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.