Noted with Interest: Update on Section 101 Patent Eligibility Law: American Axle and the Patent Eligibility Restoration Act

On June 30, 2022, the Supreme Court denied cert in American Axle v. Neapco, a Federal Circuit decision regarding patent eligibility.  The patent community had been looking to this case as way to bring much-needed clarity to Section 101 caselaw following the Supreme Court’s 2012 and 2014 decisions in Alice/Mayo, but unfortunately the Supreme Court’s denial refuses to provide that clarity.  A new bill introduced by Senator Thom Tillis aims to provide new guidance as well, but has been criticized for its inclusion of ambiguous language that could lead to even more patent-eligibility litigation.

Background on Section 101:  Section 101 of the U.S. Patent Act provides that whoever “invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”  Over the years, the Supreme Court has found several exceptions to subject-matter eligibility that are not based in the statute.  For example, natural laws, natural phenomena, and abstract ideas are not eligible to be patented.  Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980).  Almost every invention, however, relies on natural phenomena.  And almost every invention can be described in abstract terms.  So where does the line get drawn?

The Supreme Court attempted to clarify this distinction in two cases, Mayo v. Prometheus, 566 U.S. 66 (2012), and Alice Corp. v. CLS Bank Int’l, 573 U.S. 208 (2014).  The resulting test, commonly referred to as the Alice/Mayo test, consists of two steps.  First, courts consider whether the claims at issue are directed to an ineligible concept (i.e., abstract ideas or natural laws).  This is done by comparing the claimed concept to other inventions that were previously found to be ineligible.  If the concepts are sufficiently similar, courts then need to decide whether each claim, or all the claims taken together, provide “something more” that transforms the nature of the claim into a patent-eligible application.

 Already, the fuzzy nature of this test is apparent.  What constitutes “sufficiently similar”?  Or “something more?”  After the Alice decision, a slew of subject matter ineligibility rulings were decided on nearly identical grounds in the lower courts:  the claim(s) were invalid because they were directed to an abstract or natural concept and didn’t provide anything “more.”  After finding that application of the Alice/Mayo test “in a consistent manner has proven to be difficult,” the USPTO issued new guidance that aimed to provide more clarity and certainty to both patent infringers and owners.  See 2019 Revised Patent Subject Matter Eligibility Guidance, 84 Fed. Reg. 50 (Jan. 7, 2019).  In particular, the USPTO broke the first step of the Alice/Mayo test into two subparts:  (1) “[p]roviding groupings of subject matter that [are] considered an abstract idea”; and (2) “clarifying that a claim is not ‘directed to’ a judicial exception if the judicial exception is integrated into a practical application of that exception.”

And yet, just a few months later, the Federal Circuit rejected the USPTO’s guidance by affirming the then-current application of the Alice/Mayo test in American Axle.  The Federal Circuit has also since confirmed that the USPTO’s guidance “does not carry the force of law, and is not binding on [its] patent eligibility analysis.”  cxLoyalty, Inc. v. Maritz Holdings Inc., 986 F.3d 1367, 1376 (Fed. Cir. 2021).

American Axle:  The case started in 2015 when American Axle, a manufacturer of automobile components, sued its competitor, Neapco, for patent infringement.  The patent claim in question involved methods of reducing vibration on the propeller shaft assembly of a vehicle.  The district court found that the patent was ineligible under Section 101 because the asserted claims merely suggested the application of Hooke’s law, a well-known equation that describes the relationship between an object’s mass, its stiffness, and the frequency at which the object vibrates, and otherwise didn’t add anything beyond “well-understood, routine, conventional activity already engaged in by the scientific community.”  Am. Axle & Mfg., Inc. v. Neapco Holdings LLC, 309 F. Supp. 3d 218 (D. Del. 2018).     

In July 2020 the Federal Circuit affirmed the district court’s holding, finding that the asserted claims “simply require[] the application of Hooke’s law to tune a propshaft liner to dampen certain vibrations.”  Am. Axle & Mfg, Inc. v. Neapco Holdings LLC, 967 F.3d 1285, 1292 (Fed. Cir. 2020).  Judge Moore strongly dissented, arguing that the claims at issue offer a “specific, concrete solution (inserting a liner inside a propshaft) to a problem (vibrations in propshafts),” and the majority’s refusal to recognize them as patentable under Section 101 is “likely to create confusion for the district courts and to expand § 101 profoundly.”  Id. at 1304-05.

After a denial of rehearing en banc, four separate dissenting opinions emerged.  Judge Newman, one of the chief dissenters, noted that “[t]he court’s rulings on patent eligibility have become so diverse and unpredictable as to have a serious effect on the innovation incentive in all fields of technology.”  On appeal to the Supreme Court, the Solicitor General and various prominent amici (including IP bar associations, a member of Congress, and even a former Chief Judge of the Federal Circuit and former director of the USPTO) argued that the Supreme Court should take this case up to clarify the law in this area.  The Supreme Court nevertheless denied cert, leading to some disappointment in the patent community.

Patent Eligibility Restoration Act:  There have also been efforts within Congress to set more precise rules for the patent eligibility test.  On August 2, 2022, Senator Thom Tillis (R-NC) introduced the Patent Eligibility Restoration Act, specifically citing the Supreme Court’s refusal to weigh in on American Axle as a motivating factor for the bill.  The text of the bill retains much of the original wording of Section 101 but attempts to specifically define concepts that are not patent-eligible such as mathematical formulas, processes performed solely in the human mind, unmodified natural materials, and processes that occur in nature independent of human activity.  The bill also clarifies that “non-technological economic, financial, business, social, cultural, or artistic process[es]” are not patent eligible.

Overall, the bill aims to expand the scope of what courts find to be patent eligible.  First, it provides that abstract ideas or laws of nature are only ineligible if they are claimed “as such.”  This language is apparently designed to address the trend of courts finding that a patent is ineligible because it is “directed to” an abstract idea.  Under Senator Tillis’ proposed bill, such a patent would only be ineligible if it specifically claims an abstract idea—a narrower formulation, but one which some view as ambiguous.  Second, the bill provides that patent eligibility should be determined by considering the claimed invention as a whole, rather than on a claim-by-claim basis.  This means that a claim with a combination of eligible and ineligible subject matter could still be found eligible, whereas under Alice/Mayo such claims would often be found ineligible.  Third, the bill provides that whether a claim is novel or nonobvious should have no place in the eligibility analysis, as these considerations are governed by other parts of the law.

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Some feel that the continued lack of clarity around patent eligibility under Section 101 has made it difficult for inventors, businesses, patent examiners, and trial judges to reliably determine what subject matter is patent-eligible.  These questions may remain unanswered until the Supreme Court decides to take up its next patent eligibility case, and many see American Axle as a missed opportunity.  Whether the Patent Eligibility Restoration Act provides any clarity to Section 101 caselaw also remains to be seen.  Introducing a bill is a first step in a long process of revisions that could take years (and still never pass).  And even if it does pass, whether the bill provides the requested clarity is yet another question.