Source: https://www.ipwatchdog.com/2018/07/16/berkheimer-administrative-procedure-act-pto-motions-vacate-ptab-%C2%A7-101-decisions/id=99194/
Timestamp: 2019-04-24 10:12:03+00:00

Document:
After several years in which the U.S. Patent and Trademark Office (PTO) did not seem to have an official position on the issue, and many Patent Trial and Appeal Board (PTAB) panels took a position that was clearly at variance with the Administrative Procedure Act (APA), the PTO recently seems to be acquiescing to principles that the patent bar has been urging for years: (a) the PTO is subject to the same Administrative Procedure Act obligations as any other agency, and therefore cannot make factual findings without substantial evidence, and (b) there’s no carve-out for factual findings underlying § 101 subject matter eligibility rejections.
In particular, as outlined below, the PTO has recently moved to vacate PTAB decisions in several Federal Circuit appeals that had challenged eligibility conclusions as being improperly based on unsupported factual findings. These cases are only the tip of the iceberg, and it is tough to estimate how many pending PTAB appeals will require reversal of examiner rejections for this same reason. When a party has to backtrack on this many cases, it is usually because multiple failsafes failed. In this case, it is because multiple failsafes were bypassed or intentionally disabled. The bypassed failsafes included laws, such as the APA, designed to ensure agency predictability, efficiency, precision, and fairness.
We are hopeful that the PTO is using this forced stand-down on multiple appeals as a teachable moment. Will the PTO apply the lessons learned in a § 101 context to improve predictability and efficiency of the entire examination process? And maybe—not so coincidentally—will the PTO take this opportunity to enhance compliance with laws and failsafes that are designed to ensure agency predictability, efficiency, precision, and fairness, laws and failsafes that could have prevented this need to ask the Federal Circuit to vacate PTAB decisions?
Patent examiners at the PTO have a very difficult job. One of the reasons that their job is so difficult is the requirement to locate and provide evidence to support their factual findings. Over the last several years, an unfortunate practice arose at the PTO in which some examiners, in examining claims under § 101 for eligible subject matter, would routinely dismiss claim elements as conventional or well-known for purposes of patent eligibility analysis, without citing supporting evidence.
In addition to being unfair to patent applicants, this approach was also unfair to other, more thorough patent examiners who spent comparatively more time providing a rigorous examination but would end up looking less productive than examiners who took shortcuts. And, of course, these shortcuts are contrary to the “substantial evidence” requirement of the APA.
Several recent events reversing this trend are well known to the patent bar.
Second, in April, the PTO issued a memo implementing changes in examination policy limiting an examiner’s ability to find an element or combination of elements to be conventional without evidentiary support or taking of official notice. The PTO followed this up with examiner training guidance that further limits examiner discretion.
In June, a third, less visible, event evidenced that the PTO has truly taken Berkheimer to heart. As Gene reported here and here, the PTO filed motions (here and here) in several Federal Circuit appeals to vacate indefensible PTAB decisions that had affirmed § 101 rejections, and requested remand for reconsideration by the PTAB in view of Berkheimer and the Berkheimer memo.
The Federal Circuit has now issued orders in several of these cases, granting the PTO’s requested vacatur and remand.
Hopefully, the Director’s position in these appeals will affect the practice by some at the PTO of dismissing claim elements as well-known or conventional for purposes of § 101 analysis without providing any evidentiary support—we offer some suggestions in the concluding paragraphs of this article.
This memo reflected PTO confusion on the relationship of patent eligibility inquiries to the law of evidence, administrative law, and several related topics. Comment letters from the public reminded the PTO that all decisions are subject to the APA, and that APA requirements are significantly different (and, in many respects, stricter) than fact-finding and evidence rules available to Article III courts. Under a directive from the Executive Office of the President, the PTO was obligated to produce a “robust response to comments.” Unfortunately, the PTO didn’t follow this law. This neglect of this failsafe led to neglect of careful consideration of the public letters that the PTO itself solicited, and a lost chance to correct an error.
