Bilski Blog

#ALICESTORM: August 2018 Update

By Christopher King

Since our last update in June 2017, all the invalidation averages for decisions finding lack of subject matter eligibility have trended slightly downward in the federal courts. Specifically:

• The overall percentage of decisions invalidating patents under § 101 since we started tracking statistics in July 2014 has fallen slightly—from 67.5% to 66.0%—year over year.
• The 12-month and three-month average invalidation rates have likewise fallen (from 64.7% to 61.9%, and from 72.1% to 48.4%, respectively).
• The three-month average recently hit its lowest rate—48.4%—falling below 50% for the first time.

Two Steps Forward, One Step Back

By Greg Hopewell

If the focus on fact finding in Aatrix, Berkheimer, and Exergen from earlier this year helped provide additional clarity on the analysis of “something more,” the SAP America decision, at least to my mind, failed to clarify, and possibly further muddied, the analysis.

Reaching This Result Could Have Been Easy

First, a representative claim:

1. A method for calculating, analyzing and displaying investment data comprising the steps of:

(a) selecting a sample space, wherein the sample space includes at least one investment data sample;

(b) generating a distribution function using a re-sampled statistical method and a bias parameter, wherein the bias parameter determines a degree of randomness in a resampling process; and,

(c) generating a plot of the distribution function.

The other independent claims differ a bit from claim 1, but like claim 1 recite “resampling” of the data set and, in claim 11, doing so with a “bias parameter.” According to the patent, this resampling of investment data permits analysis that doesn’t assume a normal distribution of the data.

On a judgment on the pleadings, the district court found all claims ineligible and the Federal Circuit affirmed.

Good Vibrations, Bad Vibrations: American Axle v. Neapco Ruling

By Stuart Meyer with counterpoint by Gregory Hopewell

In reading post-Mayo/Alice decisions, some seem more comfortable than others. I’ve been having a tough time getting my head and heart around a recent decision from Judge Leonard Stark of the District of Delaware.  The case is American Axle & Manufacturing v. Neapco Holdings and Neapco Drivelines.  From the party names alone, this does not appear to be a likely candidate for Section 101 invalidity. 

The claims that the court found representative for Section 101 analysis confirm that we’re not talking about social media applications or financial methods here, but instead “a method for manufacturing a shaft assembly of a driveline system.”  Classic auto industry innovation dispute between two Detroit area companies, with a bonus that the judge also hails from Detroit.  Spoiler Alert: To my surprise, the first sentence of the opinion’s discussion section said, “As explained below, the Court has determined that the Asserted Claims are not directed to patentable subject matter.”

Step One of Analysis

The court proceeded to recite step one of the test:  “the claims are considered in their entirety to ascertain whether their character as a whole is directed to excluded subject matter.” (Bold and italics in this quote from Internet Patents v. Active Network being provided by Judge Stark.)  Despite AAM’s arguments that the claims are directed to industrial manufacturing processes for automotive components, the court agreed with Neapco’s view that instead they do “nothing more” than apply physics to a prior art design to minimize unwanted vibrations in the assembly.  As the court observed, “The claimed methods are applications of Hooke’s law with the result of friction damping.”  Time for me to go back to the claim details.

Neither of the exemplary claims expressly references Hooke’s law.  Instead, they reference in pertinent part “tuning a mass and stiffness of at least one liner” and inserting the liner into a hollow shaft, the liner being “a tuned resistive absorber for attenuating shell mode vibrations” and “a tuned reactive absorber for attenuating bending mode vibrations.” 

My background is in electrical rather than mechanical engineering, so this sounds to me somewhat like placing an LC circuit (an inductor and a capacitor) at the output of a DC power supply to filter out unwanted “vibrations” of alternating current.  Obviously there are physics that make such an approach work, but that does not lead me to think that the “character as a whole” of a corresponding claim would be directed to excluded subject matter.  With nothing more, I would expect such a claim to be obvious in the year 2018, but it’s more difficult to think of it as being wholly directed to excluded subject matter.

Nonetheless, the court concluded, “Looking at the ‘focus’ of the claims and their ‘character as a whole,’ Neapco has met its burden at step one.” 

Step Two of Analysis

As I read further in the opinion, the step two analysis, looking to whether the claim elements identify any “inventive concept” over the law of nature or mathematical algorithm, also included a caution to consider the claims as a whole.  Here, the court pointed to the patent itself as explaining that inserting a liner in a propshaft was well known in the prior art.  The court again sided with Neapco in the view that controlling characteristics of the liner is inherent in the design process and a “noise, vibration and harshness (NVH) engineer” would consider the applicable laws of nature when designing such liners to address vibrations. 

To my eye, it appears that there is recitation of such tuning as an inventive concept here, even though it may well be that such recitation is misplaced in that it is obvious to one of skill in the art.  In other words, as we have seen before, it may well be that such a claim is invalid, but the more reasonable path to that result is via Section 102/103 analysis than subject matter eligibility.  Traditional Section 103 analysis provides certain safeguards against hindsight (e.g., secondary considerations of non-obviousness as detailed by the Supreme Court in Graham v. John Deere) that are not typically applied in Section 101 decisions; those safeguards were not applied here either. 

Behind the Sea Change of Bilski, Alice, Mayo

I have not spent too much time trying to determine whether the court here accurately applied the tests mandated by Alice, Mayo and their progeny.  My discomfort comes from the specific result (that the claims are not, as a whole directed to patent eligible subject matter) more than the general result (patent invalidity) or the path to it.   At bottom, all inventions work because of the physics, math, etc. governing their structure and operation.  The claims here seem directed, as a whole, to the manufacture of automotive drive shafts.  It seems certain to me that even a few years ago, it would have been unthinkable to challenge such a claim on Section 101 grounds.  Was the patent bar really that disconnected from the statute for the past century?  Is the sea change brought on by Bilski, Alice and Mayo based not on difficult questions brought on by the nature of information age inventions but instead on a longstanding, fundamental misunderstanding of the statutory statement of what our patent system is intended to protect? 

It is for these reasons that I’m struggling with the AAM / Neapco decision, and I would be happy to hear others’ opinions on this.

Counterpoint (by Greg Hopewell):

This case did not sit so unwell with me, and to my eye seemed a natural re-considering of more “mechanical” inventions, now that the machine or transformation test is just a clue.  These difficult questions have been eternally presented by the patent system, and were not newly created by Bilski, Alice or Mayo or even the “information age” itself.  The machine or transformation test neatly avoided (papered over?) these questions which have existed for centuries in inventions that had physical form.  And, worse, because of its relative ease to apply, it created the impression that any physical components (or effect thereon) meant eligibility.  An additional problem is that because of the machine or transformation test, a large number of now-challengable “information age” patents were issued that, under the microscope, essentially recite the performance of an age-old financial concept (e.g., hedging or intermediary settlement) or obtaining a desired abstract result by a computer.  In my opinion, this biases the pool of challengeable patents, but does not necessarily mean that these “information age” patents are inherently more suspect with respect to eligibility.  More on these theses in future posts.

1850s — O’Reilly v. Morse & Le Roy v. Tatham

Older cases do not always use the same terms of today, but concepts will ring familiar.  O’Reilly v. Morse in 1853 rejected a general broad claim to printing characters as a result of electric or galvanic current.  Just the year before, and less famously, the U.S. Supreme Court addressed an invention for “making pipes and tubes from metallic substances” in  Le Roy vs. Tatham (1852).  Even then, the court addressed distinctions between a principle and an invention for its application:

• The word principle is used by elementary writers on patent subjects, and sometimes in adjudications of courts, with such a want of precision in its application, as to mislead. It is admitted, that a principle is not patentable. A principle, in the abstract, is a fundamental truth; an original cause; a motive; these cannot be patented, as no one can claim in either of them an exclusive right. Nor can an exclusive right exist to a new power, should one be discovered in addition to those already known. at 174-175.
• A new property discovered in matter, when practically applied, in the construction of a useful article of commerce or manufacture, is patentable; but the process through which the new property is developed and applied, must be stated, with such precision as to enable an ordinary mechanic to construct and apply the necessary process. at 175.
• A patent for leaden pipes would not be good, as it would be for an effect, and would, consequently, prohibit all other persons from using the same article, however manufactured. Leaden pipes are the same, the metal being in no respect different. Any difference in form and strength must arise from the mode of manufacturing the pipes. The new property in the metal claimed to have been discovered by the patentees, belongs to the process of manufacture, and not to the thing made. at 176.

The dissent, which would have found the claims eligible, cited several even earlier cases from England grappling with our now familiar issues.  One example citation is to “Webster’s Pat. Cases,” to wit:

"You cannot take out a patent for a principle; you may take out a patent for a principle coupled with the mode of carrying the principle into effect. But then, you must start with having invented some mode of carrying the principle into effect...."

So—no patenting a principle alone, but yes if coupled with a mode of carrying it out?  That isn’t sounding so different from the recent Federal Circuit cases cautioning against result-oriented claiming.[1]  See also Tilghman v. Proctor (1881), citing Morse: “It seems to us that this clear and exact summary of the law affords the key to almost every case that can arise. ‘Whoever discovers that a certain useful result will be produced in any art by the use of certain means is entitled to a patent for it, provided he specifies the means.’”[2]

1939 — Mackay Radio

Likewise, almost 90 years later, but still nearly 80 years ago, Mackay Radio (1939) addressed a claim to the application of a scientific truth relationship related to radio wire lengths, called the “Abraham formula.”  Though the court expressly declined to decide validity, the U.S. Supreme Court emphasized that “While a scientific truth, or the mathematical expression of it, is not patentable invention, a novel and useful structure created with the aid of knowledge of scientific truth may be.”  However, the Court’s evaluation of validity more closely sounded like obviousness, rather than eligibility: “But we do not stop to solve the problem whether it was more than the skill of the art to combine the teachings of Abraham <with others>… We assume … that this advance was invention even though it was achieved by the logical application of a known scientific law to a familiar type of antenna.”  

It’s possible the Court today, under Mayo, would not be shy in finding Mackay’s claim to be an ineligible, “conventional” application of the Abraham formula.

So, what to make of this decision in American Axle?  Do the claim limitations teach just a “result” (or the “principle” that Hooke’s law can be optimized) or do the limitations provide a particular means of doing so.  Tilghman’s key may still apply – “a certain useful result … by the use of certain means … provided he specifies the means.” 

Here, the useful result is to attenuate more than one kind of vibration.  But the means is just to “tune” the liner.

Though it initially seems like a red herring (or at least an odd direction to take the case), it appears the Court turned to Hooke’s law to determine if there were something inventive in a tuning process itself.  Hooke’s law mattered because the court agreed that “in order to ‘tune’ the liner, one merely applies Hooke’s law and then measures the amount of damping.”  So, to the district court, to the extent the invention could have provided more than just a result, the means of achieving the result (not directly recited in the claim) was itself application of a physics law and was not a contribution by the inventor.  Although not directly recited in the claim, the analysis with Hooke’s law confirms that a process for “tuning” is just claiming the attenuating result itself, rather than some particular process of achieving it.

Why Analytical Scope Matters

But, to the broader sentiments, I agree with Stuart—all inventions do work because of underlying physics, math and ‘abstract ideas.’  And, straightforward application of what a claim is “directed to” would sure seem to suggest these claims are directed to manufacturing automotive drive shafts—a concrete physical part made better by attenuated vibration.  A shift in analytical scope might also change the outcome.  As analyzed by the district court, the tuning step itself just applied Hooke’s law to a prior art liner design.  But why start there?  The analysis could have started with the general problem of reducing vibration in a propshaft.  With respect to that result, there is a specific means of achieving it: tuning the liner to attenuate more than one kind of vibration.  As the district court noted, prior art techniques attenuated vibrations with “weights and liners” but prior art liners only attenuated shell mode vibrations, and not in combination with bending or torsion mode vibrations. 

It doesn’t appear to be enough for the claims to recite or result in a machine or physical thing—as a broad understanding of “directed to” might suggest.  Instead, “directed to” appears to have a narrower meaning: What is the claimed invention directed to?  At the risk of improperly dissecting the claim, this focuses the inquiry on the inventive advance represented in and as articulated by the claim, rather than on broad subject matter categories like “car drivetrains” “computer processors” “personalized cancer treatments” or “financial systems.”  Accounting for recent decisions, Tilghman’s key might be adjusted: What is the improved result, and what specific, unconventional means did you invent for achieving it?

 

[1] Other recent concepts sound familiar, too.  In a paper-making case, the U.S. Supreme Court entertained whether “the alleged invention covers only a matter of degree in pitch” and whether it therefore “cannot be the subject of a patent.”  Eibel Process Co. v. Minnesota & Ontario Paper Co. (1923).  Eligible, in part because “[t]he invention was not the mere use of a high or substantial pitch to remedy a known source of trouble.  It was the discovery of the source not before known and the application of the remedy…”  Echoing today’s considerations of “conventional” arrangements, what initially was a question of whether the change in pitch “could be the subject of a patent” was analyzed with respect to what was known. 

[2] The identification of underlying scientific principle and its application in Tilghman is refreshingly direct: “Let us apply these principles to the present case. In the first place, the claim of the patent is not for a mere principle. The chemical principle or scientific fact upon which it is founded is, that the elements of neutral fat require to be severally united with an atomic equivalent of water in order to separate from each other and become free. This chemical fact was not discovered by Tilghman. He only claims to have invented a particular mode of bringing about the desired chemical union between the fatty elements and water. He does not claim every mode of accomplishing this result. He does not claim the lime-saponification process, nor the sulphuric-acid distillation process, and if, as contended, the result was accomplished by Dubrunfaut, Wilson, and Scharling, by means of steam distillation, he does not claim that process. He only claims the process of subjecting to a high degree of heat a mixture continually kept up, of nearly equal quantities of fat and water in a convenient vessel strong enough to resist the effort of the mixture to convert itself into steam.”  

Thawing in the 3600s? An Updated Look at Allowance Rates Post Alice

By Christopher King

In my own prosecution practice I’ve noted a recent uptick in the allowance rate of many examiners in the 36XX art units, with several examiners that had hitherto never allowed a single case allowing multiple cases during calendar year 2017.  This piqued my interest, and I decided to conduct a more robust statistical evaluation to see whether my personal experience would bear out more generally.

Signs of Recovery

My evaluation computed the aggregate allowance-to-abandonment ratio in each of the 36XX art units in calendar years 2013 through 2017.  As expected, the allowance-to-abandonment ratio plunged precipitously in calendar year 2015—the first year that the effects of Alice truly began to be felt—and continued to decline in 2016.  However, the ratio begins to increase again in 2017, with a year-over-year ratio change of 1.62 (a 62% increase) across all the 36XX art units, following a ratio change of 0.9 (a modest decline) the year before.  Perhaps more tellingly, the art units entitled “Data Processing: Financial, Business Practice, Management, or Cost/Price Determination”—traditionally the hardest-hit by Alice—experienced a mean ratio change of 2.68 (a significant increase) from 2016 to 2017, after a ratio change of 0.67 (a moderate decline) the prior year.  The hard-hit 3680s and 3690s experienced even greater recoveries. 

A Sea Change Coming?

Although even with the increases in 2017 the allowance-to-abandonment ratios are still far below their pre-Alice levels, the statistics suggest that a sea change may have begun, with the PTO starting to loosen somewhat in the wake of a series of pro-eligibility cases such as Enfish, BASCOM, McRO, Thales, Trading Technologies and Visual Memory.  More recent pro-eligibility cases such as Finjan, Core Wireless, Berkheimer and Aatrix will presumably further bolster this trend.

Following are charts of aggregate allowance-to-abandonment ratios from 2013 to 2017 for the art units in the 3680, 3690 and “Financial” (3622, 3623, 3625, 3626, 3627, 3628, 3629, 3685, 3689 and 3693) groups.

 

 

 

 

Seeing a Forest, Not Just Trees: Core Wireless v. LG

By Gregory Hopewell

Do you remember obviousness before KSR v. Teleflex? To invalidate, the rule went, one must find an express rationale for combining references (a teaching, suggestion or motivation). The KSR ruling reminded us that the TSM test was too rigid—the proper analysis should more flexibly evaluate obviousness with the skilled artisan in mind, without rigid requirements for these rationales in the references themselves.

If we knew how to more flexibly identify rationales for obviousness post-KSR, it was not clear how to more flexibly apply patent eligibility without the machine or transformation test after Bilski and Alice. A machine, apparently, was now just a clue. But identifying how to apply the more general principles from Alice and Bilski was not as easy to apply as a flexible obviousness test. The recent Core Wireless decision may show us a more useful theme for applying a more general approach to obviousness.

Eligible Decisions Have Focused on Specific Facts

Learning the new contours of the broad, general terms of the Court’s instructions in Bilski and Alice has felt like blundering through a forest, carefully inspecting the facts of individual patents at issue in various decisions and learning they are “abstract” with “no inventive concept” without easily apparent themes. Drawing the more general contours of the growing Federal Circuit case law has been challenging and compounded by selection bias of those claims actually appealed to the Federal Circuit—trolls and other enforcers may be more likely to litigate and appeal broad and results-oriented claims that appear to have many infringers (and are now ripe for challenge as ineligible). Each eligible case has often lived on its own facts, while in ineligible cases, courts (and patent examiners) may run through and reject the litany of individual reasons that eligible cases were permissible. For ineligible claims, there appeared to be the same general reasons that could broadly be applied to invalidate (e.g., an abstract idea executed on a general purpose computer). 

Unifying Principles Among Eligible Cases

General principles for finding claims eligible have been elusive. A few weeks ago, the Core Wireless decision (Fed. Cir., Jan. 25, 2018, by J. Moore, affirming eligibility) suggests a broader theme that may help tie these eligible cases together.

In summarizing prior eligible decisions, the court returned, again and again, to how prior eligible decisions addressed claims with features that were “particular” and “unconventional.” This table summarizes treatment of the previous cases cited in Core Wireless:

Prior Decision	Description in Core Wireless (internal citations and edits omitted)
Enfish [eligible, self-referential table]	“The claims were directed to a particular improvement in the computer’s functionality.” “The claimed self-referential table was a specific type of data structure designed to improve the way a computer stores and retrieves data in memory.”
Thales [eligible, determining position of object using inertial sensors]	“The claims specified a particular configuration of the sensors and a particular method of utilizing the raw data that eliminated many of the complications inherent in conventional methods”
Visual Memory [eligible, programmable operational characteristics defined by the processor]	“The claimed invention provided flexibility that prior art processors did not possess, and obviated the need to design a separate memory system for each type of processor.”
Finjan [eligible, behavior-based application scan and security profile]	“They [the claims] employ a new kind of file that enables a computer security system to do things it could not do before, including accumulating and utilizing newly available, behavior-based information about potential threats.” “The claimed behavior-based scans, in contrast to prior art systems…”

Here is one representative claim from the ‘476 patent at issue in Core Wireless: 

1. A computing device comprising a display screen, the computing device being configured to display on the screen a menu listing one or more applications, and additionally being configured to display on the screen an application summary that can be reached directly from the menu, wherein the application summary displays a limited list of data offered within the one or more applications, each of the data in the list being selectable to launch the respective application and enable the selected data to be seen within the respective application, and wherein the application summary is displayed while the one or more applications are in an un-launched state.

