Is There A Glimmer of Light at the End of the Subject Matter Eligibility Tunnel?

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It is not exaggeration to say that the US Supreme Court’s 2014 decision in Alice Corp. Pty v. CLS Bank Int’l[1] has never been understood by the US Patent and Trademark Office or the federal courts. The degree of misunderstanding is so great that when called upon to review a lower court decision invalidating a patent claiming a method for manufacturing a propeller shaft having reduced vibration characteristics, six circuit judges of the US Court of Appeals for the Federal Circuit (CAFC) agreed that the claims were directed to patent-ineligible subject matter, and exactly six other circuit judges of the same court disagreed and stated that the claims were not invalid for claiming patent-ineligible subject matter, with all twelve circuit judges applying the same principles of law set forth in the Supreme Court’s 2014 Alice Corp. decision. The Supreme Court recently signaled its potential interest in revisiting the issue of patent-ineligible subject matter in the case involving propeller shafts. Further explanation and clarification of Alice Corp. are long overdue. 

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In the first CAFC decision in the American Axle case,[2] a 2-1 split panel of three circuit judges affirmed a lower court’s decision that the patent claims were invalid as being directed to patent-ineligible subject matter, particularly “laws of nature: Hooke’s Law and friction damping.”  The technology at issue was not software, nor business methods, nor financial models, but rather propeller shafts such as drive shafts for vehicles (also known as “propshafts”). Propeller shafts are mechanical devices (usually hollow metal tubes) that transmit rotational energy from one place (e.g., a transmission or transfer case) to another place (e.g., a differential). Vibration of propeller shafts during rotation is undesirable due to noise and other factors. Thus, various methods existed for reducing vibration, including placing of weights to balance the shaft (in the same manner a wheel is balanced) and placing specially designed liners inside the propeller shafts. 

In response to a request for rehearing, the same split 3-judge panel withdrew its original opinion and replaced it with one reaching the same result, with expanded explanations.[3] On the same day, the CAFC denied a petition for rehearing en banc (by the full membership of the court) in an evenly divided 6-6 split order.[4] According to Circuit Judge Moore, "what we have here is worse than a circuit split – it is a court bitterly divided."

A petition for certiorari (discretionary review) was filed in the U.S. Supreme Court. One of the factors considered by the Supreme Court when deciding whether to grant certiorari is the existence of an inter-circuit split of authority on the same question of law, which is possible because there are eleven circuit courts of appeal plus the CAFC at the intermediate appellate level of the federal judiciary system. However, because all appeals of all patent cases are heard exclusively by the CAFC, inter-circuit splits of authority on patent law issues are not possible. The CAFC’s 6-6 split order denying the petition for rehearing en banc perfectly demonstrates a perfect intra-circuit split of authority. Although the Supreme Court has repeatedly declined opportunities to address patent subject matter eligibility and clarify its Alice Corp. decision, apparently the Court has finally taken notice of the severity of the problem facing lower courts when interpreting and applying its Alice Corp. precedent.

American Axle’s petition for certiorari poses two questions:

(1) What standard determines whether a patent claim is “directed to” a patent-ineligible concept under step 1 of the Supreme Court’s two-step Alice Corp. framework for determining whether an invention is eligible for patenting under 35 U.S.C. § 101; and

(2) whether patent eligibility (at each step of the Supreme Court’s two-step Alice Corp. framework) is a question of law for the court based on the scope of the claims or a question of fact for the jury based on the state of art at the time of the patent.

On January 29, 2021, the Supreme Court requested Neapco Holdings to file a response to American Axle’s petition, signaling the Court’s potential interest in resolving the “bitter division” of the CAFC on the issue of patent-eligible subject matter under 35 U.S.C. § 101. That response is now due March 31. Amicus curiae (“friend of the court”) briefs are already being filed by third parties, and it is expected that additional amicus curiae briefs will be filed by nearly every intellectual property law association and many industry associations, as well as individual interested third parties. We will update this story in future issues of OBWB’s Monthly Insights as developments occur.