Legal principles that are basic and unassailable to lawyers are seldom self-implementing among examiners (very few of whom are lawyers, and all of whom operate under a production count system). Without guidance, basic legal principles can be overlooked, especially those that take time. Some examiners would routinely issue § 101 rejections in which claim elements were dismissed as conventional with no evidentiary support.
Although it is understandable that examiners might make this mistake, the patent bar expected that the PTAB would act with “competent legal knowledge” as required by 35 U.S.C. § 6, and recognize its “substantial evidence” obligations under the APA and course-correct on this issue. Initially, it seemed like this issue might work itself out quickly.
Unfortunately, rather than this view catching on more broadly at the PTO, some PTAB panels swung the opposite direction. Another of the failsafes failed: many PTAB decisions on the issue brushed aside the APA, and instead relied on a naïve understanding of the law to affirm evidence-less examiner rejections. If one searches PTAB decisions that cite Poisson or 2012-011084, one will find several dozen decisions that brush aside the “substantial evidence” requirement of the APA, misallocate the burden of proof, and confuse “issues of law” with underlying “issues of fact,” to affirm an examiner on issues of fact for which the examiner proffered no evidence.
This line of PTAB decisions is especially surprising: in the very case that sparked the increase in § 101 rejections, Alice Corp., the Supreme Court thoroughly cited support for factual findings.
This “no evidence” practice could have ended early, had other PTAB panels appreciated what the Poisson panel had recognized: administrative agencies cannot make factual findings without substantial evidence support. In this regard, both the Supreme Court and Federal Circuit have made clear that the APA governs the PTO and examiners just like any other agency, and that “[a]n abuse of discretion occurs where the decision is based on … factual findings that are not supported by substantial evidence.” But this failsafe failed as well.
Even before Berkheimer I, it seemed inarguable that the question of whether a claim element or combination of elements is conventional is a question of fact, and that an examiner finding that a claim element is well-known or conventional requires substantial evidence support. As Judge Moore noted in May 2018 in her concurrence of the denial for rehearing en banc in Berkheimer II, “Berkheimer and Aatrix stand for the unremarkable proposition that whether a claim element or combination of elements would have been well-understood, routine, and conventional to a skilled artisan in the relevant field at a particular point in time is a question of fact.” This is reinforced by the Supreme Court’s recent § 101 decisions that cite evidentiary support for factual findings that certain practices were long prevalent.
The situation became a bit strange in that examiners would commonly make an unsupported factual finding that a claim limitation was conventional for purposes of § 101 analysis, even though they would clearly recognize that it would be inappropriate to take official notice that the same claim limitation was known for purposes of a § 103 rejection. And the situation becomes stranger still when one considers jurisdictional effects: the MPEP (and MPEP § 2144.03 in particular), like all other agency staff manuals that state mandatory obligations of agency personnel, limits the authority that the Director delegates to examiners—when examiners act outside of agency guidance, their actions are “illegal,” “of no effect,” and not within the authority of 35 U.S.C. § 131. And that, in turn, affects the scope of judgment available to the PTAB—when an examiner acts outside the scope of his or her delegated authority, as a matter of procedure, the PTAB has no rejection before it, and can at most examine de novo to raise a “new ground of rejection.” The PTAB cannot “affirm” a non-existent rejection.
Given all of this, it seemed odd that the PTAB would affirm an examiner rejection based on a factual finding that was not supported by substantial evidence, and it is surprising that the approach in Poisson was not more widely followed.
It is great to see the PTAB increasingly appreciating its obligations under the APA. Regardless of the path taken, the PTO’s shift in approach to this issue seems very promising, and hopefully applicants will no longer have to address rejections in which claim limitations are dismissed as conventional for purposes of the § 101 analysis without any evidentiary support.
We are hopeful that this shift in approach is a harbinger of a larger trend towards emphasis on adherence to established administrative law principles, which in turn should improve predictability during the examination process. In this regard, we wanted to take this opportunity to highlight a couple of items that the PTO is most likely already well aware of, but that we think can help further this goal of predictability.