In looking at this claim, the court noted ways in which a particular approach was being used to create an improvement and variously described limitations as follows: “a particular manner of summarizing and presenting information” “specifying a particular manner by which the summary window must be accessed,” “this claim limitation restrains the type of data that can be displayed,” and “a requirement that the device applications exist in a particular state.” Together, the court found the claim recited “a specific manner of displaying a limited set of information to the user, rather than using conventional user interface methods to display a generic index on a computer.” Like the cases above, “these claims recite a specific improvement over prior systems, resulting in an improved user interface for electronic devices.”

In this case, the court then looked to the specification to confirm that these particulars are interesting. The court notes that the specification describes problems with the prior art displays, especially for smaller screens, and that prior interfaces may require significant “drill down” through layers of interface to reach information within applications.    

Tying it All Together

This focus on the “particular approach” and its “unconventional” nature with respect to the prior art appears to me to thread the needle for many post-Alice 101 decisions. Though the evaluation for the apparently-distinct tests of “directed to an abstract idea” and “something more” has been challenging to untangle, this approach of identifying the “specific” effects of a particular approach and then evaluating if and how it is “unconventional” appears to provide a theoretical touchstone applicable to many cases.

In this framework, the first question appears to be whether the claims actually do provide a particular solution to a problem. That particular solution can be confirmed as eligible when it provides something unconventional—something beyond a “field of use” or “conventional” execution of a concept. I’ll be taking a deeper look at the broader applicability of this approach to prior decisions in a later post.[1]

 

[1] One reason the “directed to an ineligible concept” portion of the Bilski/Alice test is troublesome is that it facially appears to suggest that additional limitations or concepts in the claim beyond the abstract idea ought to, alone, render a claim eligible. If I take my abstract idea and practice it with a computer in Siberia, locating the computer in Siberia should, by definition, prevent the claim from being directed to some abstraction and avoid preemption, right?  In practice, however, any additional limitation (or even any number of arbitrary limitations) has not been enough. Confusingly, while we are cautioned to look at the “claim as a whole” for determining whether the claim is directed to an abstract idea, it becomes unclear when additional limitations are to be evaluated as part of the “directed to” inquiry or when they are addressed in the “something more” analysis. E.g., Electric Power Group recited a long claim, but the fact that it received and processed power system data and recited various power-related measurements was a “field of use.”

Did you hear about the statistician who drowned in a lake with an average depth of two feet?

By Stuart Meyer

I was reminded of this question, often posed by my dad to remind me not to become a slave to statistics, by two dramatic things that happened last week. On the one hand, at the IAM 2017 Patent Law and Policy conference in Washington DC, investors spoke about waning interest in the U.S. market given the increasing frequency of patent invalidations. On the other hand, the Nasdaq composite index (consisting of 86% U.S. companies) hit record closing and intraday highs. Whom are we to believe: those who say weak patent coverage is threatening our economy or those who say that patents are not, in fact, necessary for economic strength?

Or is there a third possibility—that other factors overwhelm the economic importance of patents so we can’t really give too much weight to the statistics?

The speakers at the IAM conference cited PTAB invalidation rates and post-Alice hostility to 21^st century technologies as reasons that they are looking more kindly on, for example, European, Chinese, and Canadian portfolio elements. Uncertainty regarding PTO examination norms and PTAB decisions, as well as apparently inconsistent panels of the Federal Circuit, have reportedly made it more difficult to value U.S. patent assets than those of other jurisdictions. The fact that the Supreme Court in the Oil States case is considering whether PTAB review of issued patents is even constitutional gives yet more pause.

The flip side is that these developments, as well as the TC Heartland decision, have clearly reduced the value of troll lawsuits. Many GCs appear eager to trade portfolio value for reduced litigation risk, and the valuations their companies are receiving seem to support their view.

So we see some evidence supporting both sides of the argument. But that doesn’t mean we should give up on trying to draw meaningful conclusions from these facts. Many factors go into a bull or bear market, whether in the technology sector or otherwise. Even if the investors speaking at the IAM 2017 conference provide only anecdotal evidence, still it is evidence that is directly relevant to the issue at hand: whether the threat of narrowed patent protection drives investment away from the U.S. The views expressed by the IAM 2017 investor speakers seem intuitively reasonable.

It’s not likely that we’ll see any truly definitive evidence of whether narrow subject matter eligibility is, net-net, economically damaging or beneficial. At least hopefully we won’t—patents are important but not important enough that we would ever want to see them overwhelm myriad other factors that impact our economy. So we’ll have to do our best by looking at evidence that we need to admit is either anecdotal or subject to varying interpretations.

If we’re really searching for the “right” answer, then instead of being result-oriented and looking merely to support some desired outcome, we’ll pay attention to all of the facts that present themselves to us. We’ll acknowledge and even embrace the ambiguities, rather than trying to mold them to some desired outcome. In this instance, to this observer, the contradictory facts still seem to support the notion that narrow subject matter eligibility is doing our economy no favors. But that conclusion is far from certain, and we’ll keep looking at the facts with an open mind.

Surviving Alice with an Appeal

By Mark Nowotarski

This third article in the “Surviving Alice” series[1] examines how the USPTO’s Patent Trial and Appeal Board has responded to the U.S. Supreme Court’s June 2014 Alice decision[2].  It also shows how applicants can use the PTAB’s recent decisions to substantially increase their chances of success before the board.  We look at appeals coming out of the USPTO’s business method work groups 3620, 3680 and 3690. 

Applicants have had a difficult time getting business method patents allowed since Alice.  The Alice decision firmly established the two part “Alice/Mayo test” as the standard for determining whether a patent’s claims were statutory under 35 U.S.C. 101.  The two steps in the Alice/Mayo test are:

1. “Determine whether the claims at issue are directed to a patent-ineligible concept” [3](e.g. abstract idea or fundamental economic practice); and
2. If the claims are directed to a patent–ineligible concept then "search for an 'inventive concept'-i.e., an element or combination of elements that is 'sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself. "[4] (e.g. an improvement to another technology)

The business method work groups[5] at the USPTO implemented the Alice/Mayo test right after the Alice decision.  Allowances in some work groups (e.g. 3690 finance) plunged by a factor of 10 within a month of the decision.  Even three years later, there is still over a 90% chance that an office action on a business method patent application will have a 101 rejection[6].  In response to these repeated § 101 rejections by the examiners, many applicants have appealed their rejections to the PTAB.  We are just now seeing these appeals being decided by the board, and overall the results have not been good for applicants.  Only about 20% of the 101 rejections are being reversed.  Nonetheless, we are gaining a significant and rapidly growing body of PTAB decisions which we can learn from.  These decisions[7] are discussed below.   

#AliceStorm: April Update and the Impact of TC Heartland on Patent Eligibility

The Supreme Court’s recent decision on patent venue, TC Heartland LLC v. Kraft Foods Group Brands, may actually turn out to be a good thing for patentees when it comes to Section 101.  But before we get to that, let’s do the AliceStorm numbers:

The overall Alicestorm index of percentage of Section 101 ineligibility outcomes in the federal courts is up 0.6% from March, at 67.6%.   The Federal Circuit contributed the most to the increase, issuing eight separate decisions finding patent eligible subject matter, with six of these decisions being Rule 36 affirmances.  The number of motions on the pleadings index are up as well, by 1.2% from March, at 63.3%. 

Turning to the monthly numbers, after the record number (35) of Section 101 decisions in March 2017 things returned to “normal” with just 15 decisions:

The bump in March contributed to a marked increase in the three-month average of ineligible decisions, jacking it up from 62% to 73%.  But beneath that, we can also see that the raw number of ineligible decisions in April (13) is about the same as the high marks since August 2016, and that the raw number of eligible outcomes (2) is at its lowest level since October 2015.  This puts the ratio of ineligible to eligible decisions in April 2017 at 6.5, the highest it’s been since June 2015.  Whether this signals a real uptick in favor of patent defendants or just a temporary blip in the overall downward trend in ineligible outcomes remains to be seen.

Turning to the motion summary:

Surviving Alice in the e-Commerce Arts

 By Mark Nowotarski

As has been well documented, the Supreme Court’s decision in Alice Corp. v. CLS Bank has had a dramatic impact on the allowability of computer implemented inventions.  This second article in our series explores the dynamics of that impact on the e-commerce arts.  Our first article[1] showed that in the finance arts (e.g. banking and insurance) Alice had an immediate and substantial impact reducing allowances per month by a factor of 10.  A similar but more complicated impact was felt in e-commerce.  Allowances per month immediately dropped but then recovered only to drop again.  We will present an analysis of what is being allowed today as a guide to practitioners filing applications in this field.

Art Unit Organization by Subclasses

E-Commerce patents fall under the general category of business methods and are examined in work groups 3620 and 3680.  Table 1 below shows the technologies they encompass as well as the associated “old” US patent classifications[2] and the examining art units[3].  The old US patent classifications are referenced because they are still used to assign applications to art units.  The primary class of e-commerce and business method patents is class 705.  The “e-Commerce subclasses” in the table below is based on the majority subclasses being examined in each art unit.  The subclass designations generally account for at least 80% of the applications being examined in a given art unit.  Interestingly, a significant minority of applications in these art units are not classified as 705 applications.  According to conversations I’ve had with examiners, these are cases that were originally assigned to other work groups but were later referred into these work groups because the classifications done by the contractor were not correct.  Apparently even after reassignment into these work groups, the original class/subclass designations stayed in the PAIR records for the applications.

Work groups 3620 and 3680 act as parallel work groups with matching individual art units handling applications in the same e-commerce subclasses.  The applications are assigned roughly equally to the matching art units as they come in from the classification contractor[4].  The subclasses with the most applications are Discounts or Incentives, Operations Research, Electronic Shopping, Business Cryptography, and Healthcare Management.  Each of these majority subclasses is examined in one or more of its own art units that specializes in that subclass.  Minority subclasses (e.g. reservations, shipping, transportation) are grouped together and assigned to the remaining art units.

I’ve highlighted the “business cryptography” subclass green since this technology has been the least impacted by the Alice decision.   The allowances per month have actually increased in the primary examining art unit 3685[5].  I’ve highlighted the “heath care management” subclass red since this technology has been the most severely impacted by the Alice.  The impact of Alice in the other technology subclasses falls somewhere in between cryptography and health care management.   

Overall Trends

Figure 1

Figure 1 above is a graph of allowances per month, abandons per month and appeals per month for the combined e-commerce work groups 3620 & 3680.  The graph covers the time period of January 2014 (pre Alice) to September 2016.  Data was obtained using PatentAdvisor[6]. 

The allowances per month dropped almost immediately after the Alice decision and the USPTO preliminary guidance of June of 2014.  This is similar to what happened in the finance arts (work group 3690).  Examiners have related to me that there was a tremendous urgency on the part of USPTO management to implement the Alice decision as soon as possible.  This was in sharp contrast to how management reacted to the Bilski decision in 2010.[7]  Management’s direction to examiners at that time was to not make any abrupt changes until the full implications of the decision were clear. 

The drop in allowances per month was followed by a rise in allowances per month coinciding with the first comprehensive guidance given to examiners in December of 2014.  It looked like examiners and applicants were able to use the guidance to find common ground.  Applicants were able to amend claims to show that their inventions had the “something more” required to overcome an Alice 101 rejection.   Unfortunately the allowances per month again dropped a few months later and settled back down to the same low level that was seen immediate after Alice.  The window of allowability that had opened was closed.

The abandons per month grew steadily after Alice but appear to have recently gone down.  Abandons per month are still very high, however, relative to allowances per month.  They correspond to an allowance rate[8] of about 14% for 2016.   

Figure 1 also shows the notices of appeal filed per month.  The notices of appeal per month dropped after Alice, rose in 2015 and have since fallen back to about their pre Alice level.  Most notices of appeal have been briefed and are proceeding to the PTAB.    

Allowance recalls

Management urgency in implementing the Alice decision is reflected in the large number of allowances that were reviewed and immediately withdrawn in July and August of 2014.  This immediate recall of allowances is similar to what happened in work group 3690.  Work groups 3620 and 3680, however, have continued the practice of reviewing allowances after they are mailed and withdrawing those that the reviewers don’t feel satisfy Alice.  This is illustrated in figure 2 below.

 

Figure 2

Figure 2 shows all allowances that have been mailed between January of 2014 and September of 2016.  The allowances that were recalled in July and August of 2014 are shown in red (based on the mailing date of the notice of allowance, not recall date).  The allowances that have been withdrawn in the ongoing recalls are shown in black outlined by red.  Allowances that have issued as patents are shown in green.  

The ongoing recalls appear to occur on about a monthly basis with different individual art units being reviewed in a given month.  All of the withdrawn allowances shown above had 101 rejections after the allowance.  Many of the ongoing recalls also have had 112, 102 and 103 rejections.   This pattern of ongoing recalls is expressly at odds with statements made by the USPTO that the recalls immediately after Alice were a one-time event.  The ongoing recalls further demonstrate how arbitrary the 101 examination process is.

I found the withdrawn allowances by using PatentAdvisor to identify applications that had a notice of allowance followed by a nonfinal rejection.  I then reviewed each case to make sure that the nonfinal rejection directly followed the notice of allowance without any intervening actions by the applicant (e.g. an RCE).  The last withdrawal I’ve seen was in October of 2016.  I’ve set up a watch in PatentAdvisor to see if any more show up in the future.

Overcoming an Alice 101 rejection

Allowances per month have fallen since Alice, but there are still a significant number of patents issuing in these work groups.  The majority of allowed cases that do issue have had to overcome a post Alice 101 rejection.  I reviewed a random selection of 200 file wrappers for these allowed cases to see if there were any common themes in the claim amendments that led to their overcoming their respective 101 rejections.  The reviewed cases were randomly selected from the allowances of 2016.  For 58% of the applications in the sample, the last rejection before allowance had a 101 rejection.  For 20% of the allowed applications, the 101 rejection was resolved before the last action.  For 22% of the applications, there was no post-Alice 101 rejection.  So for many applications, the 101 rejection was not the hardest rejection to overcome.   This is somewhat better than what I saw in work group 3690 where the 101 rejection was usually the hardest rejection to overcome and wasn’t resolved until the last rejection before allowance.   

One of the major challenges of figuring out why some cases are being allowed and some are not is that only a few examiners give a detailed reason for why a 101 rejection was overcome in their notices of allowance.  Most examiners either give a cursory reason (e.g. “the applicant’s arguments are persuasive”) or no reason at all.  My method, therefore, was to find the amendments to the independent claims that overcame a 101 rejection and use my best judgment to identify the “something more” in the added limitations that overcame the 101 rejection.  If there was no post Alice 101 rejection, I tried to identify the limitations that would have led the examiner to immediately accept the claims as statutory.  I then categorized these limitations into different groups with common themes.  Others may look at the same data and reach different conclusions as to what the common themes are.  If any reader would like a list of the cases, I would be happy to share it with them.

The major themes were “physical limitations” and “software limitations”.  The minor themes within physical limitations were “mobile devices/sales kiosks” and “physical sensors”.  The minor themes within software were “graphics/ image processing”, “business methods: cryptography/security” and “business methods: other”.   Examples of the limitations in each theme are shown in Table 2 below.

Table 2

The percentage of applications falling into each theme is shown in the header rows.  The percentages add up to more than 100% since the limitations often fell into more than one theme. 

None of these limitations are magic bullets.  Most applications that have similar limitations are still being rejected under 101.  Nonetheless, the applications that do have these limitations are being allowed at a higher rate than those that don’t. 

The fact that incorporating physical limitations into an e-commerce claim leads to a holding of statutory subject matter makes a certain amount of sense.  At least superficially the claim looks more like standard patentable subject matter.  Mobile devices and sales kiosks are physical things.  Similarly, a claim that measures a physical quantity makes the claim look like the statutory claims in Diamond v. Diehr[9].  In Diehr, the statutory claim had a temperature sensor.  Similar logic may extend into the graphics/ image processing theme.  Often image processing requires the capture of a physical image or the portrayal of a physical object. 

It is not clear to me, however, why cryptography should stand out as statutory subject matter.  Cryptography can be characterized as the purely mathematical transformation of data from one coding scheme to another.  Purely mathematical transformations were held to be non-statutory in Gottschalk v. Benson[10].  Nonetheless, as Figure 3 below shows, the allowances per month for applications classified as business cryptography have been only moderately affected by Alice.

Figure 3

If anything, the allowances per month have gone up.  This is not to say that these applications aren’t getting 101 rejections, but it does indicate that overcoming a 101 rejection in this art unit is relatively straightforward.  It also suggests that applicants would do well to incorporate any aspect of cryptography or system security related to their invention in their applications.  Applicants might even look to making the cryptography or system security aspects of their invention the focus of the application.  This will help get the application classified into the cryptography art unit where there seems to be better reception to amendments and arguments to overcome a 101 rejection.

Seeing that cryptography was an “Alice friendly” art unit led me to consider whether or not there were any especially “Alice hostile” art units.  The answer that came up was the health care management art units 3626 and 3686.  Figure 4 below shows the combined allowances per month for these art units.

These are among the most devastated art units I have seen so far.  Similar to financial services, allowances per month have fallen by about a factor of 10.  There apparently is very little in the field of health care management innovation that these art units consider to be statutory.  Yet it’s hard to imagine a field more crucial to the welfare of the people of the United States.   Political solutions alone won’t solve our skyrocketing health care costs.  Radical, high risk innovation by the private sector is also needed.  If radical high risk innovation can put a smart phone in everyone’s pocket, it certainly can help make health care more universally affordable.  This is the type of innovation that patents are designed to promote.  Table 3 below gives you an idea of the innovations in health care management that, in all likelihood, will not get patented in our current post Alice environment.  This table is a random selection of titles for currently pending applications in Health Care Management that have received a post Alice 101 final rejection.  The chances of any of these applications getting allowed is very small.

Table 3

Applicants seeking high risk investment to implement health care management innovations may have a significant hurdle to overcome if they can’t get patents.  High risk investors need patents to protect their investments.  If there is no likelihood of protection, there is less likelihood of investment.  If there is no investment, there is no progress in solving these extremely difficult problems.

Many applicants in the business method fields of finance and e-commerce fully appreciate that convincing an examiner to allow their claims is almost impossible.  Quite naturally they are turning to an appeal.  In our next article we will examine how appeals in these work groups are faring to see if that provides any realistic hope of overcoming a post Alice 101 rejection.

 Mark Nowotarski is a registered U.S. patent agent specializing in business methods and consumer products.  He has had his own practice, “Markets, Patents & Alliances” since 2001.  Prior to being a patent agent, Mark was a  corporate research fellow for Praxair where he developed and patented green manufacturing technologies for the electronics, metals, food and healthcare industries.

---

[1] Nowotarski, Mark “Surviving Alice in the Finance Arts”, Bilski Blog 30 January 2017.

[2] After January 1, 2016, the USPTO no longer published the US Patent Classifications on issued patents or pending applications, and instead used the Cooperative Patent Classifications.  However, applications are still assigned to art units based on the old USPTO classification system.  These are the classifications still used in PAIR. 

[3] The patent examiner corps is organized and managed by art units (e.g. 3681).  Art units are organized into work groups (e.g. 3680).  Work groups are organized into technology centers (e.g. 3600).   

[4] Classification of US patent applications is done by an outside contractor, but it is confirmed by the SPEs when they get cases assigned to their art units.

[5] A significant number of business cryptography applications are also examined in art unit 3621. The allowances per month of business cryptography applications have also increased in art unit 3621.  The allowances per month of the other subclasses examined in art unit 3621 (discount/incentive) have not.

