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A Comparison of U.S. and Japanese Patent Subject Matter Eligibility

Michael D. AndersonJames L. Korenchan2019 Vol. 17 Issue 2 (snippets)

Patent practitioners who focus their practice in the high-tech sector have most likely encountered Japanese patent law in one form or another. More often than not, companies at the forefront of technological advancement make, use, and sell products in Japan, or have competitors who do the same. This alone can make Japan an attractive place for obtaining patent protection in high-tech fields. Additionally, Japan is often viewed as having a very pro-patent (and thus, pro-patentee) court system, especially over the last ten or more years. In April of 2015, the Japan Patent Office (JPO) implemented a new opposition system to invalidate patents as part of the Japanese Patent Act of 2014.[1] This new system has greatly reduced the number of patents found invalid. For instance, between 2008 and 2017 the number of Requests for Trial for Invalidation in Japan fell by 40%.[2] Moreover, between 2008 and 2017 the percentage of patents found to be invalid fell from 59% to 21%.[3]

Despite a growing interest in pursuing Japanese patent protection, many U.S. practitioners have a limited understanding of Japanese patent law and limited interactions with Japanese firms. While having an extensive knowledge of Japanese patent law is not always necessary for U.S. practitioners to provide sound legal counsel, an appreciation of the differences between U.S. and Japanese patent prosecution can improve the quality of representation that practitioners provide. Of the various patent prosecution issues faced in the high-tech space, subject matter eligibility is a common hurdle. Thus, the focus of this article is the differences in subject matter eligibility analysis in the U.S. and Japan as it pertains to high-tech patent applications, particularly for computer-implemented inventions involving software or business methods.

By now, U.S. practitioners are all-too-familiar with the two-part Alice Corp. test for determining the patent eligibility of claims under 35 U.S.C. § 101. In part one of this test, one must first determine whether the claimed subject matter as a whole is directed to a judicial exception. Further, under Alice Corp. and its progeny, the judicial exception that high-tech claims typically face is whether the claims recite an “abstract idea.” If the claim is found to be directed to something other than a judicial exception, then the claim is patent-eligible. But if the claim is found to be directed to a judicial exception, then part two of the test is applied. In part two of the test, one must determine whether any element or combination of elements in the claim is sufficient to ensure that the claim recites “significantly more” than the judicial exception.

To call the recent history of patent eligibility in the U.S. tumultuous might be an understatement. The USPTO and the courts have wrestled for years over how to guide examination of claims under § 101. Court cases — particularly, those from the Federal Circuit — have provided differently-nuanced interpretations as to what constitutes an abstract idea and what elevates a claim to the realm of “significantly more.” The USPTO typically then follows suit by periodically updating its subject matter eligibility guidance. However, in practice, the manner in which examiners apply the case law of the courts and the guidance issued by the USPTO can be a mixed bag, often to the chagrin of practitioners.

Under the most recent subject matter eligibility guidance issued by the USPTO on January 7, 2019, the USPTO attempted to clarify part two of the Alice Corp. test.[4] According to the guidance, “a claim is not ‘directed to’ a judicial exception if the judicial exception is integrated into a practical application of that exception.” Thus, the guidance provides clarification to the previous test on step two of the Alice Corp. test as to what constitutes “significantly more” than the judicial exception.

The new guidance is based in part on the Federal Circuit decisions in BASCOM Glob. Internet Servs., Inc. v. AT&T Mobility LLC [5] and Arrhythmia Research Tech., Inc. v. Corazonix Corp.[6] In BASCOM, the court concluded “that claims could be eligible if ordered combination of limitations ‘transform the abstract idea . . . into a particular, practical application of that abstract idea.’”[7] Additionally, in Arrhythmia, the claims were found patent eligible because “inventions that were implemented by the mathematically-directed performance of computers were viewed in the context of the practical application to which the computer-generated data were put.”[8]

In practice, the new guidance is a powerful tool for patent practitioners. For example, before the guidance, many software-based patent applications were faced with arguing there was “significantly more” than algorithms and computer hardware in the claims. However, the new guidance obviates the previously opaque requirements. Now, rather than advocate for “significantly more,” practitioners can argue that their claim is a practical application of something that could be a judicial exception. One manner to do this can be to argue that additional elements in the claims improve the functioning of a computer or provide an improvement to other technological areas. Notably, the new guidance also does not involve a consideration as to whether such additional elements are merely conventional. Thus, a claim with conventional elements can still be patent eligible as long as it integrates a judicial exception into a practical application.

