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Mar 06, 2023

Conflicting Precedent for the Supreme Court in American Axle

“It is difficult to explain why the Court’s rationale in Schein should not also

"It is difficult to explain why the Court's rationale in Schein should not also apply to the patent statutes, and the judicially created exceptions of abstract ideas, laws of nature and natural phenomena."

The U.S. Department of Justice is encouraging the Supreme Court to grant certiorari to American Axle to clarify U.S. patent eligibility law. Thus, it appears that the chances are better than ever for this issue to get some much-needed attention.

American Axle & Manufacturing, Inc., v. Neapco Holdings LLC involves a decision by the U.S. Court of Appeals for the Federal Circuit, finding that U.S. Patent No. 7,774,911 was invalid as being directed to a natural law, and nothing more, and thus was ineligible for patent protection under 35 U.S.C Section 101. The claims of the ‘911 patent are for a method of manufacturing automobile drive shafts. In denying a rehearing, the en banc Federal Circuit issued five concurring and dissenting opinions, including six judges in dissent, with the entire court begging the Supreme Court to clarify patent eligibility. (See Solicitor's brief at page 20). American Axle filed a petition for writ of certiorari to the Supreme Court, which then invited the Solicitor General to express the views of the United States.

After more than one year of waiting, the Justice Department filed their amicus brief on May 24, 2022. The Solicitor unequivocally stated that the Federal Circuit's holding that the ‘911 claims are patent ineligible "is incorrect," and that the appellate decision reflects "substantial uncertainty about the proper application of Section 101." The Solicitor also noted that the Alice two-part test for patent eligibility enunciated by the Supreme Court in Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. 208 (2014), has produced confusion in lower courts, and has "fractured" the Federal Circuit. (See Solicitor's brief at page 19). The Solicitor also acknowledged the admitted difficulty for the U.S. Patent and Trademark Office (USPTO), inventors, businesses, and other patent stakeholders, in applying the Supreme Court's precedents consistently with regard to patent eligibility under Section 101.

The Solicitor urged that the Section 101 inquiry be guided by historical practice and judicial precedent. But Supreme Court precedent appears to be irreconcilable.

On one hand, as acknowledged by the Solicitor, the judicially created exceptions to patent eligibility (laws of nature, physical phenomena, and abstract ideas), date back more than 150 years. Bilski v. Kappos, 561 U.S. 593, 601-02 (2010) and have been reaffirmed by the Supreme Court in several decisions over the past decade. See, for example, Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. 66 (2012).

On the other hand, more recent Supreme Court precedent holds that there can be no judicially created exceptions to statutes enacted by Congress. This precedent is not discussed in the Solicitor's brief.

On January 8, 2019, the U.S. Supreme Court decided Henry Schein, Inc. v. Archer & White, Inc., 139 S.Ct. 534 (2019). This was not a patent case, but rather a case involving the Federal Arbitration Act. The Arbitration Act, signed into law in 1925, allows parties to agree to submit disputes to arbitration, rather than litigating in court. Sometimes parties disagree as to whether an arbitration clause in a contract applies to a particular dispute. Even when the contract delegates this initial threshold question to the arbitrator, some federal courts apply a "judicially created exception" and decide themselves if the argument that the arbitration clause applies is wholly groundless, so as to prevent frivolous attempts to transfer disputes from courts to arbitration.

With the circuit courts split on this "wholly groundless" exception, the Supreme Court granted certiorari to decide the question of whether the exception is consistent with the Arbitration Act. The Supreme Court reasoned that Congress designed the Act in a specific way, and it is not the Court's role to redesign the statute. Noting that the Act contains no "wholly groundless" exception, the Court explained that they could not engraft their own exceptions onto the statutory text. More specifically, the Court stated, "We may not rewrite the statute simply to accommodate that policy concern" of preventing frivolous motions to compel arbitration. In Schein, the Supreme Court concluded that public policy cannot supersede statutory text approved by Congress to support a non-statutory exception.

So, if certiorari is granted in American Axle, will the Supreme Court follow the longstanding, historical, judicially-created exceptions to patent eligibility, or its recent precedent prohibiting such exceptions? It is difficult to explain why the Court's rationale in Schein should not also apply to the patent statutes, and the judicially created exceptions of abstract ideas, laws of nature and natural phenomena. Since there is no basis in the patent statute for these exceptions, these exceptions appear to be an impermissible "redesign" of Section 101. If so, it seems that the historical exceptions to patent eligibility should be declared dead.

Additional Supreme Court precedent raises a more basic question of whether there is a need for any exceptions. Section 101 provides for any new and useful process, machine, manufacture, compositions of matter, or improvements thereof. The Court acknowledged in Bilski that the exceptions are "not required by the statutory text." Bilski, 561 U.S. at 601 (2010).

As the Solicitor's brief described, a "process" has been interpreted to include "a mode of treatment of certain materials to produce a given result" or "an act, or a series of acts, performed on the subject matter to be transformed and reduced to a different state or thing." Diamond v. Diehr, 450 U.S. 175, 183 (1981), quoting Cochrane, v. Deener, 94 U.S. 780,788 (1877). Thus, a process is not a law of nature, or an abstract idea, and if it happens to be a natural phenomenon, then it is not new. So, exceptions are not needed for inventive processes.

More than 150 years ago, the Supreme Court defined the term "machine" as "a concrete thing, consisting of parts, or of certain devices and combinations of devices." Burr v. Duryee, 68 U.S. (1 Wall.) 531, 570 (1863). Thus, machines are not a law of nature or physical phenomena, nor is a machine an abstract idea if description is sufficient to enable a person skilled in the art to make and use the machine, as required by Section 112 .

The Supreme Court has defined "manufacture" (in its verb form) as "the production of articles for use from raw or prepared materials by giving to these materials new forms, qualities, properties, or combinations, whether by hand-labor or by machinery." Diamond v. Chakrabarty, 447 U.S. 303, 308 (1980) (quoting American Fruit Growers, Inc. v. Brogdex Co., 283 U.S. 1, 11 (1931). In the noun form used in Section 101, "manufacture" refers to "articles" resulting from the process of manufacturing. The dictionary the Supreme Court relied on for defining the verb "manufacture," also defines "article" as "a particular substance or commodity: as, an article of merchandise." 1 Century Dictionary 326 (William Dwight Whitney ed., 1895). These definitions address "articles" of "manufacture" as being tangible objects or products. Thus, a manufactured article is not a law of nature, a physical phenomenon or an abstract idea.

"Compositions of matter" has been defined by the Supreme Court to mean "all compositions of two or more substances and all composite articles, whether they be the results of chemical union, or of mechanical mixture, or whether they be gases, fluids, powders or solids." Diamond v. Chakrabarty, 447 U.S. 303, 308 (1980). Accordingly, a composition of matter is not a law of nature, is not new if it is a physical phenomenon, and is not abstract if the composition is described so that a person skilled in the art can make the composition, per Section 112.

In view of the Supreme Court's definitions of the categories of patentable subject matter under Section 101, there does not appear to be a need for the judicially created exceptions.

So, despite the long history of the non-statutory exceptions to patentable subject matter, the Supreme Court's analysis in Schein and its definitions of such subject matter lead to the conclusion that the exceptions to the statutory subject matter should be abandoned, as the claims for the five categories set forth in Section 101 can be evaluated under Sections 102, 103 and 112.Image Source: Deposit PhotosCopyright: Premium_shotsImage ID: 86267474

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