[6] http://www.reedtech.com/products-services/intellectual-property-solutions/lexisnexis-patentadvisor

[7] Bilski v. Kappos, 561 U. S. 593 (2010).

[8] Allowance rate = allowances per month/(allowances per month + abandons per month)

[9] Diamond v. Diehr, 450 U. S. 175, 187 (1981).

[10] Gottschalk v. Benson, 409 U. S. 63, 67 (1972).

 

AliceStorm Update for Q1 2017

By Robert R. Sachs

With the close of the first quarter of 2017, there have been some interesting patterns developing in AliceStorm.  Let’s start with the big picture:

There was a flurry of activity in March, with a record number of Section 101 decisions.  The Federal Circuit issued 11 decisions alone (its highest monthly output), and the district courts contributed another 24 (third highest month).  However, the overall percentages of invalidity outcomes are stable as compared to last month, which is really more a reflection of the law of large numbers: there have been so many Section 101 decisions that the total percentages are not going to change significantly month to month. 

Here we can see the record spike in decisions in March:

The number of ineligible outcomes, 24, was also a record. Even so, notice the three-month average trend line of ineligible outcomes is still heading down, from 63.8% of decisions (12/16 to 2/17) to 62.5% (1/17 to 3/17).  This declining trend is seen when we look at quarterly numbers as well (this quarterly graph is new to the blog):

The columns are the quarterly total number of eligible and ineligible decisions, and the red dashed line is the percent ineligible per quarter.  Again, we can see the slow decline in ineligible outcomes.

Where is this change occurring?  Let’s look at the most active district courts in terms of volume:

This table compares the number of Section 101 decisions and the percent of ineligible decisions in the period from Alice to the end of Q3-2016, with the last six months (Q4-2016 to Q1-2017).  Most of the active courts are significantly down in terms of the percentages of Section 101 motions granted, with one very important exception, the Eastern District of Texas.  The court’s ineligibility decision rate has jumped dramatically over the last six months, up to 75%.  That’s definitely a change of tune for a court that has historically been patentee-friendly.   

Turning to the motion summary:

Motions for judgment on the pleadings still hold the edge for patent defendants for early dispositive motions.  The Federal Circuit continues to affirm PTAB ineligibility decisions, with one CBM and one ex parte decision affirmed in March. 

Here’s the updated Federal Circuit scorecard:

 Here are the 11 Federal Circuit decisions:

Decision	Panel	Outcome	Valid/Invalid?
Athenahealth, Inc. v. Carecloud Corp.	Dyk, O'Malley, Wallach	Affirmed R36	Invalid
Clarilogic, Inc. v. FormFree Holdings Corp.	Reyna, Lourie, Chen	Affirmed-NP	Invalid
Coffelt v. NVIDIA Corp.	Prost, Bryson, Wallach	Affirmed-NP	Invalid
In re: Salwan	Prost, Mayer, Moore	Affirmed-NP	Invalid
Intellectual Ventures I LLC v. Capital One Fin. Corp.	Prost, Wallach, Chen	Affirmed	Invalid
Intellectual Ventures I LLC v. Erie Indemnity Co.	Prost, Wallach, Chen	Affirmed/Vacated	Invalid/None
Mentor Graphics Corp. v. EVE-USA, Inc.	Moore, Lourie, Chen	Affirmed	Invalid
Network Apparel Gr., LP v. Airwave Networks Inc.	Wallach, Chen, Hughes	Affirmed R36	Invalid
Nextpoint, Inc. v. Hewlett-Packard Co.	Lourie, O'Malley, Taranto	Affirmed R36	Invalid
Smartflash LLC v. Apple Inc.	Prost, Newman, Lourie	Reversed	Invalid
Thales Visionix, Inc. v. United States	Moore, Wallach, Stoll	Reversed	Not Invalid

 

Chief Judge Prost and judges Dyk and Lourie continue their unbroken streak of finding every software related invention patent-ineligible.

I’ll dive into the details of the Thales decision in my next post.

 

Update:  4/21/17

In the comment below, Patent Practitioner asks if we've normalized PTAB and federal court outcomes based on prosecution dates "post-Alice."  I interpret this to mean whether there is a difference in the invalidation rate for patents issued after Alice versus those issued before.   For the federal courts, there is a significant difference as shown here:

Here we see the percent of patents subject to Section 101 motions (or appeals) that have been invalidated according to their year of issuance.   Patents issued in 2015 and 2016 would have been prosecuted in the post-Alice time frame.  We can see a significant difference in overall outcomes, from about a 60% invalidity rate down to 40% (4 of 10 patents issued in 2016)  It will be interesting to see how these numbers develop over time, as there may be other contributing factors that explain the drop.   For PTAB CBM reviews,  there were 10 patents issued in 2015, and 3 issued in 2016.  They invalidated 8 (80%) of the 2015 patents, but upheld all 3 patents issued in 2016.  So a bit hard to tell if there's a pattern here. 

AliceStorm Update February 2017

by Robert R. Sachs

As many of my readers noticed, I didn't publish any of my own blogs in January and February.  As it turned out, I suffered from a peculiar form of seasonal affective disorder (SAD), what I would call SMIAD: Subject Matter Ineligible Affective Disorder.  The unrelenting rains here in San Francisco, a similar torrent of Section 101 rejections from the USPTO, and an uptick in the rate of court decisions invalidating patents, converged to put me in a dour and de-inspired mood.  With the return of the sun and some interesting decisions from the Federal Circuit, it’s time to get back to tracking AliceStorm.

First, an update on the overall AliceStorm numbers, through the end of February, 2017:

 

Compared to the December numbers, the changes are mixed.  The Federal Circuit ineligibility rate increased 1.9% to 90.9%, while the district court rate declined 1.2% to 61.8%.  There’s been a 1% drop in the overall percentage of patents invalidated as well, down to 59.3%.  

The success rate on motions on the pleadings (including both motions to dismiss and motions for judgment on the pleadings) is down 0.6% to 62.3%.

For PTAB, I’ve added a new row for Post Grant Reviews based on Section 101.  The success rate here is 42.9%.  For CBM reviews, the numbers for PTAB are steady, with less than a 1% change since December.

Breaking the court numbers down into monthly data, we have the following trend information:

The red line shows the number of federal court (district and Federal Circuit) decisions invalidating patents under Section 101; the green line is the number of eligible decisions.  We can see a slight trend that the numbers of ineligible decisions are declining and the eligible ones are increasing.

This is confirmed by the dashed black line, which is the three-month moving average ineligibility rate, in terms of percent (i.e., total number of ineligible decisions in the current month and prior two, divided by total number of decisions).  That trend line has been slowly but steadily falling since June, 2015.  This may be due to a couple of interrelated reasons.  First, the early decisions were on patents asserted in earlier filed litigations, and these patents may have been weaker to begin with, selected by patentees before the risk of Section 101 ineligibility became clear.  Second, early on the district courts were still finding their way around Section 101 issues, with many courts noting the lack of clarity in the law, in part due at that time to only a single—and narrowly cast—example of eligible subject from the Federal Circuit, DDR.  Over time, patentees may have become more selective in which patents they asserted, while the Federal Circuit has provided more examples of eligible subject matter.  This gave the district courts better guidance to work with, and less suspect patents to rule on.  This is not to say that the common law approach will work out just fine in patent eligibility, since the Alice test itself, and the doctrine being fashioned by the Federal Circuit to implement it, can never be entirely consistent or rational.

In terms of motion success, we find the following:

Motions for judgment on the pleadings for patent eligibility are on average significantly more successful than motions to dismiss, or even motions for summary judgment.  At the Federal Circuit, all appeals from PTAB, both for CBM and ex parte, have been denied and the patents all invalidated.  It’s not clear that the Federal Circuit is being deferential to PTAB; rather this could be a result of how these decisions come to the court.  CBM appeals thus far have only been of those reviews that reach a final written decision of ineligibility, and likewise the ex parte appeals are only of final rejections.  Without examples of a CBM final written decision finding eligible subject matter, we cannot tell whether the Federal Circuit is being deferential or simply confirming that they agree with PTAB’s decisions (being deferential would have the court affirming PTAB outcomes consistently, for both eligible and ineligible subject matter).

Let’s break down how the Federal Circuit decisions are rendered:

What stands out here is that of the 70 ineligibility decisions, 40 (57%) are Rule 36 per curiam affirmances.  Some commentators have argued Rule 36 affirmances in Section 101 are improper, and indeed harmful to patentees.  From a purely pragmatic point of view, as a patent prosecutor, I much prefer Rule 36 affirmances.  These decisions are non-precedential and should not be relied upon by patent examiners in their Section 101 rejections, according to recent USPTO guidance. If the Federal Circuit had issued these decisions with written opinions, even if only half were made precedential, that would have almost doubled the number of precedential ineligibility decisions (21).  These precedential decisions would be included in the USPTO's summary chart of cases the examiners can use, and likely included in further examples of ineligible subject matter. In short, would make it easier for examiners to reject pending applications under Section 101.  As the data shows below, the examiners need no more help.

Let’s look at the Federal Circuit scorecard:

This chart shows the number and type of Section 101 decisions by member of the Federal Circuit since Alice.  Red indicates issued, precedential opinions finding ineligible subject matter; dark red indicates non-precedential opinions, and black are per curiam affirmances.  The remaining colors are opinions finding eligible subject matter, color coded as shown on the right.  Judge Lynn Hughes leads the field with 26 decisions, and only a single finding of eligible subject matter in Enfish.  Judges Timothy Dyk, Alan Lourie, William Bryson, Haldane Robert Mayer, Raymond Clevenger, Alvin Schall and Richard Linn have yet to find a patent eligible (though not for want of trying, as both Lourie and Linn argued in concurrences in Ariosa that the claims were eligible but felt bound by Mayo to hold otherwise).  Judge Kara Stoll, the newest member of the court, leads in finding eligible subject matter, with 25% of her decision (and a bonus kicker for a dissent in Intellectual Ventures v. Symantec arguing that one of the patents was eligible).

One of the questions that comes up frequently is how do the current trends compare to the pre-Alice days?  The next figure provides that comparison:

Here, I look at the 32 months before and after Alice (i.e., up to Feb. 2017).  The differences are pretty stark.   Prior to Alice, there were only 37 district court decisions on Section 101, and 359 afterwards, nearly a 10-fold increase; similar increases in the number of patents challenged and invalidated.  The rate of invalidity jumped as well, from 43.2% pre-Alice to 61.8% currently. 

As I have noted before, it is software, not business method patents that have been the target of the post-Alice changes; communication patents now occupy the second most heavily targeted group:

Let’s now turn to the USPTO.

Using data collected from Patent Advisor, I have been tracking Section 101 rejection rates (non-final and final rejections) and well as allowances.  My database includes every office action mailed in 2014-2016.  I’ve aggregated the office actions into periods, based on their mailing date.  Each date range corresponds to a particular “guidance” period for the examiner guidance memos issued by the USPTO:

Period	Start Date	End Date
Before Alice		6/19/14
Preliminary Guidance	6/20/14	12/14/14
Interim Guidance	12/15/14	7/31/15
July Update 2015	7/31/15	5/5/16
Enfish May 2016	5/6/16	11/2/16
McRo Nov. 2016	11/3/16	12/31/16

I use the guidance periods because we would expect to see changes in examiner behavior, if any, between periods, as the USPTO further refines and clarifies how the examiners are to issue Section 101 rejections.  For most art units, we have seen a drop in the Section 101 rejection rates following an overall peak in the Interim Guidance period.  That said, there’s been little drop in rejection rates. 

 

In particular, I was interested to see if the McRo memo issued in November 2016 has had any impact.  McRo was a well-reasoned decision that should have made it easier to obtain allowances in software related applications.  From the numbers it is too early to make this assessment.  On the one hand, we’re not seeing a clear decline in Section 101 rejection rates post McRo.  On the other hand, there’s been a slight uptick in the notice of the allowance rate (note the last column below):

The most significant post-McRO change occurred in the E-shopping art unit, with a 4% increase in the allowance rate from 9% to 13%.  I’ll continue to monitor the impact of the McRO memo over time.  The USPTO may issue additional guidance memos or examples based on a recent Federal Circuit decision, Thales Visionix, Inc. v. United States, which reversed a lower court decision finding a patent on mechanisms for determining the position of a moving object (e.g. the helmet of a fighter pilot)  relative to a moving reference platform (e.g., the plane), so we may continue to see improvement in the rejection and allowance rates.

We also continue to see that the Business Method art units (TC 3600BM) reject applications at higher rates than other art units, for the same classifications of inventions:

Even in highly "technical" fields like software development or computer graphics, examiners in TC 3600BM reject applications are substantially higher rates than their peers in other art units.  

One factor that I find quite telling is the rate of Office Actions that have Section 101 rejections without any prior art rejections.  This is perhaps the most frustrating of circumstances for patent prosecutors, especially for final rejections.  In this table, I’ve limited the time period to the post-Enfish period (office actions mailed after May 5, 2016) and I’ve compared the rate of Section 101-only rejections with the rate of prior art only rejections (rejections with either Section 102 or 103 rejections and no Section 101 rejections):

What surprised me here was that the highest rates of Section 101-only rejections were in Art Unit 1631, Microbiology.  Not surprisingly, the business method art units are right behind, but they also they have the lowest rate of prior art rejections.  How can it be then that these applications are so “routine and conventional” as to support a Section 101 Rejection? 

Art units 2857 and 2862 are also unexpected here.  It would seem that by nature, most applications in Electrical Component and Devices would be patent eligible subject matter, and whatever defects may appear in the claims originally and rejected in a first office action should be typically cured by amendment. 

Another question that comes up is whether applications filed after Alice are rejected under Section 101 more frequently than those filed before.  Here’s the data:

As shown here, post-Alice filed applications do better in Tech Center 1600, but appreciably worse in TCS 2400, 2600 and of course 3600BM.  

One place that has seen an interesting development is in ex parte appeals on Section 101.  Here are the total numbers and rates of affirmances of Section 101 rejections by PTAB between December 14, 2015 and February 28, 2017:

Overall, the PTAB tends to sustain examiners on Section 101 rejections.  But the total numbers hide an interesting development:

Here we see that recently, the PTAB reversed 16 Section 101 rejections in a row beginning in October, 2016—and 14 of these were from the Business Method art units.  This is perhaps the best news I’ve seen in months, a bit of sunshine in the land of the dark. 

Surviving Alice in the Finance Arts

By Mark Nowotarski

The U.S. Supreme Court’s 2014 decision in Alice Corp. v. CLS Bank (“Alice”)[i] has had a dramatic impact on the allowability of computer implemented inventions, especially in the finance arts (e.g. insurance, banking, etc.).  This series of articles explores the dynamics of that impact in different computer implemented arts as a useful guide to help patent practitioners navigate the new realities of post-Alice prosecution.

In Technology Center 3600, art units 3691-3696 within Work Group 3690 examine applications in finance, banking and insurance (“Finance Art Units”).  These art units have been the most heavily impacted by Alice.    

 

Fig. 1

Figure 1 shows the total number of allowances per month, abandons per month and appeals per month for patent applications examined in Work Group 3690, from January 2014 to March 2016.  The data is from the USPTO’s public PAIR[ii] system.  PatentAdvisor™[iii] was used to collect and process the data. There are currently about 80 examiners in this Work Group.  The Work Group produces about 8400 office actions on the merits per year (i.e. nonfinal rejections, final rejections and allowances).  Prior to Alice, about 2100 of the actions per year were allowances (25% of the total actions).  Post Alice, only 220 of the actions per year have been allowances (2.6% of the total actions).

Inventions in the finance arts are classified primarily as Classes 705/035 through 705/045, as well as 705/004 (Insurance)[iv].  The patents invalidated in Alice were all finance-related patents[v].  While it is not surprising to see that there was a substantial drop in allowances in the Finance Art Units, what is surprising was how fast the allowance rate dropped after the Alice decision.  The Alice decision was handed down on June 19, 2014, and six days later the USPTO issued a three page preliminary guidance memo that simply summarized the case.  The rate of allowances in the Finance Art Units plunged the very next week to a tenth of its pre-Alice value.  The median number of allowances per examiner in the two years since Alice is one.  That means that the typical examiner in the Finance Art Units has only allowed one case in two years.  Many have not allowed any.  A handful of examiners are allowing cases, but the vast majority are not.  Neither the Interim Guidance issued in December of 2014 nor the Update issued in July 2015 has had any measurable impact to increase the allowance rate.

The drop in allowance rate has led to a predictable increase in abandons and appeals.  The abandon rate for applications in the Finance Art Units is up by about a factor of 3.  The appeal rate has more than doubled.   

While exploring the sharp drop-off in allowances, I discovered quite a few cases allowed before Alice that had their allowances withdrawn in July of 2014, about a month after Alice.  These withdrawals were announced by the USPTO on August 4, 2014[vi].  The allowed cases that had not yet issued were reviewed and those that were not considered statutory under Alice had their allowances withdrawn.  There was also a second smaller batch of post-Alice allowances that were withdrawn in October of 2014.  We refer these bulk withdrawals of allowances as the “July recall” and the “October recall.”

 

Fig. 2

Figure 2 shows when the recalls occurred and which prior allowances were withdrawn.  It also shows the allowances that ultimately issued as patents.  After each recall, the cases were reassigned back to examiners and new 35 USC 101 rejections based on Alice were issued.  These new rejections came out over a period of several months. 

At the time of the July recall, there were about 405 cases allowed-but-still-pending.  Subsequently, 250 of these cases had their allowances withdrawn and 78 proceeded to issue on a normal schedule.  Another 77 had their issuance delayed until the end of December for reasons that are unknown.  The October recall was much smaller and different in scope, in that while only 5 allowances were withdrawn, all of them were post-Alice allowances.  In other words, while the examiners found the applications allowable under the new Alice guidance, they were overruled presumably by either an SPE or a Quality Assurance Specialist.

The 255 recalled cases have not done well.  Only 11 have been allowed again, 66 have been appealed, 83 are still being prosecuted before their respective examiners, and 95, the largest subset, have been abandoned. 

The July recall had a powerful impact on examiners.  For most examiners, the only cases they have allowed since then have claims that incorporate “physical devices.”  I took a look at a random sample of 100 allowed cases to see what might count as a “physical device” in this work group.  About 90% of the allowed cases had a prior 101 rejection under Alice.  Most of these rejections were overcome by an amendment to the claims.  In about one-half of the cases, I could identify a limitation added by amendment that added enough of a physical limitation to overcome the 101 rejection.  A sample of these limitations is presented in the table below.

 

Limitations leading to allowance
Mobile Device 42% of allowances	Physical sensor 19% of allowances	Physical payment 12% of allowances	System structure 19% of allowances
mobile device, GPS	receiving…from a camera	point of sale computing device	virtual card available through a browser
mobile device	computing hardware associated with an electrical device	point of sale computer	data processor
first entity computer	preventing the vehicle from starting	receiving an order from a merchant site	machine readable encrypted coding
mobile wallet computer system	optical sensor, remote device	smart card	computer hardware component over a computer network
mobile device of the account holder	electrical heating device	cash automation machine	triggers the metrics application to automatically…
communication device receiving a calculator interface	RFID reader	a merchant site	plurality of automated trading bots
portable device remotely located	the signal activates and causes one of the robotic arms…	cash handling device	base commands is processing in response to receipt
remotely located service provider server	causing the device controllers to adjust the energy consumption…	automatic teller machine	web server, content processor, predictive model processor
remote client device	receiving from a GPS unit	display the entire surface area of the check image	displaying…on a graphical user interface
dynamically generated by the mobile client device	meter the usage of the available internal resource by the remote computing system	currency depositing section	determining whether the current reader view has changed

 

42% of the allowances I looked at involve claims with some sort of mobile or remote device; 19% had a physical sensor in the claims; 12% had a physical payment limitation; and 19% had a limitation related to a specific system structure.  Only 8% of the allowances I looked at seemed to be purely computer implemented business methods.

