patents that cover a process for making the artificial sweetener acesulfame potassium (Ace-K). It was undisputed that Celanese’s patented process was in secret use in Europe and that Ace-K produced using this process had been sold in the United States before the patents’ effective filing dates. Under pre-AIA caselaw, such sales of products made using a secret process before the critical date would trigger the on-sale bar and invalidate any later-sought patent claims on that process. However, because Celanese’s patents had effective filing dates after March 15, 2013, the AIA rules applied. Thus, the case hinged on whether the AIA altered this rule.

In 2019, in Helsinn v. Teva, the Supreme Court addressed similar facts and confirmed that the Federal Circuit’s pre-AIA “on sale” case law, which established that “secret sales” could invalidate a patent, still applied. In Helsinn, the patentee had obtained a patent related to a fixed dose of palonosetron. Prior to the critical date, the patentee entered into a supply and purchase agreement with a third party that covered this same fixed dose of palonosetron. The Supreme Court concluded that Congress, by reenacting similar language in the AIA concerning the on-sale bar, appeared to have adopted the Federal Circuit’s pre-AIA interpretation of the on-sale bar. Accordingly, the Supreme Court held that, consistent with Federal Circuit pre-AIA precedent, an inventor’s prior sale of an invention to a third party can qualify as invalidating prior art even if the third party is obligated to keep the invention confidential.

However, unlike in Helsinn, where the claimed invention was the very subject of the commercial sale at issue, Celanese’s patents covered the secret process used to make Ace-K, and it was only the resulting Ace-K that was the subject of commercial sale – not the patented process itself. Although this distinction would not alter the outcome under pre-AIA law, Celanese averred that the AIA had revised the rules for this specific situation. To support its theory, Celanese referenced, among other things, the AIA’s use of the phrase “claimed invention” as opposed to simply “invention” as recited in pre-AIA discussion of the on-sale bar. According to Celanese, this change implied that the invention specifically “claimed” must be on sale to qualify as invalidating prior art.

The ITC rejected Celanese’s argument, concluding that the AIA did not alter the pre-AIA rule that “a patentee’s sale of an unpatented product made according to a secret method triggers the on-sale bar to patentability.” Accordingly, the ITC found that Celanese’s patents were invalid because Celanese sold Ace-K made using its secret process more [...]

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Don’t Mess With Anna: Texas Town Schools Patent Owner on § 101

by Tessa Kroll | Aug 1, 2024 | Patents

On cross-appeals from a granted Fed. R. of Civ. Pro. 12(c) motion on subject matter eligibility, the US Court of Appeals for the Federal Circuit found that a patent directed to a method for “assist[ing] an investigator in conducting a background investigation” did not claim patent-eligible subject matter, but that the mere assertion of the patent did not render the case “exceptional” for the purposes of attorneys’ fees. Miller Mendel, Inc. v. City of Anna, Texas, Case No. 22-1753 (Fed. Cir. July 18, 2024) (Moore, C.J.; Cunningham, Stoll, JJ.)

Miller Mendel sued the City of Anna, Texas, for infringement of claims directed to software for managing pre-employment background investigations based on the Anna police department’s use of the Guardian Alliance Technologies (GAT) software platform. Miller Mendel’s complaint asserted “at least claims 1, 5, and 15” of the patent, each of which generally recited a “method for a computing device with a processor and a system memory to assist an investigator in conducting a background investigation” comprising the steps of receiving data identifying the applicant, storing the data, transmitting an applicant hyperlink to the applicant’s email address and receiving an applicant’s response.

Anna moved for judgment on the pleadings, alleging that the patent claims were ineligible for patent protection under 35 U.S.C. § 101. After the district court granted the motion, Miller Mendel filed a motion for reconsideration, arguing that the district court lacked jurisdiction to invalidate any unasserted patent claims. The district court denied the reconsideration motion but clarified that its decision was limited to asserted claims 1, 5 and 15. Anna also filed a motion for attorneys’ fees, which the district court denied, finding that the case was not exceptional. Miller Mendel appealed the § 101 issue, and Anna cross-appealed on the unasserted claims and attorneys’ fees issues.

The Federal Circuit first addressed Miller Mendel’s argument that the district court erred in relying on a declaration filed by Anna in ruling on the Rule 12(c) motion. The Court acknowledged that a Rule 12(c) motion must be treated as one for summary judgment if matters outside the pleadings are presented to and not excluded by the court. However, the district court explained that the declaration was not relevant to its decision, and it did not rely on any material outside the pleadings in its § 101 analysis. Thus, the Federal Circuit found that any error in failing to explicitly exclude the declaration was harmless.

Turning next to the patent eligibility analysis, the Federal Circuit agreed with the district court that under Alice step one, the asserted claims were directed to the abstract idea of performing a background check. The claims and specification emphasized that the invention was a system to “help a background investigator more efficiently and effectively conduct a background investigation” by “automating a majority of the tasks of a common pre-employment background investigation so that fewer hardcopy documents are necessary.” In other words, the problem facing the inventor was the abstract idea of performing background checks more efficiently [...]

