Supreme Court Issues Pro-Employer Ruling on Class Action Waiver Issue

On May 21, 2018, the Supreme Court of the United States settled the contentious class action waiver issue that has riled courts for the past six years. In a 5-4 opinion, the Court upheld class action waivers in arbitration agreements. Relying heavily on the text of the Federal Arbitration Act (FAA) and “a congressional command requiring us to enforce, not override, the terms of the arbitration agreements before us,” the Court ruled that the FAA instructs “federal courts to enforce arbitration agreements according to their terms—including terms providing for individualized proceedings.” The Court also reasoned that neither the FAA’s savings clause nor the National Labor Relations Act (NLRA) contravenes this conclusion. Epic Systems Corporation v. Lewis, Supreme Court of the United States, Nos. 16–285, 16–300, 16–307 (May 21, 2018).

Background

In January 2012, the National Labor Relations Board ruled in D.R. Horton, 357 NLRB No. 184 (2012) that employers cannot use class action waivers in arbitration agreements with employees covered by the National Labor Relations Act. The Board reasoned such waivers limit employees’ rights under the NLRA to engage in “concerted activities” in pursuit of their “mutual aid or protection.” That holding appeared to put the Board on a collision course with Supreme Court precedent under the Federal Arbitration Act approving class action waivers; however, the Board reasoned the Supreme Court’s prior cases had never involved the NLRA and didn’t apply.

Most federal courts disagreed with the Board’s reasoning. In fact, the Fifth Circuit (in an appeal handled by Ogletree Deakins) refused to enforce the Board’s D.R. Horton decision. Scores of lower federal courts subsequently refused to follow the Board’s ruling, citing the Fifth Circuit’s rejection of it. Two other courts of appeals, the Second and the Eighth, similarly spurned the Board’s view.

Undeterred, the Board invoked its policy of not acquiescing to federal courts lower than the Supreme Court and adhered to its position in Murphy Oil USA, Inc., 361 NLRB No. 72 (2014). The Fifth Circuit again refused to enforce that decision.

Although dozens of federal and state courts continued to reject the Board’s rationale as inconsistent with the FAA, recently two courts of appeals went the other direction, creating a circuit split. The Seventh Circuit became the first federal appellate court to agree with the Board in Epic Systems v. Lewis in May 2016. The Ninth Circuit followed suit in August 2016 in  Ernst & Young LLP v. Morris, and, in 2017, the Sixth Circuit did so as well.

The six-year long standoff between the Board and most courts, and the more recent split between the Second, Fifth, and Eighth Circuits on one side and the Seventh, Ninth, and Sixth Circuits on the other, have left employers in a bind, as national and regional employers have found their practices subject to conflicting precedent depending on the circuit at issue.

On January 13, 2017, the Supreme Court agreed to take up the matter. With at least a half dozen petitions for certiorari pending on this class action waiver issue, the Court agreed to hear appeals in Murphy Oil, Lewis, and Morris. The Court also consolidated the three cases. On October 2, 2017, the Supreme Court of the United States heard oral argument in the three consolidated cases.

The Supreme Court’s Decision

After a thorough examination of the FAA and Section 7 of the NLRB, the Court concluded that “the law is clear: Congress has instructed that arbitration agreements [] must be enforced as written. While Congress is of course always free to amend this judgment, we see nothing suggesting it did so in the NLRA—much less that it manifested a clear intention to displace the Arbitration Act.” The Court considered the argument that the FAA’s savings clause—which allows courts to refuse to enforce arbitration agreements “upon such grounds as exist at law or in equity for the revocation of any contract”—creates an exception on the basis that the NLRA renders class and collective action waivers illegal. Justice Gorsuch, relying on the Supreme Court’s 2011 AT&T Mobility LLC v. Concepcion decision, reasoned that this argument is flawed. The savings clause permits courts to invalidate agreements on the basis of contract defenses such as fraud and duress, the Court ruled, and not, citing Concepcion, on the basis of “defenses that apply only to arbitration”

The Court also rejected the argument that class action waivers are invalid under Section 7 of the NLRA. According to Justice Gorsuch, “[t]he notion that Section 7 confers a right to class or collective actions seems pretty unlikely when you recall that procedures like that were hardly known when the NLRA was adopted in 1935.” As a result, the Court reversed the judgments in Epic Systems and Ernst & Young and remanded the two cases for further proceedings consistent with the Court’s opinion. The Court also affirmed the judgment in Murphy Oil.

