SCOTUS Denies Pro Se Inventor Challenge to Conflicting, Unexplained Section 101 Rejections

Today, the U.S. Supreme Court issued an order list denying a petition for writ of certiorari filed by inventor Noah Healy to challenge rulings upholding a patent examiner’s subject matter eligibility rejection under 35 U.S.C. § 101 at the U.S. Patent and Trademark Office (USPTO). Healy’s pro se petition challenged the U.S. Court of Appeals for the Federal Circuit’s decision to affirm the examiner’s rejection as violating the meaningful review requirements of the Administrative Procedures Act (APA) due to conflicting statutory theories on patentability that were never sufficiently explained by the agency.

Technological Solution to Market Inefficiencies Is Quintessential Human Activity

The Federal Circuit affirmed the USPTO patent examiner’s rejection of Healy’s patent application last August, agreeing with the examiner that Healy’s systems and methods for discovering and publishing clearing prices of commodities within exchange markets was directed to subject matter ineligible for patenting under Section 101. Healy’s invention addressed issues in exchange markets that have existed for nine centuries, such as manipulative pricing and crash instability, by creating markets operating on logical principles that provide a pari-mutuel payout to speculators correctly predicting future prices of commodities from those combined into a bettor pool. The resulting market still allows consumers and producers to utilize speculator pricing information while also aligning incentives among consumers, producers and speculators.

Healy’s patent application was rejected in April 2022 by an examiner who concluded that the patent claims were directed to processes covering fundamental economic principles and commercial or legal interactions. Any additional claim limitations were described at a high degree of generality such that they amounted to mere instructions to apply the abstract idea using generic computer components, the examiner also found. Healy appealed to the Patent Trial and Appeal Board (PTAB), which agreed with the examiner that Healy’s claimed improvements were directed to abstract economic principles rather than technological improvements.

Last August, the Federal Circuit affirmed the PTAB’s ruling, finding that the Board properly considered the patent application in determining that representative claim 1 was directed to logical constructs for exchange markets, “a quintessential method of organizing human activity.” This failed the subject matter eligibility inquiry at Step 1 of Alice/Mayo, according to the appellate court. Healy argued that the PTAB failed to consider explicit improvements to bandwidth utilization, storage efficiency and other aspects of the underlying technology, but the Federal Circuit cited Healy’s arguments before the PTAB indicating that reduced market inefficiencies resulted in a reduced need for computing resources.

Analyzing the PTAB’s analysis at Alice/Mayo Step 2, the Federal Circuit agreed that additional limitations in claim 1 including an intermediary market server and a clearing house module were generic computer components implementing mere instructions to achieve an abstract idea. While Healy argued that the PTAB improperly treated claim 1 as representative, the Federal Circuit acknowledged in a footnote that Healy failed to argue the patentability of remaining claims, allowing the Board to treat claim 1 as representative. The appellate court also dismissed Healy’s arguments that the PTAB committed procedural error, finding either that Healy failed to properly raise those issues before the Board or that the USPTO properly withdrew Healy’s patent application after Healy’s payment of issue fees to address the claims’ unpatentability.

Healy: Unexplained Inconsistencies Are Arbitrary, Capricious Under Encino Motorcars

Healy filed his cert petition with the U.S. Supreme Court this January asking whether an Article III court can affirm agency decisions while dismissing unrebutted record evidence as unpersuasive, or affirm agency decisions resting on contradictory statutory determinations, without an explanation sufficient to permit meaningful judicial review under the APA.

Healy’s petition states that the notice of allowance on his patent application was issued after the examiner’s Section 101 rejection was withdrawn. Further, Healy noted that the USPTO withdrew the application after allowance based on a new Section 101 utility rejection. On appeal, the PTAB reverted back to the first Section 101 rejection without explanation while also narrowing the scope of Healy’s appeal. Many of these issues were argued to the Federal Circuit, which rejected those arguments as unpersuasive without addressing their substance.

Under the Supreme Court’s 1983 ruling in Motor Vehicle Manufacturers Association v. State Farm, Healy argued that the Federal Circuit as reviewing court is required to ensure that APA requirements are met, including that the agency articulate a satisfactory explanation for its action. Further, in Encino Motorcars v. Navarro (2018), the Court has clarified that unexplained inconsistencies in agency decision-making can itself lead to a finding that an agency decision is arbitrary or capricious. While the appeal implicated Section 101 eligibility issues, Healy highlighted that his questions presented do not address Section 101’s substantive scope but rather questions of judicial review based on sufficient agency explanation that extend well beyond patent law.