Federal Circuit Refuses to Defer to 2019 USPTO Revised Patent Subject Matter Eligibility Guidance – Cleveland Clinic Found. v. True Health Diagnostics LLC (Fed. Cir 2019) (nonprecedential)

by Michael Goltry, Registered Patent Attorney (480-991-3537; mg@pgpct.com)

On January 7, 2019, the U.S. Patent and Trademark Office (USPTO) issued is 2019 Revised Patent Subject Matter Eligibility Guidance (2019 PEG). The 2019 PEG revises the USPTO’s procedures to determine whether a claim is directed to a judicial exception to patent eligible subject matter. The intention of the 2019 PEG is to clarify the procedure for determining patent eligibility. The 2019 PEG did not have this effect, at least according to the Federal Court of Appeals in Cleveland Clinic Found. v. True Health Diagnostics LLC (Fed. Cir 2019) (nonprecedential) in its analysis according to Skidmore v. Swift & Co., 323 U.S. 134 (1944).

In Skidmore, employees of the Swift and Company packing plant brought an action under the Fair Labor and Standards Act to recover overtime wages. The employees in this case engaged in general fire hall and firefighter equipment maintenance duties, operated elevators, or acted as relief men in fire duties. The employees engaged in their normal daytime employment. However, the “fire hall” duties were performed during the night. It was not denied that their daytime employment was working time within the Act. Under an oral agreement, the employees agreed to stay in the fire hall on the Company premises, or within hailing distance, three and a half to four nights a week to answer alarms. The alarms were rare and the time required for their answer rarely exceeded an hour. The employees were paid a predetermined amount for each answered alarm. The Company provided an air-conditioned brick fire hall, sleeping quarters, a pool table, a domino table, and a radio. The men used their time as they saw fit, such as in sleep or amusement, except that they were required to stay in or close by the fire hall and be ready to respond to alarms. The employees stipulated that “they agreed to remain in the fire hall and stay in it or within hailing distance, subject to call, in the event of fire or other casualty, but were not required to perform any specific tasks during these periods of time, except in answering alarms.” Id. at 136.

Without making findings of fact, the trial court determined as a “conclusion of law” that the time plaintiffs spent in the fire hall in the performance of their file hall duties do not constitute working time for which overtime compensation is due to them under the Act, as interpreted by the Administrator and the Courts. The trial court observed that “we know pursuing such pleasurable occupations or performing such personal chores does not constitute work.” Id. The Circuit Court of Appeals affirmed, and the Supreme Court reversed, holding that “no principle of law found either in the statute or in Court decisions precludes waiting time from also being working time.” Id. In making this determination, the Court stated that “[w]e have not attempted to, and we cannot, lay down a legal formula to resolve cases so varied in their facts as are the many situations in which employment involves waiting time. Whether, in a concrete case, such time falls within or without the Act is a question of fact to be resolved by appropriate findings of the trial court.” Id. at 136-137.

In reversing the Circuit Court, the Court emphasized that “Congress did not utilize the services of an administrative agency to find facts and to determine in the first instance whether particular cases fall within or without the Act. Instead, it put this responsibility on the courts.” Id. While in the pursuit of his duties the Administrator “set forth his views of the application of the Act under different circumstances in an interpretative bulletin and in informal rulings” to “provide a practical guide to employers and employees as to how the office representing the public interest in its enforcement will seek to apply it” and to “suggest standards and examples to guide in particular situations,” Id. at 137, and determined that the “purely private nature” of sleeping, eating, and amusement of the fire hall duty or any part thereof did not constitute working time under the Act, the Court failed to find any reason to defer to the Administrator’s conclusions or to try to prescribe their influence to the factual circumstances of the employees. Id. at 139.

Although Skidmore suggests courts give at least some deference to agency determinations, the Federal Circuit in Cleveland Clinic recently explained:

“While we greatly respect the PTO’s expertise on all matters relating to patentability, including patent eligibility, we are not bound by its guidance. And, especially regarding the issue of patent eligibility and the efforts of the courts to determine the distinction between claims directed to natural laws and those directed to patent-eligible applications of those laws, we are mindful of the need for consistent application of our case law.”

In Cleveland Clinic, the Federal Circuit refused to follow or give any deference to the 2019 PEG consistent with Skidmore, and instead affirmed a lower court determination that the claims at issue were ineligible as effectively claiming a law of nature. Although Cleveland Clinic is nonprecedential for some reason, it clearly affirms the roles of agencies and courts and that the courts, not the agencies, determine and apply the law on the facts on a case-by-case basis.Unfortunately, the 2019 PEG are academic, do not overwrite court precedent, and inject further uncertainty into the patent eligibility analysis in patent cases before the USPTO. The Federal Circuit Court’s rejection of the 2019 PEG will just make things more uncertain for applicants and patent examiners in the prosecution of patent applications before the USPTO.