© 2018, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

MURPHY V. NCAA: Supreme Court Update

It’s not every day that a Supreme Court decision gets covered not only in the pages of The New York Times, but also ESPN.com and Sports Illustrated. But Murphy v. NCAA (No. 16-476), which struck down the federal Professional and Amateur Sports Protection Act (PASPA) and opened the door (for now) to legalized sports betting across the country, is no ordinary decision. Beyond green-lighting a potential billion-dollar industry, the Court’s decision breathes new life into the anti-commandeering principle (once a favorite of states-rights conservatives and now suddenly popular on the Left) and highlights a divide among the justices with respect to the severability of unconstitutional statutory provisions. (We’re pretty sure it’s that last part that the sportswriters were interested in.) Because it’s a biggie, we’ll devote this entire missive to summarizing the Murphy decision, but we’ll be back tomorrow with summaries of the other decisions handed down this week.

Enacted in 1992, PASPA was borne out of a growing concern from legislators—most notably star basketballer and New Jersey Senator Bill Bradley—that if the trend of increased gambling extended to sports, it could have detrimental effects on young people and the integrity of the games. The Act made it unlawful for a State “to sponsor, operate, promote, license, or authorize by law or compact” a gambling or wagering scheme based on competitive sporting events. Just in case a State disobeyed, the law also made it unlawful for “a person to sponsor, operate, or promote” any sports-betting scheme pursuant to state law. However, PASPA did not make sports betting itself a crime, and was enforceable only by civil actions, which could be brought by the Attorney General, as well as sports leagues. It also contained a “grandfather” provision, permitting sports betting to continue in four states where it already existed, and it gave New Jersey—which was, at the time, considering proposals to legalize sports books—one year in which to legalize sports betting and benefit from the grandfather clause. But New Jersey dropped the ball on the one-year window. Nevertheless, two decades later the State decided to swing for the fences by enacting a law legalizing sports gambling, notwithstanding PASPA’s prohibition. After the major professional sports leagues and the NCAA successfully enjoined that legislative authorization, New Jersey called an audible and crafted a new law that did not technically authorize sports gambling, but instead repealed the existing state law prohibiting it. The NCAA and leagues sued again and the lower courts called New Jersey’s bluff, concluding that the repeal law violated PASPA in the same way a direct authorization of sports betting would. The State threw down its red challenge flag and the Supreme Court accepted the case for further review.

At the Supreme Court, one of our oldest and most storied legal rivalries was reignited: state vs. federal law. In the leagues’ corner, the well settled doctrine of federal preemption, long a staple of the playbook for arguing that federal law supersedes conflicting state law. On the opposite side, New Jersey placed its chips on the lesser known “anticommandeering” doctrine, which was once used to prevent the Feds from requiring States to enforce federal gun-control legislation and has been more recently touted by “sanctuary city” advocates who argue that States and municipalities are under no obligation to enforce federal immigration laws. Against the odds, the Supreme Court sided rather definitively with New Jersey, with seven justices agreeing that PASPA violated the anticommandeering doctrine, and no justice expressly disagreeing. (The dissenters were more miffed about severability than the Tenth Amendment.)

Writing for a majority including the Chief, Kennedy, Thomas, Kagan, Gorsuch (and mostly Breyer), Justice Alito acknowledged that “the anticommandeering doctrine may sound arcane,” but insisted that “it is simply the expression of a fundamental structural decision incorporated into the Constitution, i.e., the decision to withhold from Congress the power to issue orders directly to the States.” PASPA violates this principle, he concluded, because it “unequivocally dictates what a state legislature may and may not do.” Though the leagues and the United States argued that prohibiting States from enacting legislation is different from compelling them to enact legislation, Justice Alito rejected this argument with a Dikembe Mutumbo finger-wag, noting that the “distinction is empty.” Nor could the preemption doctrine save PASPA. Every form of preemption (express, conflict, field) is based on a federal law that regulates the conduct of private actors, not the States. The PASPA provision prohibiting state authorization of sports betting, on the contrary, “is not a preemption provision because there is no way in which [it] can be understood as a regulation of private actors.” It is, instead, a “direct command to the States,” which “is exactly what the anticommandeering rule does not allow.”

