Decision: Supplemental Examination No. 96/000,132
Holding: All reexamined claims canceled
Background: The America Invents Act created supplemental examination as a new way for patentees to have the Patent Office consider, reconsider, and correct information relevant to a patent’s enforceability. 35 U.S.C. § 257(a). Within three months of receiving the information, the Office determines whether the submission raises a substantial new question of patentability (SNQ). Id. If not, the process concludes and the patent remains intact. But if so, the Office reexamines the patent. 35 U.S.C. § 257(b).
Although the specter of reexamination poses certain risks, the practice has its benefits. Patents surviving supplemental examination cannot later be held unenforceable based on conduct relating to the submitted information.1 35 U.S.C. § 257(c)(1). This safe harbor allows patent owners to stave off charges of inequitable conduct—a defense to patent infringement courts have called an “absolute plague” in the patent sphere. See Burlington Indus. v. Dayco Corp., 849 F.2d 1418, 1422 (Fed. Cir. 1988).
While Congress intended supplemental examination as an antidote to inequitable conduct allegations, some patentees have tried using it to cure other ills. One emerging trend shows practitioners using supplemental examination to review a patent’s subject matter eligibility in view of Alice Corp. v. CLS Bank Int’l, 573 U.S. 208 (2014). Alice altered the landscape for patent eligibility under 35 U.S.C. § 101 by holding that abstract ideas implemented on generic computers are not patent-eligible. This article examines one of these cases and draws lessons from the patent owner’s experience. The facts may be lengthy, but the moral is not: § 101 and supplemental examination do not mix well and tossing them into the same cauldron can be a recipe for disaster.
Signature Systems (“Signature”) owns U.S. Patent No. 8,600,807 (“the ’807 patent”). The patent generally describes methods for converting reward points issued from different entities, such as airline miles and retail rewards. With the claimed method, consumers pool points from various sources and use them to purchase items over a digital exchange.
On March 12, 2015, Signature sought supplemental examination of U.S. Patent No. 8,423,402 (“the ’402 patent”)—the parent of the ’807 patent.2 See Request for Supplemental Examination, Control No. 96/000,096. In its request, Signature asked the USPTO to reevaluate the ’402 patent’s eligibility under Alice. Id. After an initial rejection, Signature amended its claims and persuaded the Office that they were patent-eligible. On September 10, 2015, the USPTO issued a Notice of Intent to Issue a Reexamination Certificate confirming that the amended claims recited eligible subject matter. The Office soon issued a reexamination certificate to this effect.
Encouraged by its success in the ’402 supplemental examination, Signature tried a similar approach with the child ’807 patent. On November 11, 2015, Signature launched Supplemental Examination No. 96/000,132 (“the ’132 SE”), seeking reevaluation of the ’807 patent’s eligibility. Signature submitted three items of relevance in its request—the Alice decision, Judge Bryson’s opinion in Loyalty Conversion Sys. Corp. v. Am. Airlines, Inc., 66 F. Supp. 3d 829 (E.D. Tex. 2014), and a Newslink article discussing American Express’s loyalty program. See Request for Supplemental Examination at 9-11.
Signature’s request stressed how the ’807 claims remained valid after Alice. Relying heavily on DDR Holdings, LLC v. Hotels.com, 773 F.3d 1245 (Fed. Cir. 2014), Signature urged that its claims were “rooted in computer technology” and overcame problems “arising in the realm of computer networks.” See Request for Supplemental Examination at 26 (quoting DDR, 773 F.3d at 1257). Since the ’807 patent involved similar computer-based technology, Signature argued, its claims were patent-eligible like those in DDR. Id.
The Office disagreed. In its view, the claims of the ’807 patent claimed the abstract idea of a “currency exchange.” See Reasons for SNQ Determination, at 7 (Jan. 7, 2016). Rather than advance computer technology, the Office reasoned, the ’807 patent claimed a “fundamental economic practice” barred from patent protection. Id.; see also Alice, 573 U.S. at 219-20. The Office also found that the claims lacked inventive features beyond those necessary to practice the abstract idea over a generic computer environment. See Reasons for SNQ Determination, at 7-8. On those facts, the Office concluded, Alice presented an SNQ against the ’807 patent. Id.
The examiner soon thereafter issued an Office Action rejecting all twelve claims of the ’807 patent under § 101. See Nonfinal Office Action (Feb. 9, 2016). The Office’s reasoning closely resembled that of its SNQ determination. Id. at 11-17. The Office also rejected the claims as indefinite and obvious over a prior patent in view of the Newslink article. Id. at 17-33.