For applicants filing cases now, the message is clear.  Incorporate a physical device into your claims.  For those pending applications that do not disclose a specific physical device, perhaps the best strategy is to direct the claims improvement in the functionality of the overall system, rather than a specific device.

In our next article we will explore what is happening in the other business method work groups, 3620 and 3680.  These work groups cover the rest of business methods including accounting, online discounts, operations, electronic shopping, point-of-sale terminals, health technology, and cryptography.  Some of these fields show the same impact as finance.  Others show an initial drop in allowances, followed by an increase and then followed by yet another drop-off.  Still others have shown no impact of Alice at all.  We will explore these variations and see how this impacts applicant strategy.

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[i] Alice Corp. v. CLS Bank Int’l, __U.S.__, 134 S. Ct. 2347 (2014).

[ii] Patent Application Information Retrieval system. http://portal.uspto.gov/pair/PublicPair

[iii] http://www.reedtech.com/products-services/intellectual-property-solutions/lexisnexis-patentadvisor

[iv] After January 1, 2016, the USPTO no longer published the US Patent Classifications on issued patents, and instead used the Cooperative Patent Classifications.  However, applications are still assigned to art units based on the old USPTO classification system.  These are the classifications still used in PAIR. 

[v] US 5,970,479, US 6,912,510, US7,149,720 and US7,725,375

[vi] USPTO Commissioner for Patents, Peggy Focarino, “Update on USPTO’s Implementation of ‘Alice v. CLS Bank,’” Director’s Forum: A Blog from USPTO’s Leadership, August 4, 2014.

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Mark Nowotarski is a registered U.S. patent agent specializing in business methods and consumer products.  He has had his own practice, “Markets, Patents & Alliances” since 2001.  Prior to being a patent agent, Mark was a  corporate research fellow for Praxair where he developed and patented green manufacturing technologies for the electronics, metals, food and healthcare industries.

 

AliceStorm Update for Fall 2016

By Robert R. Sachs

The Federal Circuit's recent decision in McRO has been interpreted by many in the patent community as a further signal that the so-called "pendulum" is swinging back to a more favorable position for patentees.  There is some superficial evidence of this possibility.  Let's look at the numbers. 

September 2016 was the first time since Alice that the number of federal court decisions finding eligible subject matter (16) exceeded those finding ineligible subject matter (13).  Those sixteen decisions also mark the highest number of eligibility decisions in a single month.  The most significant contribution to the switchover is that only two motions to dismiss under § 101 were granted in September, compared to nine that were denied, the largest gap since March 2016 (6 granted, 10 denied). 

The decline in the number of invalidating decisions is reflected in the overall percentages:

The invalidity rate of 68% is also the first time since Alice that the rate has dropped below 70%.  Similarly, the success rate on motions on the pleadings at 64.9% has dropped below 67% for the first time as well.

At best, this data may be interpreted as indicative of a shift in eligibility within the federal district courts, but I would prefer to see these numbers hold for several months.  My caution is occasioned by the Federal Circuit’s recent Section 101 decisions.  While the McRO decision has been widely viewed as a positive development, the Court continues to affirm more invalidity decisions than it reverses.  Compared to the single McRO decision in September, the Court affirmed seven lower court ineligibility decisions, including reversing a lower court’s finding of eligible subject matter in the Intellectual Ventures v. Symantec case.   

Here’s the Federal Circuit Section 101 scorecard:

Judge Hughes continues to lead in number of Section 101 cases, and has only voted once (Enfish) to find eligible subject matter.  We also continue to see a significant number of per curiam affirmances of ineligibility (about half of the Federal Circuit decisions each month), and very rare dissents--Judge Stoll’s dissent in IV v. Symantec was the first one since Alice that argued that the claims invalidated by the majority were eligible.

The Federal Circuit’s developing theory of eligibility is based on distinguishing between claims that recite the use of a computer as simply a tool to achieve a desired result, and claims that recite specifically how that result is achieved.  Further, the method or mechanism for obtaining the result must be "new" in the sense that it was not previously used by humans to achieve the same result.  This approach inherently conflates issues of novelty and obviousness into eligibility, because it aims to define not eligibility but “inventiveness.”  Judge Rich called the requirement of invention a “meaningless term” for “'that impalpable something' which you must have to get a patent.”* Rich and P.J. Federico wisely and intentionally eliminated this requirement when they wrote the 1952 Patent Act, replacing it with Section 103.  Alice and its progeny have brought it back, and its going to be sometime before the courts can cabin its often arbitrary application.

AliceStorm Continues at the USPTO

Turning to the United States Patent and Trademark Office (USPTO), there are mixed signs of improvement. My current data set, developed with the assistance of Patent Advisor, now contains over 2.9m office actions and notices of allowance, including every such action issued between Alice and June 2016.  Here are the rates for Section 101 rejections in the various the PTO Technology Centers, relative to all office actions and notices of allowances issued in each “guidance” period:

In this chart, I’ve broken out Tech Center 3600 into two parts: 3600 Business Methods (Work Groups 3620, 3680, an 3690) and 3600 Transportation & Construction (everything else).  Here the Business Method art units continue to have a very high rate of § 101 rejections.  This itself is not surprising.  What is surprising is that the May 2016 “Examiner Memos” on Enfish, Rapid Litgation Management and the new claim examples, which appeared to provide applicants with further grounds for identifying eligible subject matter, have not resulted in a clear and uniform drop in rejection rates.  Indeed, the Business Method art units have logged the largest overall increase, up 1.4%. 

The impact (or lack thereof) of the May Examiner Memos is more clearly revealed when we look at the § 101 rejection rates by art unit technology types within the Tech Centers:

Here, the 1.4% overall increase within 3600 Business Methods is revealed as a result of significant increases in E-Shopping (6.8%), POS, Inventory & Accounting (6.5%) and Business Process (5.4%), offset by smaller but still notable increases in the other Business Method art units.  All other art units in the USPTO showed either a drop in the § 101 Rejection rate following the May Examiner Memos or minor (<1%) increases. 

The May Examiner Memos appeared to have the greatest impact on the likelihood of a § 101 final rejection outside of the 3600 Business Methods:

All of the USPTO art units show both a clear drop in the percentage of final actions after the May Examiner Memos as compared to the July 2015 period. For example, the biotech art units show a drop from 17.1% of final office actions including a § 101 rejection to 16.1%.  Similarly, all other art units show a lower percentage of final office actions with § 101 rejections relative to non-final actions, thereby indicating that examiners tended to withdraw their § 101 rejections.  For example, in the computer art units, 20% of non-final actions after the May Examiner Memos included a § 101 rejection while only 9.1% of final rejections did.  But the 366 Business Method art units pressed on regardless after the May memos, with a 2.4% increase in the percentages of final actions with § 101 rejections relative to the July 2015 period, and only a modest 0.8% decrease in the percentage of final § 101 rejections relative to non-finals.

The percentages of notice of allowances show a continued downward trend across the entire USPTO:

Finally, we’ve collected data on ex parte appeals of § 101 rejections decided by PTAB after the 2014 Interim Guidance:

Overall, PTAB affirms § 101 rejections 86% of the time.  Appeals from § 101 rejections in the Business Methods art units are affirmed 89% of the time.  This is consistent with PTAB's aggressive rates of invalidating patents under Section 101 during Covered Business Method reviews, as shown above (96.7%). 

Conclusion

At best there is the beginnings of a shift in the district courts in their application of the Alice test, but little evidence of a change in the Federal Circuit or the USPTO.  This makes sense in that the district courts are the real front lines where the boundaries of eligible subject matter are being fought over.  The Federal Circuit lags behind the district courts, and the USPTO picks up the rear, following the Federal Circuit. 

* Rich, G., The Principles of Patentability, Journal of the Patent Office Society, February, 1960, Vol. XLII, No. 2, p. 75-91.

Judge Mayer’s Concurrence in IV Shows the Problem with Judicially Created Exceptions

By: Stuart P. Meyer

The press is all abuzz with reactions to Judge Mayer’s concurring opinion bluntly stating that “claims directed to software implemented on a generic computer are categorically not eligible for patent.”  Intellectual Ventures I LLC v. Symantec Corp. et al., 2015-1769, -1770, -1771 (Fed. Cir. Sept. 30, 2016).

Here, I’ll just explore one aspect of this remarkable opinion—the reasons that judicially created exceptions are dangerous. As we have previously detailed on this blog, the precipitous drop-off in PTO allowances and Article III court confirmations of validity are not driven by the literal text of Section 101 or other portions of the patent statute, but instead by judicial interpretations of exceptions that the courts deem must be read into the Patent Act. Many commentators have observed that such judicially created exceptions may be an extremely convenient way to sidestep “bad” patents but are not needed, given that the provisions of sections 102, 103 and 112 would be just as effective in addressing vague or overbroad patent claims. Single-paragraph district court explanations of why particular patents claim nothing more than an abstract idea now regularly invalidate patents at the pleadings stage. Judge Mayer’s concurrence adds fuel to this fire. A few examples from his concurrence are illustrative.

Judge Mayer starts his concurrence not with the categorical condemnation of software patents, but with a First Amendment  argument, saying that “Patents, which function as government-sanctioned monopolies, invade core First Amendment rights when they are allowed to obstruct the essential channels of scientific, economic, and political discourse.” His concern is a valid one, but Congress did not agree with it in framing the patent statute and the courts have not previously seen it that way either. Indeed, many patents in traditional art areas could be said to obstruct such “essential channels,” in various ways. In one sense, excluding a community from building a patented telephone system could be seen as such obstruction. In another aspect, one could not undertake meaningful discussion of the stability of a phase-locked loop circuit under various temperature or supply voltage variations without actually making and using such a circuit. One cannot discuss the durability of a new pitman arm on a truck’s steering system without using one. So patents by their very nature can have varying impacts on discourse.

Judge Mayer’s concurrence characterizes the claims at issue as “disclosing no new technology” and “speak[ing] in vague, functional language.” Assuming he is correct, that is indeed problematic, but such concerns are directly addressed elsewhere in the statute. He concludes on this point saying that “Essential First Amendment freedoms are abridged when the Patent and Trademark Office (‘PTO’) is permitted to balkanize the Internet, granting patent owners the right to exact heavy taxes on widely-used conduits for online expression.” Changing only a couple of words, he could similarly condemn patents directed toward printing, radio and television systems.

His statement that “Section 101 creates a ‘patent-free zone’ and places within it the indispensable instruments of social, economic, and scientific endeavor” could be used to place almost any significant invention within that zone. In fact, the more significant the invention, the less likely it could avoid this “patent-free zone.” Many have previously observed that Congress drafted Section 101 using inclusive rather than exclusive language. Given that, Judge Mayer appears to be arguing that the patent statute on its face is unconstitutional. Under what authority are courts empowered to amend such a statute by inserting exceptions, even in an attempt to “save” the statute?

As a segue to his primary point, Judge Mayer opines that, “Most of the First Amendment concerns associated with patent protection could be avoided if this court were willing to acknowledge that Alice sounded the death knell for software patents.” Judge Mayer does in fact quote the most relevant portion of Alice for support, but that language says only that “mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention.” The Supreme Court cases from Bilski to Alice go out of their way to avoid the categorical condemnation of software patents, which seems appropriate given the multiple references in the patent statute that would be hard to reconcile with such condemnation (see, e.g., the Court’s discussion of Section 273 in Bilski, 561 U.S. at 607-608, and its corresponding conclusion that “the Court once again declines to impose limitations on the Patent Act that are inconsistent with the Act’s text, 561 U.S. at 612).

Nonetheless, Judge Mayer urges that “all software implemented on a standard computer should be deemed categorically outside the bounds of section 101” (emphasis added). He makes no mention of how such a position can be squared with Bilski, or how his view of what should be can be implemented judicially rather than by Congress.

He goes on to state that the “central problem with affording patent protection to generically-implemented software is that standard computers have long been ceded to the public domain.”  Such an approach could just as easily be applied to other inventions. To give an example, one could just as easily say that since items found in a hardware store “have long been ceded to the public domain” (however one wants to interpret that), one should not be able to patent a mechanical invention created just from parts available at a hardware store.

It is at the end of his opinion that we see the policy positions Judge Mayer is really advocating.  He cites four “insurmountable problems” with software claims. First, he asserts that “their scope is generally vastly disproportionate to their technological disclosure.” Again, it seems that other sections of the patent law can ably address problems with inadequate disclosure.

Second, he asserts that software patents “provide incentives at the wrong time” because “they are typically obtained at the ‘idea’ stage, before any real inventive work has been done.” The patent statute’s requirements regarding constructive reduction to practice can readily be applied to address applications that exhibit such problems. And didn’t Congress intentionally provide incentives for inventors to submit patent applications as soon as possible after such reduction to practice?  That’s why the statutory bars are there.

Third, he bluntly states that, “Yet another intractable problem with software patents is their sheer number.” The point is well taken that a patent “thicket” may make it difficult for later entrants to the market, but this is by no means an issue unique to software-implemented inventions. Many industries have established players with thousands of patents in their portfolios, and there is no policy deliberation suggested by Judge Mayer that would support singling out software-implemented inventions alone—indeed these are exactly the considerations that Congress is empowered to undertake in crafting legislation.

Finally, Judge Mayer says that “generically-implemented software invariably lacks the concrete borders the patent law demands.” He provides no explanation as to why the requirements of section 112 are ill-equipped to address this perceived concern.

One of the most common concerns about our government—voiced from all parts of the political spectrum—is that Congress gets too little done. Thus, the worry that a Congressional “fix” to our patent system is not likely anytime soon is understandable. However, problems caused by any real or perceived Congressional dysfunction may be dwarfed by allowing courts to re-write the Patent Act.  If there is ever an area where the balancing of interests calls for the legislative process to be involved, it is in our intellectual property system. One person’s view—or even one Court’s view—of a good solution, however well-intentioned, is not the right approach.

Related articles

Bilski Blog: More Lessons From McRo

Did You Mean to Claim a Function? How the USPTO Applies Section 112(f) to Software Patents

Federal Circuit Creates New (non-Alice) Hurdle for Software Patents

More Lessons From McRo

By: Robert R. Sachs

My previous blog on McRo focused on the direct aspects of the decision, but there are other excellent points that the court makes and that can be derived from the opinion, and that should play an important role in how the courts and the USPTO handle the Mayo test.

First, the mathematical nature of the invention was not fatal; it was vital. One of the favorite buzz-saw arguments for finding ineligibility is that claims for computer-implemented inventions recite—either directly or indirectly—mathematical operations. This is about as insightful as stating that patent claims in U.S. patents are written in the English language. The invocation of the dreaded mathematical algorithm Jabberwocky and talismans of Benson and Flook often convince jurists that the claims are abstract.  The McRo court did not run scared here. Quite the contrary, the McRo court relied on the underlying mathematical nature of the rules to demonstrate non-preemption: “Defendants concede an animator’s process was driven by subjective determinations rather than specific, limited mathematical rules. . . . It is the incorporation of the claimed [mathematical] rules, not the use of the computer, that “improved [the] existing technological process” by allowing the automation of further tasks.” This holding should be heeded by the courts and the USPTO to not treat all mathematically implemented inventions as necessarily abstract.

Second, the improvement need not be in the functioning of the computer itself. McRo’s invention did not make the computer operate any faster, use less memory, or improve any other objective parameter of the device. Rather, the improvement was in subjective dimensions. First, the invention made it easier for human animators to animate 3D characters, thus improving the experience of the computer by the user, the animator. Humans have been drawing cartoons and animating images for well over 200 years, using various mechanical devices. Early film animation was done by drawing images, using pens and pencils and paint brushes as tools for this purely artistic purpose. Computer animation is simply the latest tool for this purpose, and McRo’s invention made this tool easier to use by workers in the field. Thus, McRo supports the proposition that improvements in computer tools that make them easier to use (e.g., user interface inventions) or that save users effort or time or otherwise improve their performance, all are sufficient “improvements” under Mayo.

Next, the invention specifically improved the result as experienced by the viewer by making the animated characters appear to speak more naturally, an entirely aesthetic and subjective improvement. This is consistent with the overall nature of human inventions, which is to create desirable solutions to human wants and needs, including aesthetic and artistic ones. McRo’s invention is only a means to an end, the creation of artistic works. It would have no value to animators if what animators did was of no interest to anyone. It’s because animated films are desired that animators create them, and McRo’s invention makes those end products more desirable still. In this way, McRo extends DDR. The value of the invention in DDR was entirely commercial, to improve the sales and customer retention of online merchants, as its technological contribution was trivial. The invention in DDR did not improve “how” the Internet or ecommerce sites operated in any technical way. Like McRo, DDR’s invention operated at two levels. First, it improved the design framework for creating such sites, thus an improvement in the tools used to create such sites. Second, it improved the end user experience of those sites, making users stay on the sites longer and resulting in improved customer satisfaction.

Third, the court rejected, though it did not mention, the defendant’s mental steps argument, that applying the rules to the transcript was “a simple mathematical operation that can be performed in a person’s head or using a pencil and paper.” That mathematical operations could be done mentally is —like my point above about claims being in the English language—a distraction, not a meaningful argument. By definition, every algorithm that is performed by a computer was first invented by a human who thought up the algorithm and worked it out. I discussed this issue in great detail in my articles on The Mind as Computer Metaphor. The court also rejected, without even pausing to address, the defendant’s primary (and frankly silly) argument that “there can be little question that the idea that the human mouth looks a certain way while speaking particular sounds is a pre-existing fundamental truth” that “exists in principle apart from any human action.” If you think that’s a plausible argument, see my blog on laws of nature.

Fourth, eligibility does not require tangibility. The McRo defendants argued that a “stream of output morph weight sets” is not a tangible product. The court nixed this argument: “While the result may not be tangible, there is nothing that requires a method ‘be tied to a machine or transform an article’ to be patentable.” Bilski, 561 U.S. at 603 (discussing 35 U.S.C. § 100(b)). The concern underlying the exceptions to § 101 is not tangibility, but preemption.” Examiners continue to reject claims on the grounds that the claims only produce intangible data. This basis of rejection is clearly incorrect.

Fifth, the court did not engage in a reductionist claim analysis.  In step 2 of the Mayo test, many courts and patent examiners simply look to the verbs recited in the claims—receiving, storing, generating, determining, displaying, transmitting, etc. –and state that these functions are entirely conventional and well understood, and therefore cannot be “inventive.”  This approach wipes out all software claims, since there is no way to claim the operations of a computer except by reciting steps that a computer can perform. As noted by the court in Oplus Techs. Ltd. v. Sears Holding Corp., “All software only ‘receives data,’ ‘applies algorithms,’ and ‘ends with decisions.’ That is the only thing software does. Software does nothing more.” That’s why you’ll never see a patent claim for a software process that recites slicing, dicing, shaking, and baking.  The late judge Mariana Pfaelzer recognized this in California Institute of Technology v. Hughes Communications, stating that this “simplistic” approach “would eviscerate all software patents, a result that contradicts Congress’s actions and the Supreme Court’s guidance that software may be patentable if it improves the functioning of a computer.” The reductionist approach further misses the point because it fails to consider the claim limitations as a whole and as a combination.  Had the McRo court done this, it would have been compelled to hold that there was no inventive concept since all of the claim verbs were similarly “conventional”: obtaining, generating, evaluating, and applying.  That the court did not use this approach, but instead focused on the limitations as a whole and how they worked together is instructive.  Again, the court made this plain:

Whether at step one or step two of the Alice test, in determining the patentability of a method, a court must look to the claims as an ordered combination, without ignoring the requirements of the individual steps.