That left the second provision of PASPA, which prohibited “a person” from sponsoring a sports-betting operation, even if authorized by state law. This certainly would qualify as a preemption provision, in that it regulated private conduct, but Alito (now with a slimmer majority) concluded that the rest of the statute could not be severed from the unconstitutional authorization bar, because the provisions were meant to work hand-in-glove. “If Congress had known that the latter provisions would fall, we do not think it would have wanted the former to stand alone.”

It was the severability issue that sparked a volley of separate opinions. Justice Thomas first weighed in with a concurring opinion questioning the constitutional basis for the Court’s severability doctrine, which he considered to be in sharp tension with traditional limits on judicial authority. Because no party had raised the issue, Justice Thomas joined the majority opinion in full, but he called for a review of the severability doctrine was called for in some future case.

The dissenters also focused on severability—so much so that it’s not really clear they dissented from the majority’s anticommandeering holding. Though styled a “dissent,” Justice Ginsburg’s opinion (joined by Sotomayor) did not address the anticommandeering argument at all. Instead, she maintained that, even assuming that PASPA’s anti-authorization prohibition was unconstitutional, there was no reason “to deploy a wrecking ball destroying” the entire statutory scheme. Rather than strike down the entire statute, the dissenters would have severed the offending provision and permitted the rest of the law to effectuate Congress’s intent of “stopping sports-gambling regimes while making it clear that the stoppage is attributable to federal, not state, action.” Justice Breyer joined the opinion “in part,” but wrote separately to clarify that he concurred with the majority’s anticommandeering holding. Although he joined the majority opinion striking down the authorization bar, Breyer (like Ginsburg and Sotomayor) would have allowed the ban on private sponsoring of sports-betting schemes to remain in effect. As he explained, it is perfectly reasonable to assume that Congress intended that provision as an alternative means of achieving its goal of prohibiting the expansion of sports gambling. Because there was no constitutional impediment to its doing so through the private bar, Breyer would have preferred to hand New Jersey a “pyrrhic” victory.

Instead, the Court handed New Jersey—and other states that are betting on betting to shore up their coffers—a big win. That said, with the exception of Justice Thomas, every justice agreed that Congress could achieve its earlier goal of stopping sports betting through a direct ban, under the Commerce Clause. Given the stakes for the losers in Murphy—the NCAA, major sports leagues, and Nevada, among others—odds are good that there will be some serious lobbying for a direct federal ban. In legislation, as in sports, it ain’t over til it’s over.

 

© 1998-2018 Wiggin and Dana LLP
This post was written by Kim E. Rinehart, Tadhg A.J. Dooley and David Roth of Wiggin and Dana LLP.

White House Eliminates Top Cybersecurity Position

On May 15, the White House announced that it was eliminating the position of Cybersecurity Coordinator at the National Security Council, the highest position at the White House devoted to Cybersecurity. While not unexpected, this move is significant.

Symbolically, eliminating this senior position arguably send a signal that this Administration is less focused on cybersecurity as a priority.

Functionally, it means there will be no single person in the White House accountable to the President and the National Security Advisor on cyber issues.

Administratively, and perhaps most significantly, the White House’s ability to coordinate cybersecurity among the agencies, arbitrate disputes, and set direction for policy initiatives government-wide will likely be degraded.

While the White House is explaining the move by saying it will streamline management, increase efficiency, reduce bureaucracy and raise accountability, in the short run at least it seems likely to sow some confusion and increase the criticism of federal cybersecurity policy that has already gone on for several years.

Putting it Into Practice: Any hopes companies harbored for increased clarity and leadership from the Administration on cybersecurity seem to be fading. Companies will have to spend more time monitoring the cybersecurity initiatives and requirements of individual agencies, which will likely become less coordinated going forward.

Copyright © 2018, Sheppard Mullin Richter & Hampton LLP.

Significant Changes in Store for New York Employers When It Comes to Sexual Harassment

Mayor Bill de Blasio signed the “Stop Sexual Harassment in NYC Act” into law last week. The Act brings sweeping changes that affect all New York City employers. These are among the most notable:

  • Effective immediately, sexual harassment is considered a form of discrimination under the New York City Human Rights Law (NYCHRL).