Signature responded by amending the claims in two principal ways. First, Signature clarified how the claimed exchange server hosted reward accounts for multiple users. See Amendment of Apr. 8, 2016, at 6. Signature emphasized how this feature overcame an Alice-based rejection in the ’402 patent’s supplemental examination. Id. at 10-11. Since the amended claims were “closely related” to those upheld in ’402 case, Signature urged, the Office should reaffirm the eligibility of the ’807 claims in the ’132 SE. Id. Second, Signature amended the claims to fix issues with its method steps. Id. These changes addressed the Office’s indefiniteness rejection. Id. at 6. Armed with these amendments, Signature explained how the cited references failed to teach the reward point conversion process recited in the claims. Id. Signature further objected to the Office’s characterization of the claims as covering mere “currency exchange.” In Signature’s view, reward points are not a form of legal tender, making the Office’s analogy inapt. Id. at 20.
Before the examiner could respond to Signature’s positions, the Federal Circuit issued Enfish, LLC v. Microsoft Corp., 822 F.3d 1327 (Fed. Cir. 2016). Enfish upheld the eligibility of claims directed to a “self-referential table,” a type of data structure “designed to improve the way a computer stores and retrieves data in memory.” Id. at 1339. Because Enfish’s claims “improve[d] the way computers operate,” they recited patent-eligible subject matter rather than an abstract idea. Id. at 1336.
Enfish also warned of the dangers of oversimplifying claims in a § 101 analysis. According to the Court, describing claims at a high level of abstraction untethered from their limitations “all but ensures that the exceptions to § 101 swallow the rule.” Id. at 1337. Instead, the Court directed factfinders to focus on the claim’s specific language without “downplay[ing] the invention’s benefits.” Id. at 1338.
Recognizing Enfish’s potential pertinence to the ’132 SE, Signature submitted Supplemental Remarks bringing Enfish to the Office’s attention. See Supplemental Remarks (May 16, 2016). Signature criticized the Office for engaging in the same type of claim oversimplification Enfish expressly forbids. Id. at 2-3. To Signature, the pending claims were directed to more than mere “currency exchange,” as the examiner alleged. Id.
The Office considered Signature’s arguments with mixed results. While the examiner agreed that the proposed amendments overcame the indefiniteness and obviousness rejections, see Final Office Action, at 13 (June 15, 2016), the § 101 rejection was another story. The examiner was unpersuaded by Signature’s interpretation of “currency” as limited to legal tender, citing a dictionary defining currency as “anything that functions as a medium of exchange.” Id. at 14. Because the reward points of the ’807 patent could be exchanged for goods or services, the examiner reasoned, they served as a type of currency. Id. at 14-16.
The examiner went on to explain how his conclusion would not change even if reward points were not technically a “currency.” In his view, the claims amounted to little more than exchanging one thing of value for another, something that has occurred “for hundreds of years.” Id. at 17. Unlike the claims of Enfish, the ’807 patent merely practiced an abstract idea on a computer, rather than improve the functioning of the computer itself. Id. at 24-25.
Signature appealed the final rejection to the Patent Trial and Appeal Board (“Board”). See Appeal Brief (Oct. 11, 2016). There, Signature largely reiterated the arguments it presented to the examiner. It also discussed the Federal Circuit’s then-recent decision BASCOM Glob. Internet Servs. v. AT&T Mobility LLC, 827 F.3d 1341 (Fed. Cir. 2016). In that case, Judge Chen explained how inventive concepts can subsist in unconventional arrangements of conventional pieces. Id. at 1350. Against this legal backdrop, Signature contended that the examiner erred by focusing on the purported conventionality of currency exchanges without considering the claimed arrangement as a whole. Appeal Brief at 22-25.
Notably, Signature’s brief repeatedly represented that the ’807 patent’s claims were “nearly identical” to those upheld in the ’402 supplemental examination. See id. at 8-9, 16, 18. Since the ’402 claims were patent-eligible, Signature argued, so too were the claims of the ’807 patent. Id. To support its point, Signature extensively quoted findings from the ’402 supplemental examination bearing on the ’132 SE. See id. at 16-18.
The Board was unmoved. In the Board’s view, the claims were directed to the abstract idea of “currency exchange” and failed to provide a technological solution to this problem. See Ex parte Signature Systems LLC, No. 2017-005539, at 11-16 (P.T.A.B. Apr. 3, 2017). Rejecting Signature’s reliance on DDR, Enfish, and BASCOM, the Board ruled that the claims were similar to those struck down in Federal Circuit cases decided after Alice. See id. at 6-8 (citing cases). Those cases generally explained how sending, analyzing, and storing information as such are insufficient to make a claim eligible for patenting. Id. Curiously, the Board never addressed the ’402 supplemental reexamination or discussed its relationship to the pending ’807 claims.