The requirements of the individual steps means not just the verbs (the steps) but the specific details that limit the scope of each step to particular data and how it is structured (e.g. the details of McRo’s rules) and how it is applied (e.g. how the rules were used to evaluate the phoneme sequence).   The USPTO should instruct examiners to follow this example.

All that said, there are a couple of issues that McRo should have addressed but did not.  First, the court could have further clarified that the preemption analysis should be from the perspective of a person of ordinary skill in the art (POSITA), and not a lay court. Using POSITA makes the analysis objective, technology neutral, and adaptive to changes in technology over time. POSITA is the only objective framework in the patent law and is already employed for claim construction, enablement, written description, obviousness, and the doctrine of equivalents. My partner Dan Brownstone and I set forth this theory, what we called Objective Preemption, in our amicus brief in Alice.

Finally, McRo should have distinguished the Federal Circuit’s decision in SmartGene v. Advanced Biological Labs. There the court held that a rule-based expert system for selecting therapeutic treatments for patients with particular diseases was ineligible. The claims recited the use of “a second knowledge base comprising a plurality of expert rules for evaluating and selecting a therapeutic treatment regimen for said disease or medical condition.” The court held “the claim at issue here involves a mental process excluded from section 101: the mental steps of comparing new and stored information and using rules to identify medical options.” The court attempted to limit the reach of this holding by stating “Our ruling is limited to the circumstances presented here, in which every step is a familiar part of the conscious process that doctors can and do perform in their heads,” and designating the opinion as non-precedential. Nonetheless, district courts and more significantly the patent examiners, have read SmartGene as broadly holding that comparing old and new information and using rules to identify options—in any context at all—is an ineligible abstract idea, regardless of whether it was already done by humans in the relevant field. As I have shown, SmartGene has been cited by patent examiners more than any other Federal Circuit or Supreme Court opinions except for Mayo and Alice. (As of today, SmartGene has been cited over 13,000 times; so much for a case being limited to its facts).*

The McRo panel should have distinguished SmartGene and put to an end its overzealous application. Specifically, the panel could have simply clarified two points. First, the claims in SmartGene only stated that there were “expert rules for evaluating and selecting a therapeutic treatment regimen for said disease or medical condition,” but did not state anything about the details of the rules other than their purpose “for evaluating. . . .”   By contrast, the rules in McRo were claimed as encoding a broad, but still specific relationship, to “define output morph weight set stream as a function of phoneme sequence and time of said phoneme sequence.” Second, as discussed above, McRo’s rules were not the rules used conventionally by animators, whereas the court believed that the rules in SmartGene were the very rules normally used by doctors in their practice.  The court has frequently characterized its holdings in Ultramercial, TLI, Content Extraction, and other "ineligible" cases and it should do so with SmartGene.

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*In full disclosure, I was counsel of record for the patentee Advanced Biological Laboratories.  Feel free to blame some of this mess on me.

AliceStorm in the Dog Days of Summer

By: Robert R. Sachs

Over the past two months, the trends I've discussed in my previous blogs on AliceStorm have continued and become more entrenched. In particular, the Federal Circuit has been quite active, issuing nine decisions since late June. These decisions lay out a theory of patent eligibility that in my view is divorced from both scientific reality and how innovation actually occurs. I'll discuss those points below, but first let's do the numbers.   

June, July and August showed an uptick in the number Section 101 decisions from April and May, the majority of these being motions to dismiss and judgments on the pleadings.

The rates of invalidity holdings continue to be steady: 70% overall, and 66.3% in the district courts. Success on motions on the pleadings is up to 68.1%.     

We've recently started tracking ITC proceedings as well, as shown above in the last row. Three of the five holdings of invalidity recorded above involved direct competitors and counterparties, Fitbit and Jawbone. In March 2016, Fitbit invalidated Jawbone's fitness tracking patents in an ITC proceeding brought by Jawbone (ITC 337-TA-963). In July, Jawbone returned the favor and successfully invalidated Fitbit's patents (ITC 337-TA-973); the ITC judge in the latter decision even relied upon Fitbit's arguments that it made in its own motion against Jawbone.  

As I've argued, the Supreme Court did not intend AliceStorm and specifically did not intend the impact on software patents. Yet the onslaught continues. Here is the current update on the types of patents being litigated under Section 101:

Here's the updated "scorecard" for the Federal Circuit: 

I find it interesting that Judges Hughes and Taranto, neither of whom has a scientific or technological background, are leading the court in framing the boundaries of patent eligibility. Together these two judges are on 15 of the 23 written opinions. Patents describe technological advances, often based on applying scientific developments to particular problems. I believe that a correct theory of patent eligibility requires not only a deep understanding of science, but also of how technology develops—issues involving the nature of human creativity and innovation. Since the role of the patent law, as defined by the Constitution, is to promote the progress of useful arts, it is necessary for those who define the patent law to understand how such progress in fact happens.

There is an entire literature of innovation and creativity studies that explores how this process occurs, and there are many different views and theories of what constitutes creativity and how humans invent. And when it comes to questions of what constitutes abstract ideas or laws of nature, there is again a wide range of views. Yet as far as I can tell from reading Federal Circuit opinions, the court is entirely unaware of these various fields of knowledge.

Several years ago I discussed the Mayo decision with retired Chief Judge Paul Michel. I explained that the debate about laws of nature has a long tradition in philosophy of science—the term itself goes back to Roger Bacon, who first used the phrase in 1250, over 750 years ago!—and that there are well developed theoretical explanations for what constitutes a law of nature. Judge Michel candidly admitted: "We [the Federal Circuit] had no idea," speaking of the period when the court authored its opinion in Mayo. Indeed, and that's the problem. The court, in decisions like Ariosa, Rapid Litigation Management, Exergen, is setting forth patent eligibility rulings that do not cohere with modern scientific thinking. The result can only distort the development of the patent law.  

The problem is not confined the life sciences. When it comes to software, the court does not appear to understand how software works or is developed. In DDR (Chen and Wallach), for example, contrary to the court's impression that the invention did not "overcome a problem specifically arising in the realm of computer networks," the notion of "the near-instantaneous transport between these locations [is] made possible by standard Internet communication protocols, which introduces a problem that does not arise in the 'brick and mortar' context." This so-called "problem," that clicking on a link can load a remote website, is not a problem at all; the problem in DDR resided not in Internet protocols, but in the typical way that e-commerce websites were designed. The invention then was a solution in website design, not internet engineering.  The invention did not change how the Internet worked—HTTP, TCP-IP, HTML, ASP, all of the standard Internet protocols were used by the invention in their normal manner, working exactly as they were intended to. The invention did not "improve the functioning" of the computer system in any technical sense; the improvement was only an improvement in usability. What the invention changed was simply which graphical assets were combined with which product assets to create a "hybrid webpage." (To be clear, I think this is entirely eligible subject matter.) And the court's notion that there is "near instantaneous transport between locations" is a misleading metaphor. There is no more instantaneous transport when you click on links than when you change channels from watching a local broadcast station to watching the BBC. You would not say that you're "transported" to a site in England when you turn on the BBC's Downton Abbey, any more than you would say you're transported between remote locations when you change radio stations.  

In Electric Power, the panel (Taranto, Bryson, Stoll) created a distinction that does not exist in Alice: "the distinction made in Alice between, on one hand, computer-functionality improvements and, on the other, uses of existing computers as tools in aid of processes focused on 'abstract ideas'." First, Alice drew no such distinction; Alice only held that claiming the application of an identified abstract idea with generic computer elements does not provide eligibility. There is no discussion in Alice that using a computer as a tool is insufficient to be eligible.  

Second, such a reductionist view marginalizes the power and utility of computers and software, and is inconsistent with general principles of eligibility. The computer has been developed over the years precisely to be a general purpose tool that can be programmed for specific new uses, uses which themselves can be inventions. The Nobel Prize-winning scientist Herbert Simon explains in Sciences of the Artificial: 

No artifact devised by man is so convenient for this kind of functional description as a digital computer. It is truly protean, for almost the only ones of its properties that are detectable in its behavior (when it is operating properly!) are the organizational properties. The speed with which it performs its basic operations may allow us to infer a little about its physical components and their natural laws; speed data, for example, would allow us to rule out certain kinds of "slow" components. For the rest, almost no interesting statement that one can make about an operating computer bears any particular relation to the specific nature of the hardware. A computer is an organization of elementary functional components in which, to a high approximation, only the function performed by those components is relevant to the behavior of the whole system.

What makes the computer a useful tool—and computer programming a useful art—is precisely its ability to have its functional capability changed by programming, for it is the functionality, not the underlying structure, that is what is useful to solving the problem. No other tool in the history of human development is as flexible and re-purposeful as a computer. And yet this very capability is now used as evidence of ineligibility by the Federal Circuit. 

Section 101 in its own terms focuses on utility as the hallmark of eligibility, and new use of a computer created by programming should be eligible by default. Indeed, Section 100(b)—"the term 'process' means process, art or method, and includes a new use of a known ..., machine,"—sanctions the use of known machines—motors as well as computers—in new processes. However, in Electric Power, the Federal Circuit has essentially abrogated Section 100(b) by holding that using "readily available" "off-the-shelf, conventional computer, network, and display technology" is “insufficient to pass the test of an inventive concept". While we may find that a patent claim that recites the use of an off-the-shelf motor to motorize a mechanical process is obvious, we would never say it is ineligible because it merely uses the motor as a "tool." And yet the Federal Circuit's rationale, if applied generally—as any principle of patent law should be—would result in exactly that outcome.

No theoretical explanation of the Federal Circuit's expansion of Alice is given, nor can there be because it is entirely contrary to the nature of both the patent law (at least Section 100(b)) and human invention. Humans invent by taking conventional, off-the-shelf, readily available components and combining them into new structures and functions. In this sense, using a computer as a tool is no different from using any other physical device as a tool for some purpose, some other function. All inventions make use of existing components and use them as "tools" in their ordinary way to achieve a desired function; sometimes the function is known, sometimes it is new, but it is (almost) always useful. Any complex machine is made of components—whether nuts and bolts, motors and relays, integrated circuits, batteries, etc., etc.—that function precisely as they are intended: if the parts did not function as intended, we could not build anything.  Similarly, we program conventional computers, using conventional languages and methods, to result in new functions—just like we create new machines by combining conventional parts using known engineering approaches.  

We would not hold that an invention made of existing off-the shelf parts, used entirely for their intended purposes, was not patent-eligible simply because the function performed by the parts was known. We would not say that the function was an abstract idea, and the application of that idea using conventional parts failed to provide an inventive contribution sufficient to be eligible. Any such analysis would clearly be seen as an obviousness analysis masquerading as eligibility. Yet, this is precisely what the Federal Circuit is guiding the lower courts, and the USPTO, to do.

Basing eligibility on the "unconventionality" of underlying physical components of software invention is precisely what Diehr said was wrong: eligibility is based on the invention as a whole, not the component parts. It is beyond dispute that every element in Diehr was conventional: the rubber molds, the temperature-sensing thermocouples, the Arrhenius equation, even the computer. The only difference over the prior art was the repetitive calculation of the Arrhenius equation—obviously using a computer precisely in the manner for which it was designed. Opening the mold based on the results of the calculation was at best "post-solution" activity. Yet, Diehr's claim was eligible, because it was a new use of an existing tool. The justification that Diehr had solved a problem in the real "technology" of rubber molding is wrong on two fronts. Eligibility is not based on the problem: it is based on the solution, that which is claimed. Second, without a definition of "technology" this answer is provides no guidance.  

I return then to the question of understanding the nature of technological innovation. I subscribe to the Holmsian Maxim: "The life of the law has not been logic; it has been experience." Without actual experience with technology, and with how technologists actually solve problems and invent, the entire process of invention itself, and thus patent eligibility, is just an abstraction to lay judges. As a result, the "rules" of patent eligibility may appear to be logical to a judge but are simply word games that bear little if any grounding in technological practice or scientific theory.  

Of course, the courts are not going to sit down and learn technology, work with inventors, and start developing the life experience to inform their decision-making. Thus, while I believe is not enough (!) to simply read the literature on creativity, innovation, software development, and so forth, to transform one's understanding of eligibility, it will have to do to. Here is a small sample of my favorites.

Technology and Creativity by Subrata Dasgupta, who sets forth a general theory of creativity, and provides a detailed application of the theory to various inventions.  

It Began with Babbage, also by Dasgupta. There’s a lot of history of the development of computers, but this one is different because it ties the historical developments to Dasgupta’s model of innovation.

Sparks of Genius: The Thirteen Thinking Tools of the World's Most Creative People, an analysis of the “tools” that are commonly found in creative individuals.  

Creativity Flow and the Psychology of Discovery and Invention, a classic in the field of creativity studies.

Metaphors We Live By, a classic in the field of language and cognition by George Lakoff. Explains the theory of conceptual metaphors. Necessary reading to learn to avoid confusing metaphors with actual reality—a common failing in patent eligibility jurisprudence.

Making Truth: Metaphor in Science: Applies Lakoff’s theory of conceptual metaphor to specific scientific discoveries, including the atomic model, protein folding, and global warming. Demonstrates how scientific innovation depends on metaphorical reasoning. Abstraction and modeling are part of creativity thinking, not evidence of ineligible concepts.  

Readings on Laws of Nature, a compilation of the most important essays on laws of nature, covering the range of different approaches in contemporary philosophy. 

How Nature Works: Physicist Per Bak’s explanation of Self-Organized Criticality. Covers the fundamental lawful relationships between sandpiles, quasars, earthquakes, evolution, and even traffic jams (with a hint why autonomous vehicles won’t eliminate traffic jams). 

Two Years After Alice: A Survey of the Impact of a "Minor Case" (Part 1)

By: Robert R. Sachs

 

Two years ago this Sunday, the Supreme Court in Alice Corp. Pty Ltd. v. CLS Bank Int'l¹ addressed a relatively narrow issue: does a claim reciting a generic computer implementation transform an abstract idea into a patent-eligible invention?  The Court considered this a "minor case" in which it did not break new ground, but instead simply followed its decisions in Bilski² and Mayo.³ The Court reiterated a two-step test set forth in Mayo determine whether the claim recites a judicial exception and if so, determine whether the claim recites an "inventive concept," something "significantly more" than the exception and "enough" to transform the claim into eligible subject matter.⁴  The Court applied this test to find that Alice’s claim simply recited a fundamental economic practice of risk intermediation through third party settlement, and then held that the presence of generic computing elements or steps was not sufficient to provide an inventive concept.⁵  To the Court, this was an easy case.

Three aspects of the decision are worth noting. First, the Court did not see the case as presenting a difficult question of defining what is an abstract idea. "In any event, we need not labor to delimit the precise contours of the "abstract ideas" category in this case….Both [Alice and Bilski’s claims] are squarely within the realm of "abstract ideas" as we have used that term.⁶  In other words, whatever an abstract idea was before Alice, it was the same afterward: there was no expansion of the scope of the term. 

Second, the Court’s decision was not addressing the patent eligibility of software in this particular case, let alone in general.  During oral argument, the Court was told by CLS—and accepted the representation that—"they [Alice] have no software…they’ve never written software."⁷  Even Alice acknowledged to the Court that it would have been trivially easy to write the software, agreeing with Justice Kennedy that:

any computer group of people sitting around a coffee shop in Silicon Valley could do this over a weekend.⁸ 

In other words, to the Court, this case was not about a software invention, but a business method that just happen to be implemented in software. 

The Court was also led to believe that its decision would not be broadly applicable. CLS told the Court:

This is not the death of software patents… This will not affect software patents.⁹ 

Likewise, the Solicitor General reassured the Court that they need not address the patent eligibility of the software to decide the matter. The Court apparently accepted this view, as indicated by Justice Sotomayor:

What's the necessity for us to announce a general rule with respect to software? There is no software being patented in this case.¹⁰ 

Indeed, the Court’s decision makes no mention of the eligibility of software as general matter; rather they only considered whether a "generic computer…transform[] a patent-ineligible abstract idea into a patent-eligible invention," whether "a the mere instruction to "implemen[t]" an abstract idea "on . . . a computer" suffices.¹¹  It is a misreading of Alice to say the Court held that software was abstract to begin with, or that the presence of a generic computer was evidence that the invention was an abstract idea.

Third, and most important, the Court was obviously aware that the lack of definition in both steps of the Mayo test created the risk of an over-expansive application of the judicial exceptions.  Thus, the Court extended a theme found in Benson¹² and Bilski,¹³  that Section 101 should not be interpreted to impede innovation, particularly in the realm of computer technology.  The Alice Court made clear that the judicial exceptions must be cautiously applied: "we tread carefully in construing this exclusionary principle lest it swallow all of patent law. At some level, "all inventions . . . embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas."¹⁴ 

However limited the Court believed or intended the Alice decision to be, the case has been broadly interpreted by both the federal courts and the USPTO, and the impact has been dramatic.¹⁵  I call this (legal) phenomenon AliceStorm. What follows is a survey of AliceStorm in the federal courts and USPTO.

The Impact of AliceStorm

Figure 1 shows the number of district court and Federal Circuit decisions addressing § 101 related motions on the merits since Alice was decided, through June 8, 2016.¹⁶  Except for an artificial spike in March 2016, in every month since Alice. the number of decisions invalidating at least one patent in suit has equaled or exceeded those upholding all of the contested patents.¹⁷ 

Here’s the first clue that the Court did not anticipate, let alone intend, AliceStorm. CLS told the Court that the issue was "a very small problem" that impacted only the "most marginal, most dubious, most skeptical patents," noting that in the four years "since Bilski, there have only been 57 district court decisions on Section 101 issues" and "only 12 Federal Circuit decisions total."¹⁸  Yet, in only two years since Alice, there have been four times as many district court decisions (247), with the Federal Circuit close behind (40)—reflecting that the patent defense bar saw the applicability of Alice quite differently from the Court.

Table 1 summarizes these decisions, along with some additional data:

The 70% overall success rate of § 101 defense motions is extremely impressive—and remarkably steady, down only slightly from the 71.7% I found last year. The success rate on § 101 motions on the pleadings has been even more constant, 67.1% this year versus 67.0% last year.  The percentage of patents invalidated has also been constant year over year, 66% vs. 65%.  Even more remarkable is the consistency of the Federal Circuit. Last year at this time they had decided only thirteen § 101 decisions, and found only one case, DDR Holdings, patent eligible.¹⁹  In the year since, they have decided more than twice that many (27) cases and still found only one case with patent-eligible claims, Enfish, LLC v. Microsoft Corp.²⁰ 

The Patent Trials and Appeals Board is likewise a good bet for patent defendants seeking to invalidate patents under Covered Business Method Review. The PTAB has granted 83.6% of the CBM petitions in which they considered a § 101 argument on the merits, and reaffirmed 96% of those decisions as Final Decisions. This trend is likely to continue, as the Federal Circuit in Versata Development Group.²¹  upheld both the USPTO's broad interpretation of "financial product or service" necessary to obtain Section 18 standing, as well as its very narrow definition of "technological invention" that would preclude it.²²  This is because to the extent that the PTAB is willing to classify a patent as non-technological financial product or service in deciding whether the patent qualifies for CBM review, it is predisposed to finding the patent directed to ineligible abstract ideas.