Agencies must review their guidance documents for “mandatory language such as ‘shall,’ ‘must,’ ‘required’ or ‘requirement’” and remove such language “unless the agency is using these words to describe a statutory or regulatory requirement, or the language is addressed to agency staff.” Guidance documents are not to be applied as “law” against applicants—the agency may not rely on guidance to “foreclose consideration by the agency of positions advanced by private parties,” but must consider alternatives.
Agencies are to train their employees in the above principles.
In his first ten days in office, President Trump reminded all agencies of their obligations under the Good Guidance Bulletin. These are simple requirements: some required by law, some required by concerns for predictability and efficiency. This might be a good opportunity for the PTO to implement the Bulletin. Implementation of the Bulletin is one of the easiest things the PTO could do to improve predictability and precision of agency proceedings.
Second, at the March 2018 Federal Circuit Judicial Conference, Judge Plager (the Federal Circuit’s administrative law expert) recommended that all members of the patent bar would do well to understand administrative law better, and that a really good starting point is a paper from ABA Landslide, The PTAB is Not an Article III Court, Part 1: A Primer in Federal Agency Rulemaking. If it’s a good read for the patent bar, it might be a good read for all adjudicatory staff at the PTO.
Third, there are most likely a large number of appeals sitting at the PTAB with an examiner § 101 rejection that lacks substantial evidence support. Perhaps the PTAB should institute a triage procedure for incoming appeals (and the entire docket up to cases that are up for imminent decision) to get untenable rejections off the PTAB’s backlog (and, incidentally, send a signal to examiners that the PTO will not allow incomplete work to clog the entire workflow pipeline)—any rejection where the examiner has a clear omission in the prima facie evidence or explanation should be remanded. The patent bar would likely be willing to help with this triage: one possible approach might be for the PTAB to invite appellants to file a paper requesting this triage for appeals where no “competent legal knowledge” balancing or deliberation is required, with the remedy being a simple remand under MPEP § 1211 with an instruction to the examiner to correct an omission of evidence or explanation (on § 101 or any other issue).
 Robert W. Bahr, Memorandum to Patent Examining Corps, Changes in Examination Procedure Pertaining to Subject Matter Eligibility, Recent Subject Matter Eligibility Decision (Berkheimer v. HP, Inc.), (Apr. 19, 2018).
 USPTO, Subject Matter Eligibility: Well-Understood, Routine, Conventional Activity, (Apr 2018)).
 In re Intelligent Medical Objects, Inc., appeal no. 2018-1586, Order, document 28 (Fed. Cir. Jun. 27, 2018); In re Allscripts Software, LLC, appeal no. 2018-1451, Order, document 25 (Fed. Cir. Jun. 4, 2018). We suspect there are other similar Federal Circuit appeals—we are aware of at least one appeal where this issue was raised that is currently awaiting a decision (In re Villena, appeal no. 2017-2069).
 Patent and Trademark Office, 2014 Interim Guidance on Patent Subject Matter Eligibility, 79 Fed. Reg. 74618, 74624 col. 1, lines 58-66 (Dec. 16, 2014).
 79 Fed. Reg. at 74624, col. 2, lines 19-38.
 See e.g, IEEE?USA, Comments on July 2015 Update on Subject Matter Eligibility, https://www.uspto.gov/sites/default/files/documents/2015ig_a_ieee_02nov2015.pdf (Oct. 30, 2015).
 Executive Office of the President, Final Bulletin for Agency Good Guidance Practices, OMB Bulletin 07-02, at § IV(1)(d), (Jan. 18, 2007), 72 Fed. Reg. 3432, 3440 (Jan. 25, 2007).
 Note the absence of any response to comment on the PTO’s web page—the comments are at https://www.uspto.gov/patent/laws-and-regulations/comments-public/comments-july-2015-update-subject-matter-eligibility and https://www.uspto.gov/patent/laws-and-regulations/comments-public/comments-2014-interim-guidance-patent-subject-matter. But there’s no response to comments.
 Ex parte Poisson, U.S. Pat. App. No. 12/427,040, appeal no. 2012-011084, slip op. at 5-6 (PTAB Feb. 27, 2015).
 Ex parte Frye, 94 USPQ2d 1072 (BPAI 2010) (on ex parte appeal, burden of proof lies with examiner).