  • Effective immediately, the NYCHRL covers all employers, regardless of the number of employees, with respect to claims of sexual harassment.

  • Effective immediately, the statute of limitations for filing a gender-based harassment claim with the New York City Commission on Human Rights (NYCCHR) is increased from one year to three years.

  • Starting September 6, 2018, all employers must display a new anti-sexual harassment poster, as designed by the NYCCHR, which defines sexual harassment and how to report it. As of today, that poster is not yet available.

Additionally, starting April 1, 2019, all private employers with 15 or more employees must conduct mandatory annual sexual harassment training. Training requirements are quite specific and somewhat similar to California’s state law requirements. Notably, the trainings must explain what sexual harassment is by using examples, and explain the process for both internal complaints and for filing complaints with the New York State Division of Human Rights and the U.S. Equal Employment Opportunity Commission. Employers must keep records verifying that training was completed, including signed employee acknowledgement, for three years.

The amendments to the NYCHRL make it one of the furthest-reaching anti-sexual harassment laws in the country, and come in the wake of the #MeToo movement and significant amendments to the New York State Human Rights Law (NYSHRL) designed to address sexual harassment. The NYSHRL amendments, which affect all employers in New York state, include:

  • a prohibition on confidential settlement agreements in sexual harassment claims, unless confidentiality is requested by the alleged victim;

  • newly created employer liability for independent contractors and certain other non-employees for sexual harassment when the employer, its agents, or supervisors were aware of the harassment of the non-employee and failed to take “immediate and appropriate corrective action.”

  • a prohibition on employers requiring employees to enter into mandatory arbitration agreements for sexual harassment claims, except where federal law permits employers to require arbitration; and

  • a requirement that employers have a sexual harassment prevention policy and mandatory annual training program. The bill requires the state Department of Labor, in collaboration with the Division of Human Rights, to promulgate a model sexual harassment prevention policy and training program for employers. Employers will be required to either adopt the model policy and training program or a policy and program that meet or exceed minimum standards set forth in the legislation and the policy and program developed by the state.

Copyright © by Ballard Spahr LLP

One Way Or Another: Trump NLRB Coming at Joint-Employer Standard from New Angle

President Trump’s newly constituted National Labor Relations Board (NLRB) made waves at the end of last year when it issued a slew of significant decisions, including one that overturned an Obama NLRB decision that relaxed the standard for finding “joint-employment” status between two or more companies.

Many employers celebrated the overturning of the Obama board joint-employer decision, but that celebration was short lived because the NLRB’s inspector general issued a report earlier this year finding that one of the board members who participated in the decision may have had a conflict of interest related to the case. That report caused the agency to roll back the decision and reinstitute the Obama-era joint-employer standard.

Good news for employers: NLRB Chairman John Ring recently announced that the agency is considering rulemaking to modify the standard the board uses when evaluating whether joint-employment exists. In the press release, Ring states: “Whether one business is the joint employer of another business’s employees is one of the most critical issues in labor law today … The current uncertainty over the standard to be applied in determining joint-employer status under the Act undermines employers’ willingness to create jobs and expand business opportunities. In my view, notice-and-comment rulemaking offers the best vehicle to fully consider all views on what the standard ought to be. I am committed to working with my colleagues to issue a proposed rule as soon as possible, and I look forward to hearing from all interested parties on this important issue that affects millions of Americans in virtually every sector of the economy.”

The NLRB historically has preferred setting U.S. labor policy through adjudication of specific cases versus through the rulemaking process, but the Obama board broke from that practice in 2015 when it issued its infamous “ambush election rule.”

It appears the Trump NLRB will be altering the agency’s standard for imposing joint-employment soon – one way or another. Stay tuned.