As explained above, the Court did not see Alice as a software patent case, but rather an example of a fundamental business method simply implemented on a computer. Even today the common perception is that the patents being invalidated after Alice are generally business method patents.  Figure 2 shows that this is not the case.

Business method patents (patents classified in U.S. Patent Class 705) account for 125 (22.4%) of the challenged patents, and similarly 26.3% of the invalidated patents.  But software patents account for 256 (45.8%) of the challenged patents and similarly 45% of the invalidated ones.  Thus, if the Court was expecting that Alice's patents were representative of a "small problem" that would not impact software patents either they were sorely misled, they failed to understand the scope of their decision, or the lower courts have failed to heed the Court’s cautionary notes. Or all three.

Figure 2 also shows the impact of Mayo and Myriad, with 53% of biotech related patents being invalidated under § 101.  In the majority of these cases, the rulings are based on the grounds that the claims are directed to "laws of nature" or "natural products." The problem here is that the Supreme Court's definition of a law of nature—as a correlation that "exists in principle apart from any human action," is scientifically incorrect.²³  As a result, courts unfortunately invalidated applications of the discoveries about nature that have historically been patent eligible.

Let’s return to the Federal Circuit. Here is how the judges of that court have voted on patent eligibility:

The forty Federal Circuit decisions are remarkable for two reasons.  First, the obvious: that thirty-eight went against the patentee, even though many, indeed most, of these cases had reasonable arguments for the eligibility of the claims.  While the Federal Circuit has said²⁴ that the line of patent eligibility is not always clear, they behave as if the line is laser straight and bright.  Less obvious is that in forty decisions there have been 120 decision opportunities by the individual judges, and yet there have been no dissents in any of the cases invalidating the patents in suit.²⁵  This lack of dissent—including none from Judge Newman, the court’s primary dissenter—is well below the court’s average rate of dissents over the same period.²⁶ 

In the district courts, the confusion over not just the boundaries of abstract ideas, but the entire approach, is apparent. Some courts conflate eligibility with novelty and uniqueness,²⁷ others focus on a lack of specificity.²⁸  Most apparent is a return to the pre-1952's nebulous standard of "inventiveness," based on Alice's requirement for an "inventive concept."²⁹  In particular, there is a persistent view that automation of existing processes is per se ineligible, as opposed to being simply obvious.³⁰ 

On Monday I'll review the impact of AlicesStorm at the USPTO.

 ________________________________________

Footnotes:

1 134 S.Ct. 2347 (2014).

2 Bilski v. Kappos, 130 S.Ct. 3218 (2010).

3 Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012).

4 134 S. Ct. at 2355.

5 Id. at 2360.

6 Id. at 2357.

7 Alice Corp.Pty. v. CLS Bank Int’l., No. 13-298 Oral Argument Transcript ("Alice Oral Argument"), (Mar. 31, 2014), p. 30. 

8 Id. at 12.

9 Id. at 42-43.

10 Id. at 46.

11 Alice, 134 S.Ct. at 2352.

12 Gottshalk v. Benson, 409 U.S. 63, 71 (1972) "It is said that the decision precludes a patent for any program servicing a computer. We do not so hold…. It is said we freeze process patents to old technologies, leaving no room for the revelations of the new, onrushing technology. Such is not our purpose.").

13 Bilksi v. Kappos, 130 S. Ct. 3218, 3226 (2010) ("This Court has "more than once cautioned that courts 'should not read into the patent laws limitations and conditions which the legislature has not expressed.")

14 Alice,  134 S.Ct. at 2354.

15  See, https://goo.gl/QymRX9.

16 It is telling indicator of AliceStorm these numbers are already out of date. There have been several district court and PTAB decisions since this data was compiled on June 12, 2016.

17 A split decision, one in which the court invalidates some patents or claims but not others, is included in both the eligibility and ineligibility counts.

18 Alice Oral Argument. at 42-43.

19 DDR Holdings, LLC v. Hotels.Com, L.P., 773 F.3d 1245 (Fed. Cir. 2014).

20 2015-1244 (Fed. Cir. May 12, 2016).

21 Versata Development Group v. SAP Am., Inc., 793 F.3d 1306 (Fed. Cir. 2015). Versata is seeking certiorari of the Federal Circuit decision, arguing, inter alia, that PTAB’s definition of "financial service" covers a salesman quoting the price of a mattress. 

22 Id., at 1325, 1326.

23 See, Robert R. Sachs, Jennifer R. Bush, "Prometheus Unbound:  The Untethering of Laws of Nature and Patent Eligibility From Scientific Reality," Bilski Blog, July 3, 2013, at http://goo.gl/KUIkvV.

24 See DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245, 1255 (Fed. Cir. 2014); Internet
Patents Corp. v. Active Network, Inc., 790 F.3d 1343, 1345 (Fed. Cir. 2015) ("Recently, the courts have focused on the patent eligibility of "abstract ideas," for precision has been elusive in defining an all-purpose boundary between the abstract and the concrete, leaving innovators and competitors uncertain as to their legal rights").

25 The low number of dissents is partly a result of the fact that half of the decisions are per curiam, in which a dissent is very rare.

26 Between Alice and April 25, 2016, there were 108 dissents in 1724 Federal Circuit cases (6.2%), with J. Newman issuing 35, more twice that of Reyna (14), the next most prolific dissent. Statistically speaking, one would have "expected" about 2 or 3 dissents thus far.

27 OpenTV, Inc. v. Apple, Inc., No. 5:15-cv-02008-EJD (N.D. Cal.1/28/2016) (“The concept of a database is not novel or unique. See Alice, 134 S. Ct. at 2360; Information exchanged between a database (as part of or remote from a computer) and the computer is not novel and adds nothing to the 101 analysis.”).

28 See, e.g, Intellectual Ventures I v. Canon Inc. (D. Del. 11/9/2015) (Noting that DDR Holdings provides “a benchmark of specificity to which other claims can be compared,” and that “even though most of the patent claims now being challenged under § 101 would have survived such challenges if mounted at the time of issuance, these claims are now in jeopardy under the heightened specificity required by the Federal Circuit post-Alice.); Clear With Computers LLC v. Altec Indus., Inc. 2015 U.S. Dist. LEXIS 28816 (E.D. Tex. 3/3/2015) (“The additional recitation of specific computer components such as a “database,” “memory,” “transceiver” and “wire-based network,” and computer functions such as “storing,” “transmitting” and “receiving,” are incapable of conferring the requisite specificity.”); Source Search Techs., LLC v. Kayak Software Corp., 111 F. Supp. 3d 603, 617 (D.N.J. 2015) (“That specificity removes the claims from the abstract realm.” (emphasis in original))

29 See, e.g., Intellectual Ventures I LLC v. Capital One Fin. Corp., 2015 U.S. Dist. LEXIS 62601 (D. Md. 6/11/2015 (“The use of generic hardware and software running an intrusion detection application is not viewed as new and inventive"); HealthTrio, LLC v. Aetna, Inc. No. 12-CV-03229-REB-MJW, 2015 WL 5675303 (D. Colo. Sept. 28, 2015) ("because Plaintiff’s insight…is not a sufficiently inventive concept, the Court concludes that the patents are drawn to an ineligible subject matter”).

30 GT Nexus, Inc. v. Inttra, Inc. U.S. Dist. LEXIS 150579 (N.D. Cal., 11/5/2015). (“Here, the Court finds that the patent claims merely automate the practice of booking and tracking shipping containers; this automation is insufficient to transform the nature of the patents.”); Hewlett-Packard Co. v. ServiceNow, Inc., 2015 U.S. Dist. LEXIS 29384 (N.D. Cal.,3/10/2015 (“the automation of IT incident resolution is an abstract idea, not patentable under § 101.”); Parus Holdings, Inc. v. Sallie Mae Bank, 2015 U.S. Dist. LEXIS 137444 (D. Del. 10/8/2015) (“Organizing business functions based on commands provided by a user is tantamount to the automation of the management of business communications usually performed by human administrative assistants (the identified purpose of the invention).”); Cogent Med., Inc. v. Elsevier Inc., 70 F. Supp. 3d 1058, 1060 (N.D. Cal. 2014) (“the ’879 Patent claims no more than a computer automation of what “can be performed in the human mind, or by a human using a pen and paper.””); Voxathon LLC v. Alpine Elecs. of Am., Inc.,Case No. 2:15-cv-562-JRG (E.D. Tex. 1/20/2016) (“Claim 1 is really nothing more than the automation of responding to the sender of a message received on a telephone.”).

#AliceStorm for Halloween: Was it a Trick or a Treat?

By: Robert R. Sachs

Alice has been busy the last two months, continuing to haunt the federal courts and the Knox and Randolph buildings at the USPTO. Here are the latest #AliceStorm numbers through the end of October 2015:

    

There have been 34 district court decisions in the past two months, but the percentage of invalidity decision is holding constant at 70.5%.   The number of patent claims invalidated is now over 11,000, but also holding steady at around 71%.   

There have been no new Federal Circuit Section 101 decisions, but we're going to see a flurry of activity in the next couple of months, as the court has recently heard oral argument in a number of patent eligibility cases, and more are on calendar for November.   

Motions on the pleadings have soared, with 23 in the past two months alone, and the success rate is up a tick from 70.1% to 71.4%.  

PTAB is a bit mixed: the CBM institution rate is down from 86.2% 83.7%, but the final decision rate is still 100%, with 6 decisions in the past two months invalidating the patents in suit.

Turning to the motion analysis, the motions on the pleadings are the second scariest thing to a patent holder after the specter of attorney fees under Octane Fitness:

The Delaware district court continues as the graveyard of business methods and software patents, with 31 eligibility decisions, up from 19 just two months ago, and their invalidity rate is up from 86.4% to 90.3%. 

Jumping into second place is the Eastern District of Texas, with 23 decisions total (up from 16). Contrary to the rest of the rest of the bench, their invalidity rate is 34.8%.  The Northern District of California edged up from 75% to 78.9% invalidity, and C.D. Cal is up almost 2%.

  

 And finally, here is the run down on the all district court judges with two or more Section 101 decisions. 

  

With today's blog, I'm introducing some entirely new types of data, looking at the characteristics of the patents that have been subject to Section 101 motions.  

As expected, business method patents are the most heavily litigated and invalidated (click to see full size):

 

The distribution of patents in terms of earlier priority dates shows a very large fraction of the invalidated patents were first filed in 2000: 

Now compare that to the distribution of patent classes with respect to priority year as well: 

Here too we see a very large number of the business method patents filed in 2000.  I've coded all of the software related technologies as blue to group them visually. 

Why the cluster around 2000?  State Street Bank, which held that there was no rule against business method patents, was decided in mid-1998.  As those of us who were practicing them remember, it took about two years before the impact of the decision was widespread.  This was also the time of the Dotcom bubble when it seemed that just about everyone was starting up a business on Internet.  Those two factors resulted in a surge of patent filings. 

Of all the patents that have been thus challenged under Alice, only two have post-Bilski priority dates:

• 8447263, Emergency call analysis system, filed in 2011, and litigated in Boar's Head Corp. v. DirectApps, Inc., 2015 U.S. Dist. LEXIS 98502 (E.D. Cal., 7/28/2015).  The court granted DirectApps motion to dismiss, finding the patent invalid.  
• 8938510, On-demand mailbox synchronization and migration system, filed in 2010, and litigated in BitTitan, Inc. v. SkyKick, Inc., 2015 U.S. Dist. LEXIS 114082 (W.D. Wash, 8/27/2015). BitTran's motion for preliminary injunction was denied in part because of SkyKick successfully argued that BitTrans was not likely to succeed on the merits due to Alice problems.

• 8,604,943; 9,070,295; 9,082,097; 9,082,098 and 9,087,313, all of which claim priority to March, 2012, and were invalidated just last week in MacroPoint LLC v. FourKites Inc., Case. No. 1:15-cv-01002 (N.D. Ohio, Nov. 5, 2015).  The court invalided all 94 claims in these patents, as being directed to the abstract idea of “tracking freight.” While the last four patents were issued in June and July, 2015, none of them overcome an Alice rejection, and the court noted that “Nothing in the Reasons for Allowance dictate a finding that these concepts are inventive on the issue of patent-eligible subject matter.”

Over time we'll see more post-Bilski patents being litigated, and then eventually a true test: a business method patent granted after Alice that overcame an Alice rejection.  By my count, there are about 80 such patents thus far, and about another 90 that have been allowed.   It will not be too long then before one of these patents is challenged under Section 101.  

In my next column, I'll review some very disturbing decisions by coming out of the Delaware district courts. 

Update on Section 101 Rejections at the USPTO

By: Robert R. Sachs

In my June post, The One Year Anniversary: The Aftermath of #AliceStorm, I surveyed the frequency of Section 101 rejections at the USPTO. My analysis was based on approximately 300,000 office action and notices of allowance received from Patent Advisor.  
As a reminder, the Section 101 rejection rates from the June post at the level of the USPTO Technology Center (TC) are shown below.  The numbers here are the percentage of all events in the cohort (TC and time period) that had a Section 101 rejection.  An event is either an allowance or a rejection; other events such as restriction requirements, advisory actions, and so forth are not counted.  

Since June, I've received a significant amount of new data from Patent Advisor.  The trends we saw before are continuing, with some interesting new developments.   

 

 
First, TC 3600, which includes the E-commerce work groups (3620, 3680,  3690) continues to have the highest rates of § 101 rejections.   

Second, all of the TCs showed a significant increase in § 101 rejections in June. Tech Center 1700, which covers chemical and materials engineering saw an unexpected three-fold increase!  Rates dropped back down in July and August. 

As explained before, TC 3600 covers both E-commerce and non-Ecommerce work groups and it is the former that contribute to the high rejection rates.  Similarly, the rejection rates in TC 1600 appear generally low, but this obscures higher than average rejection rates in biotechnology work groups.  If we filter for those work groups we find the following:

 

We can then drill down into the specific technologies in these respective work groups for their § 101 rejection rates:

  

To assess how these rejection rates impact prosecution outcomes in the E-commerce groups in particular, I reviewed the status of all applications in these work groups that had a significant prosecution event in the last seven months (March 17 to October 17).  Here is a complete breakdown of the status of these applications:

Of interest are the 3,633 applications abandoned for failure to respond to an office action.   Also interesting is the filing of the 506 appeals during this period.  This is a harbinger of things to come.  

I also aggregated the status by work group technology:

The average number of office actions before abandonment here was 3.13, as compared to 3.27 office actions to allowance and patenting, not a significant difference.  Here is a view of the distribution of the number of office actions to abandonment, allowance 

 

This shows that almost 25% of abandonments occurred after the first office action, whereas most of the allowances occurred by the fourth.  Cumulatively (not shown here) the behavior was the same: 80% of abandonments and allowances occurred after the fourth office action.  Some applicants (or some examiners, depending on your perspective) fought to the bitter end, with 18 cases having ten or more actions before abandonment.  

The average abandonment rate at 16.5% is about twice the abandonment rate for the rest of the Office.  The allowance rate at 1.9% is strikingly low.  These two statistics are disturbing when you  consider the  following. In this time period, the vast majority of applications have been amended in view of previous § 101 rejections and the Office's own Interim Guidance, and arguments have been presented that the claims are not abstract ideas or fundamental business concepts, that they do not preempt all practical applications, that they offer improvements in some technology, and that they contain claim limitations reciting significantly more than the mere judicial exception. And yet more than 98% of the time, these arguments are rejected.

In the July 2015 Update to the Interim Guidance, the USPTO states that when it comes to economic concepts, the "term 'fundamental' is used in the sense of being foundational or basic". Is it truly likely that most, let alone all, of the 3,633 abandoned patent applications claim nothing more than foundational  or basic economic practices?  That the applicants in these cases did nothing more than implement some foundational economic practice on a computer, without doing anything more?  That the thousands of patent counsel prosecuting these cases couldn't draft a single eligible claim? 

From a business perspective, abandonments are more harmful to small companies with a small number of patent filings than to larger companies.  If you are a large company with hundreds of applications, abandoning 20% of them because of Section 101 rejections still leaves you with plenty of applications.  But if you are a small company, you tend to file on the core, crown jewel technology. If you have to abandon even one or two applications, the impact can be dramatic:  a loss of a competitive advantage, the withdrawal or delay in funding by investors, the loss of potential customers.   In this light consider the following:

This chart shows that over 1,000 companies have abandoned 100% of their applications in the last six months, accounting for 1119 applications, fully 30% of all abandoned applications.  Overall, companies with greater than 50% abandonment rates had 6 or fewer applications.  As the final total shows, these companies accounted for 43% of all abandonments in the last six months. 

Now, not all news is bad news.  As the charts show, there are 452 allowed applications that will issue within the next several months.  These applications are likely the best evidence of the kinds of amendments and arguments that are getting over 101 rejections. I've included a partial list of 244 of these applications at end of the posting.  The list is sorted by art unit and then by examiner, so you can easily find applications in an art unit of interest.  By identifying an examiner on one of your cases, you can review the kinds of amendments and arguments that the examiner has accepted and plan your strategy accordingly.

Abandonments and rejections aside, there are E-commerce examiners who are allowing cases, and they deserve recognition and support.  Here is a list of the top examiners, those who have an allowance rate (allowed+patented / total cases) over the past six months of 15% or more, which puts them well ahead of the rest of the E-commerce group.  

 

 In future posts I'll explore the biotechnology groups in a similar manner.