 Alice Corp. Pty. Ltd. v CLS Bank Int’l¸ 134 S.Ct. 2347 (2014).
 Star Fruits S.N.C. v. U.S., 393 F.3d 1277, 1281 (Fed. Cir. 2005); see Dickinson v. Zurko, 527 U.S. 150, 152 (1999); In re Gartside, 203 F.3d 1305, 1313 (Fed. Cir. 2000).
 Berkheimer v. HP Inc., 890 F.3d 1369 (Fed. Cir. 2018).
 Berkheimer II, 890 F.3d at 1370 (Moore, J. concurring).
 See Alice, 134 S.Ct. at 2355; Bilski v. Kappos, 130 S.Ct. 3218, 3231 (2010); see also Parker v. Flook, 437 U.S. 584, 588 (1978) (assuming, “since respondent does not challenge the examiner’s finding, that the formula is the only novel feature of respondent’s method.”).
 In re Ahlert, 424 F.2d 1088, 1094 (CCPA 1970); MPEP § 2144.03.
 In re Eynde, 480 F.2d 1364, 1370 (CCPA 1973).
 In re Zurko, 258 F.3d 1379, 1385 (Fed. Cir. 2001).
 Service v. Dulles, 354 U.S. 363, 387–88 (1957) (agency action without the procedures set forth in the agency’s unpublished manual was set aside); Vitarelli v. Seaton, 359 U.S. 535, 545 (1959) (agency action inconsistent with agency’s guidance was “illegal and of no effect”).
 Ex parte Bhogal, appeal no. 2016-008742, slip op. at 6 (PTAB Mar. 19, 2018).
 Bhogal, slip op. at 6, citing Berkheimer I, 881 F.3d at 1368).
 Bhogal, slip op. at 6.
 Ex parte Galloway, appeal no. 2017-004696, p. 6 (PTAB May 24, 2018).
 Good Guidance Bulletin (supra note 8), § IV(1)(d), and Preamble § A.
 In these two respects, the Good Guidance Bulletin is merely a restatement of the law arising under the APA, Housekeeping Act, etc.
 Good Guidance Bulletin (supra note 8), § II(1)(b).
 Good Guidance Bulletin (supra note 8), § III(1).
 Office of Management and Budget, Memorandum, Interim Guidance Implementing Section 2 of the Executive Order of January 30, 2017, Titled “Reducing Regulation and Controlling Regulatory Costs”, https://www.whitehouse.gov/sites/whitehouse.gov/files/briefing-room/presidential-actions/related-omb-material/eo_iterim_guidance_reducing_regulations_controlling_regulatory_costs.pdf (Feb. 2, 2017). (“Agencies should continue to adhere to OMB’s 2007 Memorandum on Good Guidance Practices.”). Another in the PTO’s chain of errors is the view that a Deputy Assistant Commissioner for Patent Examination Policy has the authority to tell the President to go take a hike. E.g., Application 10/113,841, Decision on Petition at 19-20 (Jul. 14, 2011).
 David Boundy, The PTAB is Not an Article III Court, Part 1: A Primer on Federal Agency Rule Making, ABA Landslide 10:2, pp. 9-13, 51-57 at 51-52 (Nov-Dec. 2017), available here. Another recent article, The PTAB is Not an Article III Court, Part 2, examines the relationship between the PTAB and the PTO’s regulations.
 E.g., Ex parte Braeken, 54 USPQ2d 1110, 1112 (BPAI 1999) (remanding when examiner failed to explain correspondence between claim and reference—though at the end of the long appeal backlog, rather than at the beginning).
 5 U.S.C. § 555(e) (all adverse agency decisions must include a “statement of grounds”); Tourus Records Inc. v. Drug Enforcement Admin., 259 F.3d 731, 736–37 (D.C. Cir. 2001) (the § 555 statement of grounds must fairly address the issue presented); Roelofs v. Secretary of the Air Force, 628 F.2d 594, 599 (D.C. Cir. 1980) (same); compare PPC Broadband, Inc. v. Iancu, Appeal 2017-1362 (Fed. Cir. Jul. 3, 2018) (remanding for a second time, after the PTAB failed to fill the gap in its explanation that led to the first remand).