© 2018 BARNES & THORNBURG LLP
This article was written by David J. Pryzbylski of Barnes & Thornburg LLP

DHS Issues Cybersecurity Strategy

The Department of Homeland Security (“DHS”) released its cybersecurity strategy on May 15, 2018.  The 35-page document sets forth a plan for managing cybersecurity risks through public and private sector collaboration.  By 2023, DHS seeks to have “improved national cybersecurity risk management by increasing security and resilience across government networks and critical infrastructure; decreasing illicit cyber activity; improving responses to cyber incidents; and fostering a more secure and reliable cyber ecosystem through a unified departmental approach, strong leadership, and close partnership with other federal and nonfederal entities.”  The strategy document is broken into five pillars:  risk identification; vulnerability reduction; threat reduction; consequence mitigation; and enable cybersecurity outcomes.  DHS assures that it “will maintain a leadership role, collaborating with other federal agencies, the private sector, and other stakeholders, across all of its cybersecurity mission areas to ensure that cybersecurity risks are effectively managed, critical networks are protected, vulnerabilities are mitigated, cyber threats are reduced and countered, incidents are responded to in a timely way, and the cyber ecosystem is more secure and resilient.”

© Copyright 2018 Murtha Cullina
This article was written by Dena M. Castricone of Murtha Cullina

ERISA’S New Claims and Appeals Procedures for Disability Benefits Claims

“It’s a New Dawn; It’s a New Day; It’s a New Life for Me; and I’m Feeling [not so] Good”

While Nina Simone’s song captures the power of “feeling good,” the effects of an employee’s disability do not feel good for the employee or employer. And if your organization offers employee benefits that require the plan administrator to determine whether a plan participant is disabled, you should confirm that your plans reflect updated claims and appeal procedures.  Regulations finalized back in 2016 are now in effect.

“This Old World is a New World for Me”

Under ERISA, a federal law that applies to most benefit plans that are offered by an employer to its employees, the plan administrator is required to adopt reasonable procedures to govern how participants file claims and appeals, when and how such claims and appeals will be reviewed, and how notification of denials will be provided. The requirements have changed over the years.  Most recently, in December 2016, the U.S. Department of Labor (“DOL”) published a final regulation that revises requirements that apply to disability benefits.  Although the new regulation was final in January 2017, with the change in presidential administration, the DOL delayed its effective date pending consideration of its effects.  Many wondered if this delay would eventually lead to its withdrawal.  However, the DOL announced in 2018 that no further delays would be adopted.  As a result, the final regulations apply to claims involving disability determinations that are filed in ERISA plans on or after April 1, 2018.

“And a Bold World for Me”

The final regulations specifically adopt procedural changes to make the rules for disability claims and appeals more similar to the rules for group health plan claims and appeals. The new rules require changes in operations as well as changes in plan communications.  For instance, if there is new evidence or a new rationale presented on appeal, the claimant may affirmatively respond to the new evidence or rationale before the determination on appeal is made.  If a determination is made that differs from the views of the Social Security Administration or the claimant’s experts, the denial notice should address the difference. And depending on where a claimant lives, the plan may be required to provide notices and disclosures in a culturally and linguistically appropriate manner.  This can include taglines that indicate how to access non-English language assistance; offering a telephone customer assistance hotline that answers questions and provides assistance in filing claims and appeals in a non-English language; and upon request, translating notices into a non-English language.

The stakes for noncompliance are high. Some errors may permit a claimant to request a court’s review without first being required to exhaust the plan’s claim and appeal procedures.  Typically, an ERISA plan is permitted to require a claimant to exhaust the plan’s claims and appeals procedures.  Doing so supports Congress’s desire to permit a plan administrator to exercise its discretion in interpreting and applying plan language.  The potential to shift decision-making power from a plan administrator to a reviewing court emphasizes how important it is for plan sponsors to have their plans reviewed by experienced benefits counsel to ensure compliance.

© Steptoe & Johnson PLLC. All Rights Reserved.
This article was written by Jamie L. Leary of Steptoe & Johnson PLLC

FCC Streamlines Wireless Environmental Review Process—Part 1: FCC Exempts Wireless Small Cells from Environmental Review Requirements

A high FCC priority is to streamline broadband deployment including the wireless infrastructure necessary to provide service to the public. One FCC proceeding directed to that objective was initiated in April 2017 with a Notice of Proposed Rulemaking (NPRM), Notice of Inquiry (NOI), and Request for Comment (RFC) regarding Accelerating Wireless Broadband Deployment by Removing Barriers to Infrastructure Investment.