While the new USPTO guidance attempts to bring some clarity and consistency to patent eligibility, the interplay between the courts and the patent office remains uncertain. Thankfully for patentees seeking protection in Japan, the bar for patent eligibility appears to be lower and more clearly defined. In contrast to the U.S., the hurdle for patent eligibility in Japan is lower. For example, in Japan, an examiner must determine whether a claimed invention as a whole involves the “creation of a technical idea utilizing the laws of nature.”[9] But similar to the U.S., examples of inventions typically deemed patent ineligible under this Japanese standard include those that are directed to economic laws, rules for playing a game, mental activities, mathematical formulas, or the mere presentation of information (e.g., image data taken with a digital camera).[10]

When claims are deemed “software-related,” the determination takes a slightly different form and involves a two-part inquiry.[11] First, the examiner evaluates the claimed invention from a non-software focused standpoint. In other words, the patent eligibility of a software-related invention evaluated using this standpoint should not rest on the fact that the invention involves software. Thus, the examiner first determines whether the invention stands on its own, and is patent eligible notwithstanding the software aspect. But if the examiner is unable to make this first determination, the examiner then evaluates the invention with a heavier emphasis on the software aspects of the claim.

From a non-software focused standpoint, a software-related invention is likely to be found to be patent-eligible when it involves (i) “concretely performing control of an apparatus (e.g., an engine, a washing machine, a disk drive), or processing with respect to the control” or (ii) concretely performing information processing based on the technical properties of an object (e.g., physical, chemical, or electrical properties).[12] Interestingly, even claims that involve “software for causing a computer to execute a procedure of a method,” or “a computer or system for executing such a procedure” are often found to be patent eligible in Japan without further inquiry.[13]

From a software-focused standpoint, a software-related invention is likely to be found to be patent-eligible when “information processing by the software is concretely realized by using hardware resources.”[14] In other words, the cooperation of software and hardware resources can elevate a claim to a level of patent eligibility. Examples of hardware resources include various “physical device[s] or physical element[s]” that are “used in processing, operation, or implementation of a function,” such as a computer, CPU, memory, input device, output device, or a physical device connected to a computer.[15]

The Japanese software-focused standard for patent eligibility is particularly notable for several reasons. For one, it is in stark contrast with U.S. standards, in which merely implementing a process using software and hardware is almost always insufficient for patent eligibility. Additionally, the lower hurdle before the JPO is undoubtedly a contributing factor to the higher level of allowed software-related claims and business method claims in Japan compared to that in the U.S.

For software-related claims, the Japanese standard as a whole, and particularly the software-focused standard, allows for a certain type of patent protection in Japan that is not currently available in the U.S.: program claims. A “program claim” is distinct from a computer readable medium (CRM) claim and was introduced into Japan Patent Law in 2002 to address the issue that a CRM claim does not cover a situation where a software program is provided to a user, not by a CRM such as a CD-ROM, but rather by the user downloading the software program over a network.[16] In the JPO examination handbook, the JPO provides the following example forms that program claims can take, which U.S. practitioners will certainly note as being quite different from the scope of what is patent eligible in the U.S.[17]

Example 1: A program for causing a computer to execute a step A, a step B, a step C, …

Example 2: A program for causing a computer to function as means A, means B, means C, …

Example 3: A program for causing a computer to implement a function A, a function B, a function C, …

Because program claims do not require an apparatus that stores the software code, program claims provide patent protection in an area that CRM claims do not, and are thus useful for at least that reason.

There are other types of claims that fall under the JPO’s definition of a “program” and are often found to be patentable using the software-focused standard. One example is a “trained model,” such as “[a] trained model for causing a computer to function to output quantified values of reputations of accommodations based on text data on reputations of accommodations,” where the model comprises multiple neural networks.[18] Another example is a “data structure,” such as “[a] data structure of dialogue scenarios utilized in a voice interactive system.” These types of claims can be more difficult to obtain in the U.S.[19]

As for business method claims, between 2012 and 2017 in the U.S., the allowance rate for business method claims was 32.4% in 2013, dropped to 6.2% by 2016, and rose to 12.7% in 2017.[20] Over the same period of time in Japan, however, the allowance rate for such claims was consistently near 70%.[21] The high allowance rate in Japan can be attributed to the low hurdle for software. In particular, while business methods are not patent eligible on their own, software for implementing such methods are patent eligible as long as they meet the aforementioned requirements. For example, claim 1 of Japanese Patent No. 5492261 is directed to “a system for determining executability of a loan transaction” and is recited as follows:

  1. A system for determining executability of a loan transaction comprising:

means for receiving a loan application telegraphic message including an identifier of a loan application client, a loan execution date and a loan application amount from a terminal device;

means for storing, for the loan application client, a loan limit amount, a total amount of loan balance and a future loan execution amount that has been scheduled to be loaned during a period of time up to the loan execution date; and

means for determining that a loan transaction for the loan application telegraphic message is executable if a first total amount of the loan application amount, the total amount of loan balance and the future loan execution amount is less than or equal to the loan limit amount.

