Knobbe/Martens: Intellectual Property Law

Impact of the USPTO Examination Guidelines on Software Patents Post-Alice

By Lincoln S. Essig and Damien Howard September 2, 2016

The Supreme Court’s 2014 decision in Alice Corp. v. CLS Bank Int’l, 134 S.Ct. 2347 (2014) (“Alice”) has had a significant impact on the patent eligibility of software-implemented inventions under 35 U.S.C. § 101.  In Alice, the Supreme Court held that patent claims relating to mitigating settlement risk in financial transactions using a computer system were patent ineligible.[1]  In doing so, the Court set forth a two-part patent eligibility test: 1) Are the claims directed to a patent ineligible concept (e.g., abstract idea); and 2) If so, do the claims amount to significantly more than the patent ineligible concept itself?[2]  Following this decision, the United States Patent and Trademark Office (“USPTO”) issued multiple guidelines to aid Examiners in their review of patent applications under Alice.  The first guidelines published on December 16, 2014 (“2014 Guidelines”), followed by an update that published on July 30, 2015 (“2015 Guidelines”).  An additional update published on May 6, 2016 (“2016 Guidelines”).

The impact of the USPTO’s administration of Alice has been particularly hard felt for applications relating to software and business method technologies.  Our analysis of recent data, however, may indicate that the steep drop off in patent issuances due to Alice has at least hit its floor and started an upward trend.

We examined the data[3] for patents in various art units[4] of tech center 3600[5] that 1) issued between January 1, 2013 and May 6, 2016[6] and 2) had overcome a rejection under 35 U.S.C. § 101 (“101 Rejection”), the statute under which all Alice rejections are made.  The selected date range enabled us to compare the examination of issued patents during several distinct time periods: 1) before the June 19, 2014 Alice decision; 2) between the Alice decision and the 2014 Guidelines; 3) between the 2014 Guidelines and the 2015 Guidelines; and 4) between the 2015 Guidelines and 2016 Guidelines. 

Not surprisingly, our analysis of the patents issued since the Alice decision reveals a marked increase in the occurrence of 101 Rejections in the selected art units.  These results are shown in Graph 1 below, which illustrates the percentage of issued patents in the selected art units that received a 101 Rejection during examination.  As the graph shows, since Alice and with each new set of USPTO guidelines, the percentage of issued patents assigned to the selected art units that received a 101 Rejection during examination has increased to the point where more than 80% of issued patents received a 101 Rejection during examination.  Thus, applicants hoping to obtain a patent related to electronic commerce[7] should prepare and develop strategies for addressing 101 Rejections.

Graph 1: Patents that issued between January 1, 2013 and May 6, 2016 in selected art units that received a 101 Rejection during examination©

Graph 1: Patents that issued between January 1, 2013 and May 6, 2016 in selected art units that received a 101 Rejection during examination©

 

Despite the increase in rejection rates under § 101, there is evidence that the ability to obtain a patent in these areas has improved since the release of the 2015 Guidelines. While we acknowledge that correlation does not equal causation, we believe that the 2015 Guidelines may have led to the improved patent issue rate because the 2015 Guidelines have placed a higher burden on examiners in formulating patent eligibility rejections.  For example, the 2015 Guidelines instruct examiners to identify abstract ideas based on concepts the courts have identified as abstract ideas.[8]

Graph 2 below illustrates the average number of patents issuing per month in the selected art units that received a 101 Rejection during examination.[9]  The significant drop in patents issued per month (or PPM) after Alice is not surprising; however, the noticeable uptick following the 2015 Guidelines is noteworthy.  While the post-2015 Guidelines PPM rate is still well below 50% of the pre-Alice levels, the rate has increased by nearly 25% compared to the 2014 Guidelines-2015 Guidelines time period.   

Graph 2: Average patents issued per month between January 1, 2013 and May 6, 2016 in selected art units that received a 101 Rejection during examination©

Graph 2: Average patents issued per month between January 1, 2013 and May 6, 2016 in selected art units that received a 101 Rejection during examination©

Delving deeper, an analysis of the individual art units reveals a more nuanced story.  In one art unit related to electronic commerce (3694), with each new set of guidelines, the PPM has continued to drop to the point where the PPM post-2015 Guidelines is at 5% of the pre-Alice levels.  In four other art units related to electronic commerce (3685, 3692, 3693, 3695), the PPM rate post-2015 Guidelines is hovering around 10% of the pre-Alice levels.  However, in two art units related to electronic commerce (3622, 3627) since the 2015 Guidelines, the PPM has improved markedly, to the point where the PPM rate post-2015 Guidelines is back to pre-Alice levels, and a third art unit related to electronic commerce (3687) is at 90% of the pre-Alice levels.  Thus, the art unit is more important than ever and is a factor that should be considered when determining which aspects of an invention to pursue. 

Although there has been both a sharp increase in patent eligibility rejections and a sharp decrease in issued patents for software and business method-related inventions since Alice, patent applicants are still having some success in obtaining patents in these technology areas.  Further, since the 2015 Guidelines, the average number of patents issuing per month in these technology areas that have successfully overcome a 101 Rejection has increased.[10]  Thus, while obtaining a business method or software-related patent continues to be challenging post-Alice, the outlook is brighter for those pursuing patent protection.



[1] Alice at 2352–53

[2] Id. at 2355

[3] The data was obtained from PatentAdvisor®

[4] Art Units 3622, 3623, 3624, 3625, 3626, 3627, 3628, 3629, 3682, 3684, 3685, 3686, 3687, 3688, 3689, 3691, 3693, 3694, 3695

[5] Tech center 3600 has been identified as the tech center most likely to issue subject matter eligibility rejections post-Alice.

[6] While the analysis of pending applications could provide more and greater insights (e.g., abandonment rates, pendency rates, etc.) into the effect of Alice and the USPTO Guidelines, for the dates analyzed, the data regarding an unknown number of pending applications is not yet available as those applications have not yet published under 37 CFR 1.211.  Accordingly, our analysis relied only on issued patents. 

[7] The USPTO has categorized electronic commerce technologies in the selected art units of tech center 3600 to include the following software-related technology categories: Business Crypto; Business Processing; Civil Engineering; Cost/Price, Transportations,  Reservations; E-Shopping; Finance & Banking, Accounting; Health Care, insurance; Incentive Programs; Manufacturing; Operations Research; Point of Sale, Inventory, Accounting; and Social Networking.

[8] The 2015 Guidelines state: “Because the courts have declined to define abstract ideas, other than by example, the 2014 IEG instructs examiners to refer to the body of case law precedent in order to identify abstract ideas by way of comparison to concepts already found to be abstract.”  July 2015 Update: Subject Matter Eligibility, pg. 3 (July 30, 2015) available at https://www.uspto.gov/patent/laws-and-regulations/examination-policy/201...

[9] As not all information has become public for applications pending at some time during the dates January 1, 2013 – May 6, 2016 timeline, we were unable to calculate allowance rates.

[10] We were unable to analyze trends since the 2016 Guidelines due to the lack of reliable data since that time.

 

Meet the Knobbe Martens Attorneys

Impact of the USPTO Examination Guidelines on Software Patents Post-Alice
With a focus on all aspects of patent prosecution and counseling, licensing, and due diligence,  Lincoln Essig is totally dedicated to helping businesses at every phase of development...
Impact of the USPTO Examination Guidelines on Software Patents Post-Alice
Damien Howard advises on strategic patent procurement for domestic and international clients involved in the electronics, medical devices, and software industries.  Damien is also...
Attorney Finder