Signature fixated on this omission in its Request for Rehearing. Signature recounted how the Office had already blessed “nearly identical” claims in the ’402 patent’s reexamination. See Request for Rehearing, at 4-6 (June 2, 2017). In Signature’s view, the Board’s decision failed to account for the Office’s “carefully considered” positions on the ’402 patent in the present appeal. Id.
The Board remained unpersuaded. “The Office . . . must decide each case on its own merits,” the Office wrote, “and the similarity of claims found patentable by another Examiner is not material to this proceeding.” Decision on Rehearing, at 2 (June 30, 2016). The Board also pointed out how its decision focused on Federal Circuit cases decided after the ’402 supplemental examination, diminishing its probative value. Id. at 2-3. The Board denied the request for rehearing and subsequently issued a reexamination certificate canceling every claim of the ’807 patent.
Signature’s misfortunes with its ’807 patent offer several lessons to practitioners considering supplemental examination. The first, and most obvious, is that past performance does not guarantee future results. As seen in the ’132 SE, Signature’s repeated invocations of the successful ’402 reexamination fell on deaf ears at the Patent Office.3 Neither the examiner nor the Board gave credence to the eligibility findings for the ’402 patent. If Signature’s experience applies more broadly—and we think it does—patentees should carefully gauge whether relying on the outcomes of other Office proceedings is justified for a given patent. In some cases, the argument may sound better on paper than it will play out in practice.
Second, the ’132 SE highlights the importance of having a well-vetted amendment strategy prior to requesting supplemental examination. Signature was largely content to amend its claims to mirror those of the ’402 patent without having significant fallback positions. Resting on its laurels proved to be Signature’s undoing—when the Office declined to follow the roadmap paved by the ’402 patent, Signature found it difficult to make its own affirmative case for the ’807 claims. Had Signature further amended its claims to cover specific technical improvements, its patent may have met a different fate. For example, Signature could have amended its claims on computerized exchanges to recite improved data structures (see, e.g., Enfish, 822 F.3d at 1339), specific rules to automate subjective processes (see, e.g., McRO, Inc. v. Bandai Namco Games Am. Inc., 837 F.3d 1299 (Fed. Cir. 2016)), or computer security measures (see, e.g., SRI Int’l, Inc. v. Cisco Sys., 918 F.3d 1368 (Fed. Cir. 2019)). Any of these approaches—and others—may have placed its claims on better eligibility footing. While it is unclear whether Signature could have successfully made such amendments in its case, other patentees should consider how their specifications may support more technical-oriented claiming. And of course, U.S. patent applicants of computer-based technology should draft new applications with these considerations in mind.
Supplemental examination appears to be a poor vehicle for strengthening a patent’s eligibility posture. For now, the procedure seems better suited for its intended purpose of dispelling accusations of inequitable conduct than its more creative use as a §101 shield. But truth is stranger than fiction, and the final word on supplemental examinations has yet to be written.
1 For more details of supplemental examination, see Nyshadham et al., “Supplemental Examination Nuts and Bolts: Get it in Your Toolbox and Don’t Leave Home Without It,” AIA blog, June 3, 2019. And for a discussion of supplemental examination and its relationship to subject matter eligibility, see Weisfeiler, et al., “Supplemental Examinations and Supplemental Examinations and Alice: The Bare Essentials of When Not to Poke the Bear,” AIA blog, July 9, 2019.
2 For a thorough discussion of the ’402 supplemental examination and its aftermath, see Onochie, et al., “In Supplemental Examination, Discretion Is the Better Part of Valor,” AIA blog, July 29, 2019.
3 Nor did the ’402 patent’s success at the Patent Office continue. In CBM2018-00035, the PTAB decided to reassess the ’402 patent’s eligibility despite its prior triumph in supplemental reexamination. The PTAB declined to dismiss the case under 35 U.S.C. § 325(d), finding that new facts and cases warranted institution. A Final Written Decision recently issued holding all claims unpatentable under 35 U.S.C. §101. Am. Express Co. v. Signature Sys., LLC, CBM2018-00035, Paper 40 (P.T.A.B. Oct. 30, 2019).
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Finnegan is deeply saddened by the death of our colleague Donald R. Dunner, who passed away on October 16, 2019, after a life of dedication and inspiration to many in IP law. Don was in a category all his own with his talent and distinct knowledge of IP law. His direct approach and enthusiasm for work and life touched everyone who worked with him, and we will miss him dearly.