A Chilly Reception for Section 101 Challenges at the ITC

Outside of the ITC, defendants have been increasingly successful in challenging the patentability of asserted claims under Section 101.  Recent decisions by the Supreme Court and the Federal Circuit have clarified, and arguably narrowed, the scope of patentable subject matter, and have repeatedly urged district courts to resolve any Section 101 defenses as soon as possible.  At the ITC, however, this defense has rarely been asserted, and has only once been successful since Bilski.  Nevertheless, ITC practitioners should expect to see more of these defenses in the near future, and there are interesting, open questions surrounding how the ITC will interpret and implement the Supreme Court’s decisions on this issue.

Section 101 defines a patentable invention as “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.”  It is well established that laws of nature, natural phenomena, and abstract ideas are not eligible for patent protection under 35 U.S.C. § 101.  Many of the Supreme Court’s recent patent decisions have addressed Section 101 challenges.  Beginning in earnest in 2010 with Bilski v. Kappos, 561 U.S. 593, the Supreme Court has issued a string of Section 101 decisions, each holding that the asserted claims were directed to patent-ineligible subject matter.  See Mayo Collaborative Servs. v. Prometheus Labs., Inc., 32 S. Ct. 1289 (2012), Ass’n for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107 (2013), Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014).

The Federal Circuit has followed suit, issuing twelve precedential decisions on Section 101 defenses in a little more than a year since the Supreme Court’s Alice decision.  All but one of these Federal Circuit decisions have found the asserted claims invalid.  This flurry of Federal Circuit decisions parallels the storm of activity in the district courts; over one hundred and thirty district court opinions have cited Alice on Section 101 patent eligibility.

So far, these developments have barely touched the ITC.  There have been only two rulings at the ITC on Section 101 issues since Alice:  the summary determination orders in Investigation 337-TA-925 (Certain Communications or Computing Devices and Components Thereof) and Investigation 337-TA-944 (Certain Network Devices, Related Software and Components Thereof (I)), in which Judge Lord and Judge Shaw, respectively, denied respondents’ motions for summary determination of invalidity.  The 925 Investigation was recently terminated based on a settlement without a final decision on the Section 101 defense.  The 944 Investigation remains pending, with the Judge’s determination regarding violation scheduled for January 2016.

Section 101 defenses were rare at the ITC before Alice as well.  Since Bilski in 2010, there have been only eight final decisions on Section 101 defenses, and respondents have prevailed only once.  In 2010, just a few months after Bilski, former Judge Charneski agreed with respondents in the 680 Investigation that the asserted claim was invalid based on Section 101.  Since then, every Initial Determination to address this issue has rejected the Section 101 defense, and the Commission has never determined that a Judge was incorrect on this point.

Perhaps just as important for respondents considering Section 101 defenses is the issue of timing.  An early decision on patentability has the potential to save significant litigation costs, and this potential has driven much of the surge of Section 101 activity in the federal courts.  Following the Supreme Court’s description of Section 101 as a “threshold test” in Bilski, the Federal Circuit has repeatedly urged courts to decide whether a claim is patent-eligible as soon as possible.  E.g., Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709, 717-20 (Fed. Cir. 2014) (Mayer, J. concurring, collecting cases and explaining why early decisions on Section 101, like the motion on the pleadings affirmed here, were appropriate and desirable unless there are significant claim construction disputes whose resolution would affect the patentability analysis).

The ITC Judges, however, have thus far rejected attempts to resolve Section 101 issues early.  Since Bilski, summary determination motions raising Section 101 defenses have been denied seven out of eight times.  A representative example is former Judge Charneski’s denial of summary determination in the 680 Investigation (Certain Machine Vision Software, Machine Vision Systems, and Products Containing Same).  Even though the Judge eventually agreed with the Respondents on the Section 101 issue in his Initial Determination following the hearing, he concluded it was “simply too early in the game” to decide the issue at the summary determination stage.  The ITC Judges have not typically identified any claim construction issues that they believed prevented early resolution of the Section 101 issues, but rather stated that claim construction had not occurred and denied summary determination without further discussion (for examples, see the summary determination orders in the 837, 845, 795, 704, and 685 Investigations).

That sentiment has been echoed at the ITC as recently as a few months ago, when Judge Lord denied summary determination on a Section 101 defense in the 925 Investigation and explained:  “Although claim construction is not a prerequisite to a validity determination under § 101, it will ordinarily be desirable—and often necessary—to resolve claim construction disputes prior to a § 101 analysis, for the determination of patent eligibility requires a full understanding of the basic character of the claimed subject matter.”

Of course, further Section 101 motions are to be expected in future investigations, given the wave of recent Supreme Court and Federal Circuit decisions favorable to the defense.  Since Bilski, only two of the six current Judges—Judges Essex and Shaw—have actually ruled on the merits of a Section 101 defense.  As the ITC Judges gain more exposure to Section 101 defenses, it remains to be seen whether the ITC will become more receptive to such defenses in the future.