New USPTO Director Authors Appeals Review Panel Decision Giving Hope on 101 Rejections

In his first full week on the job USPTO Director John Squires authored an appeals review panel decision criticizing (and vacating) a PTAB panel’s decision to enter a new ground of rejection concerning non-statutory subject matter. The opinion, in Ex parte Desjardins,[1] gives some hope to applicants fighting rejections under 35 USC 101, particularly for inventions involving machine learning, such as those involving artificial intelligence, neural networks, or large language models.

This is only the second appeals review panel decision since the process for such decisions was instituted in 2023, in the wake of the Supreme Court’s decision in U.S. v. Arthrex.[2] In Arthrex the Court found that the role of PTAB judges, as inferior officers not confirmed by the Senate, was incompatible the decisions of the judges not being reviewable by the USPTO Director. The USPTO then instituted a process for Director reviews, either in response to a request of a party in an appeal, or instituted sua sponte by the Director.[3] Desjardins was a sua sponte Director Review, instituted after the applicant’s request for rehearing had been denied.

The invention in Desjardins involved a computer-implemented method of training a machine learning model. The examiner rejected the claims on obviousness grounds, a rejection that was affirmed by a divided PTAB panel.[4] The panel also entered a new ground of rejection, rejecting all of the claims under 35 USC 101 as directed to ineligible subject matter. The Director’s appeal review panel left in place the obviousness rejections, but vacated the new grounds of rejection under 35 USC 101.

The Director’s panel differed with the Board on the question of whether the claim recited additional elements that integrate with the judicial exception (an algorithm in this case) into a practical application.[5] The Board saw no such additional elements, but the Director’s panel disagreed. In evaluating the asserted additional elements the Director’s panel relied on statements by the Federal Circuit in Enfish v. Microsoft[6] regarding computer technology, that advances in such technology are often “improvements to software that, by their very nature, may not be defined by particular physical features but rather by logical structures and processes,” and that “[s]oftware can make non-abstract improvements to computer technology, just as hardware improvements can.”[7]

After making the connection between the claims at issue in Desjardins and the advantages described in the specification, the Director’s panel reproached the Board panel, using some quotable language:

Under a charitable view, the overbroad reasoning of the original panel below is perhaps understandable given the confusing nature of existing § 101 jurisprudence, but troubling, because this case highlights what is at stake. Categorically excluding AI innovations from patent protection in the United States jeopardizes America's leadership in this critical emerging technology. Yet, under the panel's reasoning, many AI innovations are potentially unpatentable-even if they are adequately described and nonobvious-because the panel essentially equated any machine learning with an unpatentable "algorithm" and the remaining additional elements as "generic computer components," without adequate explanation. Dec. 24. Examiners and panels should not evaluate claims at such a high level of generality.[8]

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[1] Appeal 2024-000567, Application 16/319,040 (PTAB Apps. Rev. Sept. 26, 2025) (“Desjardins”).

[2] 141 S. Ct. 1970 (2021).

[3] See 37 CFR 42.75(a) (Director Review in response to a request from a party) and 37 CFR 42.75(b) (institution of a sua sponte Director Review on the Director’s initiative). A party may either request a reheating or a Director Review, but cannot request both. 37 CFR 42.75(c).

[4] Ex parte Desjardins, Appeal 2024-000567, Application 16/319,040 (PTAB Mar. 5, 2025).

[5] That’s Step 1 of the Alice formulation of the patent eligibility test, and Step 2A, Prong 2 of the MPEP formulation.

[6] 822 F.3d 1327 (Fed. Cir. 2016).

[7] Id. at 1339.

[8] Desjardins, at 11.