On August 22, 2016, Administrative Law Judge David Shaw of the International Trade Commission (“ITC” or “Commission”) issued his final initial determination (“the ID”) in Certain Portable Electronic Devices and Components Thereof, Inv. No. 337-TA-994. The ID invalidated all of the asserted claims for lack of patentable subject matter under 35 U.S.C. § 101, and terminated the investigation.  This decision resulted from an early evidentiary hearing, conducted by order of the Commission within 100 days of its Notice of Institution under its “pilot program.”  81 Fed. Reg. 29307 (May 11, 2016).

The ID has implications related both to the implementation of the 100 day pilot program and continually developing Alice jurisprudence.  For a more in depth discussion of those issues, please see our client alert here.

100 Day Pilot Program:

In 2013, the Commission instituted an early disposition pilot program, requiring an early evidentiary hearing and initial determination within 100 days of the Notice of Institution, in order to test whether the early adjudication of certain issues would increase efficiency of investigations at the ITC.  Since its adoption, only three investigations have been ordered into the pilot program.

On August 22, 2016, the ALJ in the 994 investigation, the most recently ordered pilot program, issued an ID a mere 104 days after institution of the investigation, and 152 days from the filing of the complaint, recommending that the investigation be terminated because all asserted claims were invalid in light of Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347, 2351 (2014) (“Alice”).  Prior to the 994 investigation, the two previous pilot programs were ordered on domestic industry and standing – threshold jurisdictional questions.  The 994 investigation marks the first time that the validity of a patent has been adjudicated in the pilot program.

Through the 994 investigation, the Commission has indicated that it is now willing to adjudicate additional issues in the 100 day pilot program beyond just predicate jurisdictional questions.  Though infrequently utilized in its three year existence, the Commission has demonstrated a commitment to early adjudication of dispositive issues (albeit in rare circumstances), and has proposed rules for a permanent, rather than pilot, early disposition program at the ITC.  See https://www.usitc.gov/secretary/fed_reg_notices/rules/misc_045_notice09152015sgl.pdf.

Alice:

In the ID, ALJ Shaw ruled that the asserted claims of the ’433 patent were ineligible under §101, in light of Alice.  ALJ Shaw determined under the first Alice step that the asserted claims were directed to an abstract idea.  He noted that, under this first step, the Federal Circuit has contrasted claims “directed to an improvement in the functioning of a computer with claims ‘simply adding conventional computer components to well-known business practices’…or ‘generalized steps to be performed on a computer using conventional computer activity.’”  Id. at 28 (quoting TLI Commc’ns LLC v. AV Auto., LLC, 823 F.3d 607, 611 (Fed. Cir. 2016) (citing Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1335 (Fed. Cir. 2016))).  At the second step of the Alice analysis, the ALJ held that there was no evidence of an inventive concept that transforms the abstract idea claimed in the patent into something patent eligible.

ALJ Shaw’s ID in the 994 investigation, the fourth time the ITC has invalidated a patent under Alice, is consistent with developing Alice jurisprudence. Specifically, patent claims that merely recite well-known methods tied to generic computer components will likely be found to be not patent eligible.  In addition, the ID follows a growing trend in the wake of Enfish which finds courts placing increased emphasis on step one of the Alice test. This case underscores that practitioners should pay close attention to both steps of the Alice analysis, and also teaches that it is critical to carefully select asserted claims with an eye toward Alice-based vulnerability. Some observers anticipated such vulnerability of the claims asserted in the 994 investigation when the complaint was filed, and believe this explains why the case was placed in the 100-day program.

Conclusion:

Following this result in the 994 investigation, the manner in which the Commission handles future requests for early disposition under Alice will be closely watched.  In light of the outcome in the 994 investigation, future proposed respondents may request early disposition in view of Alice with increasing frequency, now that the Commission has shown a willingness to resolve Alice questions in early stages of an investigation.  However, it is likely that the 100 day program will continue to rarely be utilized by the Commission, even on request by the proposed respondents. In addition, prevention may be the best cure, as avoiding Alice questions altogether can be accomplished by carefully selecting claims prior to assertion.

For more on the August 22, 2016, ID from the 994 investigation, click here.

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