David Boundy is a partner at Cambridge Technology Law. Mr. Boundy practices at the intersection of patent and administrative law, and consults with other firms on court and administrative agency proceedings, including PTAB trials and appeals. In 2007–09, Mr. Boundy led teams that successfully urged the Office of Management and Budget to withhold approval of the USPTO’s continuations, 5/25 claims, information disclosure statements, and appeal regulations under the Paperwork Reduction Act. In 2018, the Court of Appeals for the Federal Circuit asked Mr. Boundy to lead a panel of eminent academics and the President’s chief regulatory oversight officer in a program at the court’s Judicial Conference on administrative law issues. Judge Plager recommended Mr. Boundy’s papers published in ABA LANDSLIDE, The PTAB is Not an Article III Court, Part 1, to the patent bar.
For more information or to contact Mr. Boundy, please email him at DBoundy@CambridgeTechLaw.com.
Every patent attorney and agent needs to read this.
Also suggested: an allocating of a patent term adjustment equal to the time period the PTO improperly ate up, during an inappropriate 101 delaying of a patent application or patent.
Nice suggestion. I had a patent in the business methods area that had to win two lengthy appeals to finally be granted. There was a huge patent term adjustment awarded — which was worthless because there had been a terminal disclaimer required on this case years ago. Sigh.
If I r call correctly, terminal disclaimer is not effective to rescue patent term adjustment.
I would have to double check, but I believe this was revealed in a case from about three to four years ago.
The standard of proof in the PTO is preponderance of the evidence. The examiner and/or the Board, must support their factual findings by a preponderance.
Substantial evidence is a standard of review, not a standard of proof.
The PTAB reviews examiners’ findings of fact for a preponderance of the evidence. If the examiner’s finding is not supported by a preponderance of the evidence, they must reverse.
It would be real interesting to have the Office adhere to the rule of law (37 CFR 1.2) and put on the record of every case so affected the shadow communications that are evidenced in the behavior of APJ Astorino.
After all, it is clear that something was shared and that something IS affecting the business of these prosecution matters.
Sunlight (in such cases) would be the best antiseptic.
Re “B”, maybe Astorino was brought in-line to make sure the burden on examiners is low to nil. Also, if you search “Alice”, you can see recent PTAB decisions that don’t even cite Berkheimer.
Because the Examiner, therefore, has not shown by a preponderance of the evidence that the combination of features set forth in Appellants’ claims is merely a recitation of a natural phenomenon alongside nothing more than well-understood, routine, and conventional elements already engaged in by skilled artisans in the field, we must reverse the Examiner’s rejection.
For reason as to little hope, decision mailed July 9, 2018, Examiner affirmed on 101, no mention of Berkheimer. The claim is over two pages long, represented at pages 2, 3 and 4 of the nine page decision.
Here, the recited computer system and network for executing the mathematical formula is conventional as evidenced by Appellants’ Specification stating “[i]t will be apparent to one of ordinary skill in the art that other known electronic components may be added or substituted in the computer system 700” (emphasis added).
The claims are similar to the claims of Electric Power, because they do not require any nonconventional computer or network components, or even a “non-conventional and non-generic arrangement of known, conventional pieces.” See Elec. Power, 830 F.3d at 1355.
Great point; obviously, you are completely correct that the standard of proof in the PTO is preponderance of the evidence. We probably should have mentioned this standard of proof, and we appreciate your pointing this out.
This is an interesting issue in that, while PTO action does not really fit neatly into traditional legal boxes, the PTO can arguably be characterized as both a party with a burden of persuasion under a preponderance of the evidence standard of proof, and a trier of fact (and law). As the PTO is an administrative agency, its factual findings can be set aside under the APA if unsupported by substantial evidence, and PTO reliance as a trier of fact and law on factual findings that are unsupported by substantial evidence can be characterized as an abuse of discretion.