*********************************

Partial Listing of Allowed Applications

Publication No.	Serial No.	Examiner	Art Unit	Assignee	Title (See, Note below)
20120035990	13106051	COPPOLA, JACOB C	3621	TAPJOY	Rewarding Application Installs
20150278524	14739519	COPPOLA, JACOB C	3621	BANK OF NEW YORK MELLON TRUST	Secure Information Handling System Flash Memory Access
20040078334	10416095	COPPOLA, JACOB C	3621	ORCHESTRIA	Information Management System
20090151008	12315113	COPPOLA, JACOB C	3621	INVENTION SCIENCE FUND I	Media Markup System For Content Alteration In Derivative Works
20120005080	13168812	COPPOLA, JACOB C	3621	C SAM	Transactional Services
20120274480	13547194	COPPOLA, JACOB C	3621		Usage Metering Based Upon Hardware Aging
20110321127	13167645	COPPOLA, JACOB C	3621	C SAM	Transactional Services
20120109672	13292836	COPPOLA, JACOB C	3621	C SAM	Transactional Services
20130030910	13193464	COPPOLA, JACOB C	3621	III HOLDINGS	Generating Using A Digital Pass
20120005087	13168858	COPPOLA, JACOB C	3621	C SAM	Transactional Services
20080228733	12048072	REAGAN, JAMES A	3621	DIGIMARC	Determining Content Treatment
20070265854	11306671	REAGAN, JAMES A	3621	IBM	Digital Rights Management For Publishing Scanned Documents On The Internet
20100106649	12604019	REAGAN, JAMES A	3621	IMS HEALTH	Authorizing Transactions Via Mobile Devices
20110313850	13152070	REAGAN, JAMES A	3621	ADSAFE MEDIA	Reviewing Content Traffic
20080313938	12096708	BEKERMAN, MICHAEL	3622		Shopping Trolley With Display Or Advertising Surface
20120296782	13437416	MOSLEY, KYLE T	3622	PROJECT J	System For Managing Product Inventory Counts
20130117096	13289857	MOSLEY, KYLE T	3622	AT&T	Internet Protocol Multi-Media System Value Voucher Distribution With Network Storage Redemption
20140111323	14143132	SCHMUCKER, MICHAEL W	3622		Display Device Mountable On An Automotive Vehicle Method
20110131080	12627071	BROCKINGTON III, WILLIAM S	3623	IBM	Performance-Aware Enterprise Components
20080077463	11516953	DELICH, STEPHANIE ZAGARELLA	3623	IBM	Optimizing The Selection Verification Deployment Of Expert Resources In A Time Of Chaos
20130007744	13611570	GILLS, KURTIS	3623		Optimizing On DemAllocation Of Virtual Machines Using A Stateless Preallocation Pool
20110107330	12834690	GILLS, KURTIS	3623	AVAYA	Generation Of Open Virtualization Framework Package For Solution Installations Upgrades
20110029970	12782743	GILLS, KURTIS	3623	IBM	Optimizing On DemAllocation Of Virtual Machines Using A Stateless Preallocation Pool
20140122141	13666834	JARRETT, SCOTT L	3623	FLOUR TECHNOLOGIES	Improving Cost Effectiveness Of Coking System
20130246124	13715792	KASSIM, HAFIZ A	3623	AMERICAN EXPRESS	An Analysis Cycle To Determine Interest Merchants
20130317877	13900404	MANSFIELD, THOMAS L	3623	INFOSYS	Information Technology Energy Wastage Management System
20120239453	13416275	MANSFIELD, THOMAS L	3623	IBM	Resource Cost Optimization Program
20130186333	13797229	MANSFIELD, THOMAS L	3623	CERTUSVIEW TECHNOLOGIES	Overlaying Electronic Marking Information On Facilities Map Information And/Or Other Image Information Displayed On A Marking Device
20100088164	12571356	MANSFIELD, THOMAS L	3623	CERTUSVIEW TECHNOLOGIES	Analyzing Locate Marking Operations With Respect To Facilities Maps
20110202929	12832044	MANSFIELD, THOMAS L	3623	ORACLE	Parallelizing Database Requests
20100305991	12475035	MANSFIELD, THOMAS L	3623	IBM	Complexity Reduction Of User Tasks
20050149372	10885191	MANSFIELD, THOMAS L	3623	AT&T	Planning Resources Based On Primary Alternate Location Relief Strategies
20130312003	13947629	MILLER, ALAN S	3623	SAMSUNG; USC	Dynamically Parallelizing Application Program
20080306803	12133332	MILLER, ALAN S	3623	SCHLUMBERGER	Performing Oilfield Production Operations
20130238376	13780202	SINGH, GURKANWALJIT	3623	TOSHIBA	Job Supporting Apparatus Portable Terminal Job Supporting Method
20120136689	12956162	SINGH, GURKANWALJIT	3623	MICROSOFT TECHNOLOGY LICENSING	Event Planning Within Social Networks
20140358627	14463594	STERRETT, JONATHAN G	3623	GREENLINE SYSTEMS	Risk Detection Reporting Infrastructure
20140006073	13538902	BYRD, UCHE SOWANDE	3624	YAHOO	Framework For Marketplace Analysis
20100088028	12441284	COUPE, ANITA YVONNE	3624	NEC	Electronic Apparatus Power Supply Control Program For Position Measuring
20100166273	12160528	COUPE, ANITA YVONNE	3624		Representing Multichannel Image Data
20110228997	12725811	COUPE, ANITA YVONNE	3624	MICROSOFT TECHNOLOGY LICENSING	Medical Image Rendering
20140019186	13545704	DIXON, THOMAS A	3624	SAP	Capacity Planning Management
20140012614	13543617	DIXON, THOMAS A	3624	NASDAQ OMX GROUP	Due Diligence System Method
20100318402	12833121	GOLDBERG, IVAN R	3624	CERTUSVIEW TECHNOLOGIES	Managing Locate And/Or Marking Operations
20110055835	12841288	GOLDBERG, IVAN R	3624	IBM	Aiding Resolution Of A Transaction
20100088134	12572202	GOLDBERG, IVAN R	3624	CERTUSVIEW TECHNOLOGIES	Analyzing Locate Marking Operations With Respect To Historical Information
20080313004	11761663	GOLDBERG, IVAN R	3624	IBM	Providing A Bi-Directional Feedback Loop Between Project Management Personal Calendar System
20140297351	13853916	KONERU, SUJAY	3624	IBM	Computing System Predictive Build
20130262165	13850820	KONERU, SUJAY	3624	ALIBABA GROUP HOLDING	Sending Recommendation Information Associated With A Business Object
20130166351	13543631	KONERU, SUJAY	3624	MU SIGMA BUSINESS SOLUTIONS PVT	Generating A Marketing-Mix Solution
20130204663	13762041	KONERU, SUJAY	3624	6 SENSE INSIGHTS	Sales Prediction System Method
20140222488	13761639	KONERU, SUJAY	3624	IBM	Quantifying The Quality Of Trend Lines
20070038490	11203324	KONERU, SUJAY	3624	IBM	Analyzing Business Architecture
20110307141	12814859	ROTARU, OCTAVIAN	3624	ON BOARD COMMUNICATIONS	Determining Equipment Utilization
20130022956	13189193	ROTARU, OCTAVIAN	3624	SYSMEX	Analyzer Method For Performing A Measurement On A Sample
20080201708	11692309	ROTARU, OCTAVIAN	3624	NOVELL	Virtualized Workflow Processing
20130074110	13669589	AIRAPETIAN, MILA	3625	LINKEDIN	Parallel Fact Checking
20130051887	13486686	AIRAPETIAN, MILA	3625	ADVANTAGE TECHNOLOGY & INNOVATIONS	Identifying Stacking Splitting Of Stenographic Keystrokes
20130198196	13763856	AIRAPETIAN, MILA	3625	LINKEDIN	Selective Fact Checking Method System
20130268392	13442501	DESAI, RESHA	3625	SEARS BRANDS	Presenting Product Recommendations
20120265585	13528592	DESAI, RESHA	3625	QUICKPAY	Location Based System For Entry Exit
20130124354	13671327	GARG, YOGESH C	3625	EXBIBLIO	Automatic Modification Of Web Pages
n/a	12776961	GARG, YOGESH C	3625
20130254075	13747396	HAQ, NAEEM U	3625	SCIQUEST	Taxonomy Data Structure For An Electronic Procurement System
20120191575	13358494	HAQ, NAEEM U	3625	CITRIX SYSTEMS	Enabling Communication Of Identity Information During Online Transaction
20120310791	13150568	HAQ, NAEEM U	3625	AT&T	Clothing Visualization
20050216304	11137076	MISIASZEK, MICHAEL	3625	W.W. GRAINGER	Electronically Creating A Customized Catalog
20130144766	13817089	MISIASZEK, MICHAEL	3625	RAKUTEN	Comment Submission Support System Comment Submission Support Device Comment Submission Support Device Control Method Program Information Storage Medium
20130173397	13339154	MISIASZEK, MICHAEL	3625	TARGET BRANDS	Recently Viewed Items Display Area
20120265631	13303983	MISIASZEK, MICHAEL	3625	SHIFT4	Enabling Merchants To Share Tokens
20130198034	13709358	MISIASZEK, MICHAEL	3625	MUSIC CHOICE	Cross Channel Delivery System Method
20110238533	12731025	MISIASZEK, MICHAEL	3625	INVISIBLEHAND SOFTWARE	Data Processing
20150294338	14750081	PALAVECINO, KATHLEEN GAGE	3625		Network-Based Marketplace Service For Facilitating Purchases Of Bundled Services Products
20130179303	13346549	PALAVECINO, KATHLEEN GAGE	3625	GOOGLE	Enabling Real-Time Product Vendor Identification
20130254069	13896996	PALAVECINO, KATHLEEN GAGE	3625	DO IT BEST	Generating An Order For Purchase
20120173354	12982393	PALAVECINO, KATHLEEN GAGE	3625	VERIZON	Providing A Unified Messaging Modeling Infrastructure
20110016021	12821554	PALAVECINO, KATHLEEN GAGE	3625	JWL IP HOLDINGS	Scripted Content Delivery
20100153228	12549277	PALAVECINO, KATHLEEN GAGE	3625	QUALCOMM	Bundling Application Services With Inbuilt Connectivity Management
20090164897	11961599	PALAVECINO, KATHLEEN GAGE	3625	YAHOO	Recommendation System Using Social Behavior Analysis Vocabulary Taxonomies
20130198035	13800774	ROSEN, NICHOLAS D	3625	BOOM PAYMENTS	Confirming Local Marketplace Transaction Consummation For Online Payment Consummation
20120021774	13248991	ROSEN, NICHOLAS D	3625	GOOGLE	Context-Influenced Application Recommendations
20130091071	13562012	ROSEN, NICHOLAS D	3625	GOOGLE	Product Catalog Dynamically Tailored To User-Selected Media Content
20130185176	13352893	ROSEN, NICHOLAS D	3625	CELLCO PARTNERSHIP D B A VERIZON WIRELESS	Cross Channel Real Time Awareness Framework
20150277681	14230864	SEIBERT, CHRISTOPHER B	3625	MONTICELLO ENTERPRISES	Providing A Single Input Field Having Multiple Processing Possibilities
20130238468	13412994	WOLCOTT, ALEX E	3625	XEROX	Managing Distribution Of Digital Rights Revenue For Integrated System
20090281724	12119316	BURGESS, JOSEPH D	3626	APPLE	Map Service With Network-Based Query For Search
20100274483	12430492	CHNG, JOY P	3626	GOOGLE TECHNOLOGY HOLDINGS	Ergonomic User Interface For A Portable Navigation Device
20130054478	13199545	GILLIGAN, CHRISTOPHER L	3626	ELWHA	Reporting Ingestible Product Preparation System Method
20130159019	13768765	GILLIGAN, CHRISTOPHER L	3626	DR SYSTEMS	Providing Dynamic Customizable Medical Examination Forms
20130060579	13560934	GILLIGAN, CHRISTOPHER L	3626	ONEMEDNET	Devices For Managing Medical Images Records
20110123079	12625898	GILLIGAN, CHRISTOPHER L	3626	PENRAD TECHNOLOGIES	Mammography Information System
20110125526	12625926	GILLIGAN, CHRISTOPHER L	3626	PENRAD TECHNOLOGIES	Multiple Modality Mammography Image Gallery Clipping System
20110085715	12578826	LULTSCHIK, WILLIAM G	3626	CARESTREAM HEALTH	Method For Locating An Interproximal Tooth Region
20060241975	11473960	PAULS, JOHN A	3626	HEALTH HERO NETWORK	Multi-User Remote Health Monitoring System With Biometrics Support
20140129259	14073812	RAPILLO, KRISTINE K	3626	2020 VISION CENTER	Enabling Customers To Obtain Vision Eye Health Examinations
20130343630	14011947	REYES, REGINALD R	3626		Automatic Interpretation Of Computer Tomography Scan Data
20140003699	14011906	REYES, REGINALD R	3626		Automatic Interpretation Of Computer Tomography Scan Data
20090304242	12092528	REYES, REGINALD R	3626	HITACHI	Image Analyzing System Method
20140095187	13710167	SOREY, ROBERT A	3626		Tracking Goods
20100042323	12440754	SOREY, ROBERT A	3626	TOYOTA	Collision Prediction Device
20120284041	13460824	TOMASZEWSKI, MICHAEL	3626	JVM	Integrated Drug Management Of Providing Prescription Drugs By Using The Same
20140201095	14155205	TOMASZEWSKI, MICHAEL	3626	CERNER INNOVATION	Healthcare Assurance System
20130246088	13793848	TOMASZEWSKI, MICHAEL	3626	HILL ROM SERVICES	Algorithm For Predicting Mitigating Adverse Events
20110251850	13085298	TOMASZEWSKI, MICHAEL	3626	PROVIDER MEDS	On Site Prescription Management Health Care Facilities
20110231202	12728721	WINSTON III, EDWARD B	3626	AI CURE TECHNOLOGIES	Collection Of Protocol Adherence Data
20100198496	12365151	WINSTON III, EDWARD B	3626	TELENAV	Navigation System With Path Prediction Method Of Operation Thereof
20100164791	12347371	WINSTON III, EDWARD B	3626	AT&T	Providing Mapping Data
20100217676	12392192	AMSDELL, DANA	3627		Automatically Adding Gratuity To Amount Charged In Electronic Transaction
20110112918	12915550	AMSDELL, DANA	3627	MASTERCARD INTERNATIONAL	Risk Management In Payment-Enabled Mobile Device
20110218871	12893834	AMSDELL, DANA	3627	VISA INTERNATIONAL SERVICE ASSOCIATION	Portable Account Number For Consumer Payment Account
20100286872	12838529	AMSDELL, DANA	3627	TOYOTA	Parking Assisting Apparatus
20110071711	12727976	AMSDELL, DANA	3627	PENNY & GILES CONTROLS	Controller Control Method For A Motorised Vehicle
20080281520	12117925	AMSDELL, DANA	3627	TOPCON	Positioning System Receiving Terminal Used Therein
20090043502	11837331	AMSDELL, DANA	3627	CISCO	Navigating Using Multiple Modalities
20080059344	11516823	AMSDELL, DANA	3627	SAP	Analyzing Stock Differences In A Supply Chain
20140067568	13601786	BUCHANAN, CHRISTOPHER R	3627	WAL MART STORES	Locating Organizing Digital Receipt Data For Use In In-Store Audits
20080265022	12140212	BUCHANAN, CHRISTOPHER R	3627	TOSHIBA GLOBAL COMMERCE SOLUTIONS HOLDINGS	Customer Checkout Accelerator
20100185391	12689231	BUCHANAN, CHRISTOPHER R	3627	HTC	Recording Medium For Selecting Location
20080243655	11778250	BUCHANAN, CHRISTOPHER R	3627	LUCENT	Implementing Rating Timer Control In A Pre-Biller To Support Online Offline Charging
20140114825	13659754	CHAMPAGNE, LUNA	3627	MASTERCARD INTERNATIONAL	Routing E-Invoices
20120030073	12845420	CHAMPAGNE, LUNA	3627	IBM	Creation Use Of Constraint Templates
20140258007	13785970	CHEIN, ALLEN C	3627	BANK OF AMERICA	Mobile Device As Point Of Transaction For In-Store Purchases
20130080274	13636418	CHEIN, ALLEN C	3627	MASTERCARD INTERNATIONAL	Delivery Of Information Services To Personal Devices
20110137759	12962528	CHEIN, ALLEN C	3627	AETHON	Providing Information Regarding A Status Of An Item
20150178677	14139172	DANNEMAN, PAUL	3627	EBAY	Kiosk For Receiving Delivering Packages
20140052625	14048874	DANNEMAN, PAUL	3627	METABANK	Transfer Account System Computer Program Products Associated Computer-Implemented Method
20140006196	14013819	DANNEMAN, PAUL	3627	PAYPAL	Dynamic Funding
20130345941	13974159	DANNEMAN, PAUL	3627	EATON	Shift Rail Transmission Position Sensing
20140372261	13920856	DANNEMAN, PAUL	3627	MASTERCARD INTERNATIONAL	System And/Or Method For Determining Needs Ability Assessment
20140337150	13889242	DANNEMAN, PAUL	3627		Automatic Receipt Logging Notifications For Transactions
20130132219	13680824	DANNEMAN, PAUL	3627	MOZIDO	Using A Mobile Wallet Infrastructure To Support Multiple Mobile Wallet Providers
20150039481	13959490	DANNEMAN, PAUL	3627	CALIX	Service Utilization Browser Plug-In
20130117163	13668822	DANNEMAN, PAUL	3627		An Inventory Aggregator
20100036758	12248127	HAIDER, FAWAAD	3627	VISA	Processing Fees For A Card
20110225073	13047302	OBAID, FATEH M	3627	SAMSUNG	Apparatus Method For Performing Wireless Charging
20100235234	12788830	OBAID, FATEH M	3627	HOSHIKO	Transacting With Network Traffic
20140365345	14362990	OBAID, FATEH M	3627	PANASONIC	Information-Providing Method Information-Providing System
20140324652	14331078	OBAID, FATEH M	3627	AT&T	Passive Rfid Postage Stamps Method Of Using The Same
20130132214	13684062	OBAID, FATEH M	3627	STARBUCKS	Cooking Management
20130088615	13629198	OBAID, FATEH M	3627	BARBARO TECHNOLOGIES	Conducting A Transaction In A Virtual Environment
20120173347	12981616	OBAID, FATEH M	3627	SAMSUNG	Automatic Tracking Decoding Barcode By Means Of Portable Devices Having Digital Cameras
20070062851	10553292	OBAID, FATEH M	3627	RED PARCEL POST	Distributing Packages Other Similar Dispatched Articles
20120030043	12846576	OBAID, FATEH M	3627	BANK OF AMERICA	Wearable Financial Indicator
20040254883	10687534	OBAID, FATEH M	3627	APPLE	Submitting Media For Network-Based Purchase Distribution
20100324771	12866555	ORTIZ ROMAN, DENISSE Y	3627	TOYOTA	Autonomous Moving Body Its Control Method Control System
20110153442	12802546	ORTIZ ROMAN, DENISSE Y	3627		Establishing Credit On A Cash Register Or Printer
20150278773	13554586	ORTIZ ROMAN, DENISSE Y	3627	GOFIGURE PAYMENTS	Mobile Payment System Method
20120047037	13214368	ORTIZ ROMAN, DENISSE Y	3627	TOSHIBA	Store System Sales Registration Method
20110060494	12860948	ORTIZ ROMAN, DENISSE Y	3627	YAMAHA	Saddle Riding Type Vehicle
20130073403	13234056	ORTIZ ROMAN, DENISSE Y	3627	TELETECH HOLDINGS	Activating Services Associated With A Product Via A Service Center Supporting A Variety Of Products
20100076879	12594238	ORTIZ ROMAN, DENISSE Y	3627	ZTE	Providing Services Via Peer-To-Peer-Based Next Generation Network
20090204514	12028918	ORTIZ ROMAN, DENISSE Y	3627	IBM	Media For Managing Shared Inventory In A Virtual Universe
20080040502	11456734	ORTIZ ROMAN, DENISSE Y	3627	WEST VIRGINIA UNIVERSITY	Automated Tracking Of Class Attendance
20110209210	13100387	RACIC, MILENA	3627	JPMORGAN CHASE BANK	Single Sign-On Session Management Without Central Server
20110131117	12989752	RACIC, MILENA	3627	WINCOR NIXDORF INTERNATIONAL	Administration System For Monitoring Of Disposal Processes For Money
20130030965	13191166	ROJAS, HAJIME S	3627	PAYPAL	Location-Based Payer Charging System
20100312421	12773965	ROJAS, HAJIME S	3627	EUROCOPTER	Assisting In Piloting A Hybrid Helicopter A Hybrid Helicopter Provided With Such A Device A Method Implemented By Said Device
20100250053	12680719	ROJAS, HAJIME S	3627	CONTINENTAL	Tachograph Toll Onboard Unit Display Instrument System
20120214521	13463037	ROJAS, HAJIME S	3627	ENVISIONIT	Verifying Message Delivery Integrity In A Wireless Mobile Message Broadcasting System
20120214405	13463033	ROJAS, HAJIME S	3627	ENVISIONIT	Message Receipt Verification In A Wireless Mobile Message Broadcasting System
20100272347	12810777	ROJAS, HAJIME S	3627	LAM RESEARCH	Dynamic Alignment Beam Calibration
20130166423	12365138	ROJAS, HAJIME S	3627	ADOBE	Providing Content On Connected Devices
20080301009	11756160	ROJAS, HAJIME S	3627	AMAZON TECHNOLOGIES	Providing Fulfillment Services
20130230205	13774992	SHEIKH, ASFAND M	3627	RICOH	Expense Report System With Receipt Image Processing
20130080645	13683397	SHEIKH, ASFAND M	3627	INFOSYS TECHNOLOGIES	Providing Real-Time Communications Services
20130084830	13683355	SHEIKH, ASFAND M	3627	INFOSYS TECHNOLOGIES	Providing Real-Time Communication Services
20090094145	12282880	SHEIKH, ASFAND M	3627	NAVER	Automatically Completed General Recommended Word Advertisement Recommended Word
20090319429	12183844	SHEIKH, ASFAND M	3627	BANK OF AMERICA	Cash Positioning Reporting
20140006186	13562614	WILDER, ANDREW H	3627	BANK OF AMERICA	Readable Indicia For Fuel Purchase
20130138518	13308180	WILDER, ANDREW H	3627	AT&T	Wireless Transactions For Enhancing Customer Experience
20100293023	12464448	WILDER, ANDREW H	3627	INFOSYS TECHNOLOGIES	Framework For Developing Enterprise Service Architecture
20120221444	13035734	WILDER, ANDREW H	3627	RED HAT	Message Queue Based Product Asset Management Auditing System
20090150266	12323134	WILDER, ANDREW H	3627	U.S. BANK	Buyer Routing Arrangements Method For Disparate Network System
20150262188	14702722	YU, ARIEL J	3627		Customer Service Management System
20120150673	13324970	YU, ARIEL J	3627	MAGTEK	Conducting Financial Transactions Using Non-Standard Magstripe Payment Cards
20110276442	12773550	YU, ARIEL J	3627	BRIDGEWATER SYSTEMS	User-Centric Mobile Device-Based Data Communications Cost Monitoring Control
20120072256	13212961	YU, ARIEL J	3627		Vehicle Impound Auctioning Management System
20080294488	12125734	YU, ARIEL J	3627	HUSSMANN	Supply Chain Management System
20090281851	12437418	YU, ARIEL J	3627	SALESFORCE.COM	Determining On-Line Influence In Social Media
20100292913	12308478	YU, ARIEL J	3627	ROBERT BOSCH	Map Data Method For Generating Maps Navigation Device
20130339071	13970410	ALLEN, AKIBA KANELLE	3628	LIVE NATION ENTERTAINMENT	Queuing Access To Network Resources
20110029147	12830019	ALLEN, AKIBA KANELLE	3628	ALSTOM	Multi-Interval Dispatch Method For Enabling Dispatchers In Power Grid Control Centers To Manage Changes
20100191549	12359228	ALLEN, AKIBA KANELLE	3628	MICROSOFT	Icafe Pre-Ordering
20140205859	13694943	CAMPBELL, SHANNON S	3628		Electroless Silvering Ink
20150149382	14614875	CHEN, GEORGE YUNG CHIEH	3628	BROADRIDGE INVESTOR COMMUNICATION SOLUTIONS	Automated On-Demand Customizable Assembling High Throughput Printing Of Documents
20140089015	13624873	CHEN, GEORGE YUNG CHIEH	3628	PALO ALTO RESEARCH CENTER	Providing Just-In-Time Loading Zone Parking
20120239588	13349557	CHEN, GEORGE YUNG CHIEH	3628	CUMMINS INTELLECTUAL PROPERTY	Determining Freight/Load Distribution For Multiple Vehicles
20150154558	14614919	CHEN, GEORGE YUNG CHIEH	3628	BROADRIDGE INVESTOR COMMUNICATION SOLUTIONS	Automated On-Demand Customizable Assembling High Throughput Printing Of Documents
20110131286	12972610	CHEN, GEORGE YUNG CHIEH	3628	BOOKIT	Booking Method System
20130046663	13211482	HARRINGTON, MICHAEL P	3628	ANALOG DEVICES	Measuring Active/Reactive Powers
20140089021	14094669	JUNG, ALLEN J	3628	PALO ALTO RESEARCH CENTER; XEROX	Providing Multi-Locational Curbside Valet Parking Services
20060004675	11154866	JUNG, ALLEN J	3628	UNITED PARCEL SERVICE OF AMERICA	Offline Processing A Carrier Management System
20130144665	13746646	VETTER, DANIEL	3628	TICKETMASTER	Computer Aided Event Venue Setup Modeling Interactive Maps
20130106569	13719583	ABRAHAMSON, AMANDA C.	3629	SENTRILOCK	Vehicle Activity Module
20140279615	14202218	CASLER, TRACI	3629	LIVE NATION ENTERTAINMENT	Centralized Device-Aware Ticket-Transfer System Method
20080154623	11951988	FLEISCHER, MARK A	3629	LIVE NATION ENTERTAINMENT	Access Control Using A Networked Turnstile
20140162235	14025704	FLEISCHER, MARK A	3629	GOOGLE	Determining Individuals For Online Groups
20110099118	12912644	FLEISCHER, MARK A	3629	AOL	Electronic Distribution Of Job Listings
20110218924	12718569	FLEISCHER, MARK A	3629	ORACLE	Distributed Order Orchestration System For Adjusting Long Running Order Management Fulfillment Processes With Delta Attributes
20120259793	13082710	LINDSEY III, JOHNATHAN J	3629	COMPUTER ASSOCIATES THINK	Transaction Model With Structural Behavioral Description Of Complex Transactions
20110137667	12959876	LINDSEY III, JOHNATHAN J	3629	SIEMENS	Sales Estimating Tool For Building Control System
20110004499	12496881	LINDSEY III, JOHNATHAN J	3629	IBM	Traceability Management For Aligning Solution Artifacts With Business Goals In A Service Oriented Architecture Environment
20100223097	12396467	OFORI-AWUAH, MAAME	3629	GROUPON	Providing Information To Contacts Without Being Given Contact Data
20080001704	11818321	OUELLETTE, JONATHAN P	3629		Childcare Tracking System Method
20130006883	13595831	OUELLETTE, JONATHAN P	3629	WORKSCAPE	Performance Drive Compensation For Enterprise-Level Human Capital Management
20130046706	13497494	OUELLETTE, JONATHAN P	3629	EMPIRE TECHNOLOGY DEVELOPMENT	Analyzing Communications To Determine Business Entity Popularity
20100280964	12770336	OUELLETTE, JONATHAN P	3629		Issuance Conveyance Management Of Endorsements
20140136417	14157423	ALI, HATEM M	3691	GONOW TECHNOLOGIES	Portable E-Wallet Universal Card
20130200999	13836864	ALI, HATEM M	3691	DIGITAL LIFE TECHNOLOGIES	Portable E-Wallet Universal Card
20130024372	13630248	ALI, HATEM M	3691	DIGITAL LIFE TECHNOLOGIES	Portable E-Wallet Universal Card
20120123937	13359352	ALI, HATEM M	3691	DIGITAL LIFE TECHNOLOGIES	Portable E-Wallet Universal Card
20130134216	13717363	ALI, HATEM M	3691	DIGITAL LIFE TECHNOLOGIES	Portable E-Wallet Universal Card
20130232033	13870144	HAMILTON, LALITA M	3691	BROADCOM	Billing Support In A Media Exchange Network
20150186852	14644917	HAMILTON, LALITA M	3691	BANK OF AMERICA	Incident Management For Automated Teller Machines
20120179494	13354915	HAMILTON, LALITA M	3691	HSBC TECHNOLOGIES	Account Opening Flow Configuration Computer System Process For Implementing Same
20140222652	14254030	KAZIMI, HANI M	3691	EPIT	User Interface For An Electronic Trading System
20110320339	13229676	KAZIMI, HANI M	3691	TRADING TECHNOLOGIES INTERNATIONAL	Interface For Historical Display Of Market Information
20130132137	13746044	KAZIMI, HANI M	3691	IBM	Online Registration Block Tracking For Travel Wholesalers Agencies Hotels
20120310807	13316952	POINVIL, FRANTZY	3691	HARTFORD FIRE INSURANCE	Graphically Enabled Retirement Planning
20120330826	13599285	POINVIL, FRANTZY	3691		Virtual Accounts Linked To Financial Accounts
20150220923	14171189	POINVIL, FRANTZY	3691	FMR	Real-Time Spend Management With Savings Goals
20120173421	13496413	POINVIL, FRANTZY	3691	NTT	Electronic Settlement Server Program Thereof
20150112730	14057419	BAIRD, EDWARD J	3692	STATE FARM MUTUAL AUTOMOBILE INSURANCE	Assessing Risk Using Vehicle Environment Information
20130054320	13561244	JOHNSON, GREGORY L	3692		Fast Mobile Payment
20100088228	12572321	LIU, I JUNG	3692	IBM	Dual Layer Authentication For Electronic Payment Request In Online Transactions
20110179042	13079690	WONG, ERIC TAK WAI	3692		Object Modeling For Exploring Large Data Sets
20110251955	13133369	AMELUNXEN, BARBARA J	3693	NXP	Enhanced Smart Card Usage
20130159157	13328961	BORLINGHAUS, JASON M	3693	PALO ALTO RESEARCH CENTER	Energy-Disutility Modeling For Agile Demand Response
20140257874	14203356	MAGUIRE, LINDSAY M	3693	STATE FARM MUTUAL AUTOMOBILE INSURANCE	Determining Monitoring Auto Insurance Incentives
20140304156	13856217	ANDERSON, MIKE W.	3694	GELLER NAKIA	Gold Precious Metal Buying Machine Method
20140180939	13909482	APPLE, KIRSTEN SACHWITZ	3694	APPLICATIONS IN INTERNET TIME	Integrated Change Management Unit
20090198522	12002376	ZIEGLE, STEPHANIE M	3694	HARTFORD FIRE INSURANCE	Equity/Interest Rate Hybrid Hedging System Method
20090319355	12141720	OYEBISI, OJO O	3695	MICROSOFT TECHNOLOGY LICENSING	Presenting Advertisements Based On Web-Page Interaction
20140244494	13792764	PRINSLOW, GARRISON T	3695	DIGIMARC	Smartphone Payments
20100161343	12342908	ROBINSON, KITO R	3695	NCR	Obtaining Diagnostic Data From A Device At A Remote Location
20140074720	13609197	TIBLJAS, SHACOLE C	3695	KING FAHD UNIVERSITY OF PETROLEUM & MINERALS	Virtual Account Token-Based Digital Cash Protocols
20140164233	14100876	CHANG, EDWARD	3696		Data Extraction Method
20130332354	13915173	CHANG, EDWARD	3696	SAMSUNG	Mobile Device and Control Method Thereof
20150227927	14175786	KING JR., JOSEPH W	3696	BANK OF AMERICA	Revocation Of Application Access Based On Non-Co-Located
20150161582	14623418	NGUYEN, LIZ P	3696	QUISK	Self-Authenticating Peer To Peer Transaction
20130238368	13864687	NIQUETTE, ROBERT R	3696	PROGRESSIVE CASUALTY INSURANCE	Customizable Insurance System
20140279447	14272367	PATEL, JAGDISH	3696	SQUARE	Transferring Money Using Email
20140040124	13945533	PATEL, JAGDISH	3696	SONY	Physical-Quantity Receiving Device Physical-Quantity Supplying Device Physical-Quantity Receiving Method Physical-Quantity Supplying Method Storage Medium Having Physical-Quantity Receiving Program Storage Medium Having Physical-Quantity Supplying Program