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Beware Equitable Doctrine of Issue Preclusion in Multiparty, Multivenue Patent Campaigns

by Sydney E. McDermott | Aug 1, 2024 | Patents

Addressing for the first time whether an invalidity order merges with a voluntary dismissal for purposes of finality, the US Court of Appeals for the Federal Circuit held that an interlocutory order merges with the final dismissal, rendering the interlocutory order final for purposes of issue preclusion. Koss Corp. v. Bose Corp., Case No. 22-2090 (Fed. Cir. July 19, 2024) (Hughes, Stoll, Cunningham, JJ.). As a consequence, the Federal Circuit found that the patent owner’s appeal from an adverse decision in an inter partes review (IPR) was moot under the doctrine of nonmutual collateral estoppel.

In July 2020, Koss filed a patent infringement lawsuit against Bose in the Western District of Texas, asserting three patents whose common specification discloses a “wireless earphone that communicates with a digital-audio source, such as an iPod, over an ad hoc wireless network like Bluetooth.” The same day, Koss asserted the same patents against Plantronics. Bose filed a motion challenging venue and also petitioned for inter partes review (IPR) of the three patents. Later in 2020, Bose filed a declaratory judgment action seeking a declaration of noninfringement in the District of Massachusetts on the three patents Koss asserted against Bose in the Texas litigation. The Massachusetts litigation was stayed pending the resolution of the venue motions in the Texas case.

In 2021, the Texas court dismissed Koss’s complaint against Bose for improper venue. Koss then asserted a counterclaim of infringement of the same three patents in the Massachusetts litigation. The Massachusetts court again stayed the litigation pending the resolution of the IPRs, which (by that time) the Patent Trial & Appeal Board had instituted. Meanwhile, Koss’s case against Plantronics was transferred to the Northern District of California, and Plantronics moved to dismiss the complaint on the ground that all the asserted claims (which included all the claims asserted against Bose) were invalid under 35 U.S.C. § 101. The California court granted Plantronics’s motion, rendering all the asserted claims invalid. However, that order did not finally dispose of the case.

Koss then moved for leave to amend its complaint, which the California district court granted. In the amended complaint, Koss asserted two additional patents. Plantronics moved to dismiss the asserted claims in those patents as invalid under § 101. The parties fully briefed Plantronics’s motion, but before the district court issued a decision on the merits of that motion, Koss voluntarily stipulated to dismissal with prejudice, disposing of the lawsuit in its entirety. Koss did not ask the district court to vacate its earlier order finding certain claims invalid under § 101. The California district court then issued an order dismissing the case with prejudice. The deadline for Koss to appeal the judgment came and went – Koss did not appeal.

Arguing that the patents had been finally adjudicated invalid in the Plantronics litigation, Bose moved to dismiss Koss’s appeal from the Board in the IPR proceedings as moot. Koss opposed the motion, arguing that its amended complaint rendered the invalidity decision on the prior complaint non-final because the [...]

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AI Takeover: PTO Issues More Patent Eligibility Guidance for AI Inventions

by Peter Brunovskis, PhD | Jul 25, 2024 | Patents, Technology

The US Patent & Trademark Office (PTO) issued a 2024 Guidance Update on Patent Subject Matter Eligibility, Including on Artificial Intelligence, which focuses on subject matter eligibility for artificial intelligence (AI)-based inventions. 89 Fed. Reg. 58128 (July 17, 2024).

The new guidance is part of the PTO’s ongoing efforts since 2019 to provide clarity on the issue of subject matter eligibility under 35 U.S.C. § 101 and to promote responsible innovation, competition and collaboration in AI technology development as espoused in the Biden administration’s Executive Order 14110, “Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence.” The guidance follows on the heels of the PTO’s recently issued Guidance on Use of AI-Based Tools in Practice Before the PTO and Inventorship Guidance for AI-Assisted Inventions.

The new guidance aims to assist PTO examiners, patent practitioners and stakeholders in evaluating the subject matter eligibility of patent claims involving AI technology. The guidance includes three main sections:

Section I provides background on issues concerning patentability of AI inventions.
Section II provides a general overview of the PTO’s patent subject matter eligibility guidance developed over the past five years.
Section III provides an update to certain areas of the guidance applicable to AI inventions.

As in the prior subject matter eligibility updates and discussions, the guidance document’s analysis of subject matter eligibility focuses on the Alice two-step analysis: an evaluation of whether a claim is directed to a judicial exception (i.e., abstract ideas, natural phenomena, laws of nature), and if so, an evaluation of whether the claim as a whole integrates the judicial exception into a practical application of that exception and/or an analysis of whether the claim recites additional elements that amount to significantly more than the recited judicial exception itself. The guidance highlights a number of relevant recent Federal Circuit cases and is further accompanied by three new examples with hypothetical patent claims for assisting PTO examiners in applying the guidance to an analysis of patent claim eligibility under 35 U.S.C. § 101.

The PTO requests written comments to the guidance through the Federal eRulemaking Portal by September 16, 2024. If there is anything to be gleaned from the guidance or the current state of patentability for AI inventions, the topic will remain highly controversial and heavily debated.

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