Because the PTO’s decision to move to vacate several PTAB decisions which were on appeal to the Fed. Cir. was our jumping off point, we framed our discussion around review of findings of fact made by the PTAB as a trier of fact, rather than on deficiencies in offerings of proof by the PTO as a party with a burden of persuasion. We think that many of the same points equally could have been made in this latter context, but we’re glad you brought this up, as we probably should have mentioned it in the article.
While standards of proof and standards of review generally aren’t comparable, it seems like under either standard, if the PTO’s portion of the evidence pile weighs zero, the applicant wins.
We would suggest that PTO reliance on a factual finding that is unsupported by substantial evidence can represent both a failure to meet the applicable burden of persuasion under a preponderance of the evidence standard, and an abuse of discretion by an administrative agency subject to review under the APA.
In referencing PTAB action, we intended to convey our surprise that some PTAB panels did not seem to consider whether factual findings they adopted could stand up to review under the APA.
Interestingly enough, I passingly reference Ex Parte Young in an article I’m trying to publish.
Check the last 20 s101 decisions as of last Sunday. 17 affirmations, 3 reversals including Young.
Anyway, I suspect APJ Astorino had his arse handed to him for employing common sense. He was certainly ahead of the CAFC by several years.
Anyway, most APJs limit their s101 analysis by citing misleading dicta from English, the holding of EPG v Alstom, and Ariosa.
Thanks! I blame my excellent coauthor for any brilliant insights, but am happy to take credit for any errors or oversights.
With respect to Ex parte Poisson, there is a story behind why it (and other decisions) stopped showing up on searches, but it’s not my story to tell. I believe that the attorney who has done a lot of great work investigating this issue is working on a write up which will probably be posted soonish.
Still waiting for In re Villena to publish. It’s six weeks overdue.
I suspect my attack on Ariosa has something to do about that. Anti-evidence Reyna screwed the pooch spewing that nonsense.
BTW, my first attempt to overturn the PTO’s abuse re evidence and the APA failed miserably in 2016 as you know.
Anyone else notice in subsequent actions post-Berkheimer memo some actions have completely dropped the “conventional” line?
I noticed this the other day. Rather than deal with providing evidence of conventionality (which, I will add is at a higher level than merely novelty of obviousness), the examiner elected to “hide the ball” and omit the phrase in an otherwise “cut and paste” second action.
Of course, I politely pointed out that merely omitting the use of the phrase does not relieve the examiner of providing the evidentiary basis. It will be interesting to see how the examiner reacts, given as I also pointed out (pre-emptively) that the examiner must answer the substance of all the arguments that I presented – including explicitly the argument that the examiner must still provide an evidentiary basis of conventionality even if he has deleted that one line from his rejection.
Thanks AAA JJ for pointing this out.
Our point is the great number of failsafes and warning signs the PTAB had to bypass to get to its view that a question of fact could be met when the examiner came forward with zero substantial evidence — a “preponderance” is still a preponderance of “substantial evidence,” and personal insight weighs nothing in that balance. So while we agree with you that a factual finding supported by some substantial evidence may still not be supported by a preponderance, and we agree that the PTAB’s decision-making must be based on de novo review to a preponderance, and we are not advocating that the PTAB reduce its standard of review to bare “substantial evidence,” on the sets of facts we were discussing here, “substantial evidence” was the easier explanation. Thanks for prompting the refinement.
One of the places the difference matters is in our suggestion for triage by remand. In the kind of ministerial review that’s appropriate for the remand we suggest, the PTAB can’t do a substantive “preponderance” weighing. But a procedural “quick look” review for some-vs-nothing “substantial evidence” could get the entirely meritless appeals off the PTAB’s backlog.
You don’t need evidence when Taranto has declared a whole genre of information-age claims patent ineligible under Electric Power Group v. Alstom and SAP America v. Investpic. His categorical rule is totally retarded.
Investpic is a case worth reading.
Electric Power Group was distinguished in a subsequent case. The Office “boilerplate” version of that case needs to be fought at every opportunity.
In other words, according to Taranto – keep it secret, don’t share, don’t benefit the public with your knowledge. If you are big (SV big) and can get “employees” to sign illegal NDAs, you win. That’s the world Taranto wants and is building from the bench.

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