The NPRM addressed Pole Attachments, Expediting Copper Retirement, and Streamlining the Section 214(a) Discontinuation of Service process. The NOI addressed possible prohibition of state and local laws inhibiting broadband deployment and pre-emption of state laws governing copper retirement. The RFC addressed common carrier discontinuation of service issues unrelated to wireless infrastructure and the environmental review process.

In November 2017 the FCC adopted a (first) Report and Order (R&O). It concluded that in specified circumstances “replacement of a pole that was constructed with a sole or primary purpose other than supporting communications antennas with a pole that will support such antennas would have no potential to affect historic properties.”  Accordingly, it excluded replacement utility poles from required review under Section 206 of the National Historic Preservation Act (NHPA) if specified conditions are met. Please see my December 5, 2017 blog entry “Is the Road to 5G Paved with Federal and State Pre-emptions of Local Authority?” for a summary of those conditions.

In March 2018, the FCC adopted a Second R&O. In it, the FCC excluded small wireless facilities from National Historic Preservation Act (NPHA) and National Environmental Policy Act (NEPA) review under specified circumstances and also streamlined NHPA and NEPA review for larger wireless facilities. The FCC stated that these actions will make a real difference in promoting U.S. leadership in 5G and can cut the costs of deployment by 80%, trim months off deployment timelines, and incentivize thousands of new wireless deployments thus expanding the reach of 5G and other advanced wireless technologies in the U.S.

The FCC concluded that deployment of small wireless facilities by non-Federal entities do not require historic preservation review under NHPA nor environmental review under NEPA because such deployments are neither an “undertaking” (NHPA) nor a “major Federal action” (NEPA). The Second R&O noted that the FCC last considered whether some wireless facilities could be exempt from these requirements in 2004 when virtually all wireless sites were “macro” sites, but that new small cell sites are materially different in size and in their likelihood of impact on surrounding areas. The FCC concluded that conducting such reviews for small wireless sites would result in costs far exceeding benefits and that the burden would grow exponentially as ever-increasing numbers of small wireless facilities are deployed.

Here is the newly amended FCC rule that specifies the conditions for exclusion from NHPA and NEPA review for small wireless facilities:

Section 1.1312(e): Paragraphs (a) through (d) of this section shall not apply:

  1. to the construction of mobile stations; or

  2. where the deployment of facilities meets the following conditions:

(i)  The facilities are mounted on structures 50 feet or less in height including their antennas as defined in § 1.1320(d), or the facilities are mounted on structures no more than 10 percent taller than other adjacent structures, or the facilities do not extend existing structures on which they are located to a height of more than 50 feet or by more than 10 percent, whichever is greater;

(ii) Each antenna associated with the deployment, excluding the associated equipment (as defined in the definition of antenna in § 1.1320(d)), is no more than three cubic feet in volume;

(iii) All other wireless equipment associated with the structure, including the wireless equipment associated with the antenna and any pre-existing associated equipment on the structure, is no more than 28 cubic feet in volume;

(iv) The facilities do not require antenna structure registration under Part 17 of this chapter;

(v) The facilities are not located on Tribal lands, as defined under 36 CFR § 800.16(x); and

(vi) The facilities do not result in human exposure to radiofrequency radiation in excess of the applicable safety standards specified in § 1.1307(b).

These changes were adopted by the FCC on a 3-2 vote. The changes go into effect on July 2, 2018.

Part 2 will address the actions of the FCC to streamline its environmental review process for larger wireless facilities.

© 2018 Keller and Heckman LLP
This article was written by Michael T. N. Fitch of Keller and Heckman LLP

EMI options – the wait is over!

Since 6 April 2018 companies have been unable to grant new EMI options, because the existing EU state aid approval expired without fresh approval having been received.

So there has been much excitement today at the news that the EU Commission has now given state aid approval, and companies can now grant new EMI options. For companies that granted EMI options since 6 April (e.g. as part of a commercial transaction which could not be delayed) the wait continues as the EU Commission’s press release does not state the date from which their approval applies. We expect this will be indicated in the EU Commission’s formal decision, which has not yet been published. For the majority though, it’s good news and a welcome return to “business as usual”.

The state aid approval will apply as long as the UK is an EU member state, and the EU Commission has indicated that long-term approval of the EMI scheme will need to be dealt with in the EU withdrawal agreement.