Note: Many of the titles have been shortened by removing the stock "Methods, Systems, etc." from the beginning; any typographical errors are my own.   

#AliceStorm: The Summertime Blues Continue

By: Robert R. Sachs

In my July post, I noted that Section 101 court decisions were issuing fast and furious, with twelve decisions in just the first ten days.  I predicted that "At this pace, we could see some twenty to thirty decisions this month."

Sadly, I was spot on: there were 21 decisions, with 17 of those (81%) invalidating 36 patents.  With those cases, and the cases through August 26, these are the current #AliceStorm numbers:

Compared to the last numbers from July, the invalidity decision rate is up a tick, patent invalidity percentage is essentially unchanged, and claims are down a bit.  No surprise, PTAB continues its 100% kill rate on final CBM decisions.

Here are the motion numbers:

The Federal Circuit numbers jumped from 16 to 19 decisions because there were two per curiam affirmances of invalidity in July and August, and one we picked up from before.  Successful motions for JOP are up 3% to 75%, while successful motions to dismiss ticked up 1.1%.

As to tribunals:

The Northern District of California showed a slight increase, up 1.7% to a 75% invalidity grant on all Section 101 based motions.  

One of the questions that comes up is how the numbers compare before and after Alice. To determine this, I looked at the 14 month periods before and after Alice.  Here are the results:

Note that the percent change post-Alice for decisions and patents is calculated with respect to the raw counts of decisions and patents, not with respect to the invalidity percentages.  

To put this in perspective:  the courts invalidated more patents in the 14 months since Alice, then they did in the five years previous to Alice. 

Is that what the Supreme Court intended when the cautioned the courts to "tread carefully in construing this exclusionary principle lest it swallow all of patent law."?  

What's Up at the USPTO? Section 101 Rejection Rates, Of Course

With the assistance of Patent Advisor, I now have about 570,000 records of office actions and notices of allowance from the last year or so.   The most recent update I received just over 79,000 office actions and allowances:

Overall, the rejection rates for all kinds run about 69%, with TC 3600 just marginally higher.  But as I've explained, looking at TC 3600 as whole hides the real rejection rates for patent eligibility. 

 

Here, I have the percentages of Section 101 rejections in each of the identified months, broken out between the e-commerce art units (3620, 3680 and 3690) and all other art units at the USPTO (i.e., biotech, communications, computers, etc.).  As you can see, the ecommerce examiners are continuing to issue 101 rejections at a very high rate, almost 87% in June.  What's more, the percentage of notices of allowance dropped dramatically in the ecommerce units, from 11.44% to just 4.6% in June.  

Perhaps more disconcerting, is that even in other art units, the 101 rejection rate more than doubled, from 6.45% to over 13%, and the notice of allowance rate dropped.  Can it really be that so many thousands of patent applications merely claim abstract ideas?  

Let's look at the rejection rates for June, specifically, organized by technology area:

This is a cross-functional summary, in that I've aggregated the rejection rates according to the kinds of technology, which extends across different Tech Centers, or I've extracted technologies from within Tech Centers. For example, I've pulled Medical and Drugs out TC 1600, and Transportation out of TC 3600, in which it's lumped in with business method patents.  I've moved Amusement and Education, which are in TC 3700, to the Commerce group to join with the e-commerce technology from TC 3600.  Again we see the extraordinary percentage of Section 101 rejection rates in Commerce (and the correspondingly low notice of allowance rates), relative to other technology areas.  

USPTO Stats Confirm the Alice Effect

The USPTO just released statistics on patent application filings, pendency, and so forth.  New patent applications are expected to decline by 1.8% overall in FY2015, even though the Office expected 5% growth, continuing a six year growth trend.  

 

Even more interesting is that RCE filings are down about 6% as well, RCE's being the typical mechanism we use to continue to push for allowance. TC 3600 had the sharpest drop in RCE filings in particular.

And, no surprise, the drop in total filings (new and RCE) was most pronounced in TC 3600. Without having the actual data, it's hard to exactly confirm, but from the below it appears that most TC's are flat or have a tiny decline in filings.  Along with the RCE drop in TC 3600, that suggests that TC 3600 is contributing the most to the overall decline in applications filings.  The upshot: Alice is having real measurable impact on application filings.  

If these trends on 101 rejections continue, then examiners are working themselves out of a job, and the USPTO is working itself in the red. Fewer applications does not mean reduced pendency.  Instead it means fewer examiners because there will be less fee income coming into the USPTO to pay examiners--fees from new applications, fees from extensions of time, fees for everything.  And in the long run, it means less maintenance fees, which are already back-end loaded, to pay future examiners.   This is the law of unintended consequences at work. 

There Ain't No Cure for the 101 Blues...

Now some anecdotal evidence. 

First, as many of you know, immediately after Alice the USPTO did a sweep of all cases with notices of allowance--and even paid issue fees--to review for Alice rejections.   The Office stated publicly at AIPLA Spring and other venues that this was a one-time deal, and that they were not going to do any further post-issuance review to issue Section 101 rejections.  However, the Office appears to have gone back on its statement.  Just last week, one of our cases in TC 3600, on which we had received a notice of allowance and immediately paid the issue fee, was yanked back without explanation.  

Similarly, we have an application in TC 3600 art unit that has allowed just 7 patents in the past 6 months (with 118 cases being abandoned).  We appealed a Section 101 rejection.  We were pleased, to say the least, when the examiner withdrew the final rejection after apparently reading our appeal brief, and issued a notice of allowance.  We were not so pleased when just three days later we received a notice of withdrawal of the allowance! We called the SPE and were told that the allowance "was a mistake," and the examiner was being instructed to file an answer to the appeal brief.

It also appears that the USPTO is targeting patent applications for disposals based on Alice.  Consider two applications filed on May 12, 2014,  14/275,026 and 14/275,094, both of which are continuations and both assigned to the same examiner.  The initial claims in the ‘094 mentioned accounting, and that application has already received two non-final office actions, both including an Alice rejection; the first rejection was issued on June 29, 2014, just over a month after filing.  The ‘026 had no such language and has not even been examined yet.  I could understand a month or two difference in the timing of office actions but not more than a year, given that they have the same examiner.  This suggests that the USPTO is focusing on the '094 application precisely because of its accounting-oriented claims.

And then there's this tale: Earlier this week I had an interview with a primary examiner in a business methods art unit to discuss a 101 rejection, where there were no prior art rejections. As you know, a primary examiner in theory has authority to allow an application.  Well, I stress "in theory" because when it comes to 101 rejections in the business methods units, it appears that even if you convince the primary, he still needs to get approval from both his supervisor and a legal specialist. 

This poor fellow has not allowed a case in over year—but not for want of trying.  He told me that he’s had a couple of cases where he was willing to allow the application and withdraw the 101 rejection—but his SPE and the specialist overruled him.   It was pretty clear that he was frustrated by the entire process.  And that very frustration made it more or less impossible for him to offer any suggestions as to what to do, since he figured that anything he suggested would get overruled by his superiors: all he would say is "Read the Interim Guidance and the July examples, they tell you what to do."  He also admitted that he was concerned with getting dinged by the quality assurance reviewers, who scrutinize applications and penalize the examiners for making mistakes—such as allowing a case they should have rejected under Alice.   Thus, with the odds and the incentives stacked against him, he was, by his own admission, just waiting out the final two years before he retires. 

That makes him the lucky one. 

The rest of us are going to be around for a while.