The key feature of this claim is not the presence of “a terminal device” (which is arguably the only concrete recitation of hardware in the claim) or another technical aspect, but rather a business process. However, based on the JPO Examination Handbook, it would be clear to a person skilled in the art that, considering the claim as a whole, the underlying business process is “implemented by concrete means or procedures on which the software and hardware resources that a ‘computer’ usually comprises, such as a CPU, memory, storage means, input and output means, etc. cooperate.”[22] Here, a “means for determining” implies a CPU, a “means for storing” implies memory, and a “means for receiving” implies an input or output means. The business process is concretely realized by using hardware resources and is thus patentable.  

A clear understanding of Japanese patent law in the areas of software and business methods can help practitioners avoid missteps and better represent companies who have or seek to have patent protection in Japan. For example, even when U.S. patentees pursue software-related claims in Japan, they often attempt to do so with CRM-style claims and do not consider whether they should file program claims. In fact, due to how unfavorably U.S. patent law is on business methods, and how risky U.S. patent law can be on software claims, U.S. patentees often forego pursuing patent protection in these areas altogether. Thus, U.S. practitioners and patent applicants alike should be aware of all the particular advantages of Japanese patent law in these areas and reach out to a Japanese associate if any other advice is needed. After all, it could be worthwhile for both parties.

 

Yukio Oishi is a partner with the Japanese law firm of TMI Associates. His practice focuses on patent prosecution and patent disputes, including patent litigation and patent licensing negotiations. He is a guest contributor for this issue of snippets. http://www.tmi.gr.jp/english/staff/y_oishi.html

[1] Outline of the Partial Revision of the Patent Act, etc., Japan Patent Office (May 19, 2014), available at https://www.jpo.go.jp/e/system/laws/rule/hokaisei/document/tokkyohoutou_kaiei_2605 14/outline.pdf.

[2] JPO Status Report 2019, Japan Patent Office, at 36 (March 2019), available at https://www.jpo.go.jp/e/resources/report/statusreport/2019/document/index/all.pdf.  

[3] Overview of Trial for Invalidation and Opposition Systems in Japan, JPO Trial and Appeal Department at 6 (March 2017), http://www.ptabbar.org/wp-content/uploads/2018/03/Pre-Conference-Session-Comparing-the-PTAB-to-Other-Forums-Around-the-World-FINAL.pdf.  

[4] 2019 Revised Patent Subject Matter Eligibility Guidance, Federal Register, 84 Fed. Reg 50 (Jan. 7, 2019).

[5] 827 F.3d 1341, 1352 (Fed. Cir. 2016).

[6] 958 F.2d 1053, 1056-57 (Fed. Cir. 1992).

[7] BASCOM Glob. Internet Servs., 827 F.3d at 1352.

[8] Arrhythmia Research Tech, 958 F.2d at 1057.

[9] Examination Handbook for Patent and Utility Model in Japan, Japan Patent Office, Annex B, Chapter 1, Computer Software-Related Inventions, Section 2.1 and 2.1.1, available at https://www.jpo.go.jp/e/system/laws/rule/guideline/patent/handbook_shinsa/document/index/app_b1_e.pdf.

[10] Id.

[11] Id. at Section 2.1.1.

[12] Id. at Section 2.1.1.1.

[13] Id.

[14] Id. at Section 2.1.1.2.

[15] Id.

[16] News Release, JPO (April 2002)

https://www.jpo.go.jp/system/laws/rule/hokaisei/tokkyo/houkaisei_h140417/houkaisei_gaiyou.html.

[17] Examination Handbook for Patent and Utility Model in Japan, Japan Patent Office, Annex B, Chapter 1, Computer Software-Related Inventions, Section 1.2.1.1.

[18] Id. at Section 3, Case 2-14; see also Section 1.2.1.1.

[19] Id. at Section 3, Case 2-13.

[20] Business Methods Allowance Rate, USPTO, https://www.uspto.gov/patents-getting-started/patent-basics/types-patent-applications/utility-patent/business-methods-27 (last visited May 23, 2019).

[21] See Nobuyuki Taniguchi, Recent Developments on Software-related Patents in Japan, Nakamura & Partners (Aug. 18, 2017), http://www.nakapat.gr.jp/en/legal_updates_eng/recent-developments-on-software-related-patents-in-japan/; Yukio Oishi, Protecting Fintech Business by Obtaining Patent Protection in Japan, Japan Patent and Trademark Update, TMI Associates (November 2017), available at https://www.tmi.gr.jp/wp-content/uploads/2017/11/jptu_issue_8.pdf.

[22] See, e.g., Examination Handbook for Patent and Utility Model in Japan, Japan Patent Office, Annex B, Chapter 1, Computer Software-Related Inventions, Section 2.1.1.2, Example 4.