© Copyright 2018 Squire Patton Boggs (US) LLP
This article was written by Liz Pierson of Squire Patton Boggs (US) LLP

PTO Releases Revised Guidance on Compliance with Mayo/Alice Rule

On April 19, the USPTO released a Memorandum from Robert Bahr, The Deputy Commissioner for Patent Examination Policy, that summarized the support required for a finding if a claim directed to a judicial exception to s. 101 eligibility under Step 2A of the Mayo/Alice analysis chart of MPEP 2106 – a natural phenomenon, an abstract idea or a product of nature [ ed. note “PAIN’]– contains an additional inventive concept that, taken alone or in combination, would not represent well-understood, routine, or conventional [“WRC”] activity. The Memorandum was prompted by the recent decision in Berkheimer v. HP, 881 F.3d 1360 (Fed. Cir. 2018).

At virtually the same time, Director Iancu released a Request for Comments on Determining Whether a claim element is [WRC] for the Purposes of Subject Matter Eligibility, and it pretty much repeats the factors listed in the Bahr Memorandum. For a detailed summary of the factual underpinnings that an examiner must make in order to support a rejection on the basis that a claim directed to a PAIN does not meet the inventive concept requirement because it is WRC, please refer to my post of April 20th.

I criticized the four factors outlined in the Memorandum/Request for using the s. 112 standard that that which is known to the art need not be set forth fully in the specification, as a blaze mark to guide examiners in determining whether the additional elements(s) in the claim are WRC. In other words, if the specification does not give the details of how to measure a biomarker, the examiner can use such facts to support a WRC finding. This relying on material not present in the specification is repeated in Factors 1, 3 and 4. I also criticized Factor 2 as permitting examiners to simply cite to “one or more court decisions discussed in MPEP 2106(5)(d)(2)” as noting the WRC nature of the additional element(s) in the claim, primarily due to the breadth of the summaries of the cases in this section of the MPEP.

The Revised Guidance in the May 8th Presentation (which is available as a slideshow from the PTO) takes these two criticisms to heart. It drops the reference to the value of a s. 112 analysis in Factors relating to the evidence of WRC provided by the specification, the disclosures in the prior art and the ability of the examiner to take official notice of the WRC, which usually will be based upon disclosures in the prior art.

The Revised Guidelines start out by stating that the examiner should conclude that a claim element(s) represents only WRC activity only if he/she can conclude that the element(s) is “widely prevalent or in common use in the relevant industry,” a conclusion that must be supported by factual determinations. Here is a quick run-down of the four “Options” that the examiner can use to demonstrate that a claim directed to PAIN does not contain more than elements that are WRC (These are mostly my words):

  1. Applicant makes a “statement against interest” in the specification or during prosecution that a claim element(s) is conventional, widely prevalent or in common use, or is a commercially available product.

  2. The examiner can cite to one or more court decisions as noting the WRC nature of the additional elements, as reported in MPEP 2106(d)(II). I criticized this as overly broad, especially in view of the fact that there is almost no case law involving diagnostic testing or methods of medical treatment. Interestingly, in Vanda v. West-Ward, the Fed. Cir. stated that the Mayo claims were diagnostic claims. This is a stretch – What condition did they diagnose? The recited patient had been treated with the drug before any sample testing was carried out. However, the revised guidelines make it clear that the additional element in the claim must be the same as the element addressed in the court case, as well as the fact that the case must be on the MPEP list. Vanda v. West-Ward should be added to this list.

  3. The examiner finds prior art publication(s) that demonstrate that the element(s) in questions are WRC, not just in existence at some point in the past. This should come from the prior art located in the search done by the Examiner or disclosed by Applicant.

  4. The examiner is permitted to take official notice of the WRC of the additional element(s) but only to be used when the examiner is certain thereof based upon his/her personal knowledge. For all but the most indisputable WRC, the examiner may be required to provide a declaration under 37 CFR 1.104(d)(2).

If more than one element is present, the examiner must show that the combination of the elements is WRC in the pertinent art. If the examiner cited to a publication not previously of record in response to an argument by applicant, the office action should not be made final.

Comments must be received by Aug. 20, 2018 by submitting them to Eligibilty2018@USPTO.gov.

 

© 2018 Schwegman, Lundberg & Woessner, P.A.
Read more updates on Mayo/Alice on the National Law Review’s Intellectual Property Page.

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