It's been one year since the Supreme Court's decision in Alice Corp. v. CLS Bank. On its face the opinion was relatively conservative, cautioning courts to "tread carefully" before invalidating patents, and emphasizing that the primary concern was to avoid preemption of "fundamental building blocks" of human ingenuity.  The Court specifically avoided any suggestion that software or business methods were presumptively invalid.  But those concerns seem to have gone unheeded.  The Court's attempt to sidestep the tricky problem of defining the boundary of an exception to patent eligibility—"we need not labor to delimit the precise contours of the "abstract ideas category in this case""—has turned into the very mechanism that is quickly "swallow[ing] all of patent law.” The federal courts, the Patent Trial and Appeal Board, and the USPTO are using the very lack of a definition to liberally expand the contours of abstract ideas to cover everything from computer animation to database architecture to digital photograph management and even to safety systems for automobiles.

Let's look at the numbers to present an accurate picture of the implications of the Supreme Court’s decision. My analysis is a data-driven attempt to assess the implications of Alice one year out. It is with an understanding of how the Supreme Court’s decision is actually playing out in the theater of innovation that we can better project and position ourselves for what the future holds.

Alice at Court

Table 0 Fed Courts

As of June 19, 2015 there have been 106 Federal Circuit and district court decisions on § 101 grounds, with 76 decisions invalidating the patents at issue in whole or in part.  In terms of patents and claims, 65% of challenged patents have been found invalid, along with 76.2% of the challenged claims. 


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It's been six weeks since my last AliceStorm update, and we've had plenty of action: twelve §101 decisions, and fourteen patents invalidated in just that period. That said, the success rate of motions on the pleadings is dropping, now down to a mere 69.6%. At PTAB, ten new institution decisions, all of which were granted on ineligibility grounds. And PTAB continues with its 100% kill rate, with seven (!) final decisions invalidating patents.

Here's the data.

Total

Total Invalid

% Invalid

+/-

Fed. Cir and 
Dist. Ct. Decisions

90

63

70.0%

-3.9%

Patents

215

131

60.9%

-10.4%

Claims

4,497

3,282

73.0%

-7.3%

Motions on Pleading

46

32

69.6%

-7.6%

PTAB CBM Institution Decisions on 101

51

44

88.5%

1.52%

PTAB CBM Final
Decisions on 101

27

27

100%

 0%


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Between January 1, 2015 and January 23, the USPTO issued 247 patents in class 705, the overall business methods classification.   I reviewed the file histories of every single one of these patents.  I found only four that had post-Alice Section 101 rejections.  Between October 1, 2014 and December 31, 2014 there were 872 class 705 patents issued.  I found none (zero) that had post-Alice rejections.

In both groups, the vast majority had no Section 101 rejections, or if they had any, they were pre-Alice, based on Bilski.  The vast majority of these pre-Alice rejections were made before 2014, some as far back as 2011–and yet the notice of allowances only came in mid or late 2014.  As you likely know, the pre-Alice rejections were easily overcome by adding "processor" limitations to the method claims, and adding "non-transitory" to computer program product claims.

Generally, the rejections themselves were the form paragraphs we've all seen, with little or no specific  analysis of the alleged abstract idea, and zero discussion of the limitations of the claims with respect to "inventive concept," or why the claims limitations do not recite "significantly more" than the abstract idea itself.

On the other hand, the responses varied:

  1. Form rebuttal, the claims are not abstract. 
  2. Failure of examiner to make prima facie case of ineligibility.
  3. Substantive arguments that claims are not abstract and include inventive concepts.
  4. Failure of examiner to make prima facie case, along with substantive arguments that the claims were not abstract and include "inventive concepts."

What follows is a detailed look at each of the cases.


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Fenwick & West has launched an interactive PTAB Database that details proceedings filed with the USPTO’s Patent Trial and Appeal Board – providing quick and easy access to information about PTAB decisions.

With the creation of PTAB by the U.S. Patent and Trademark Office, core aspects of resolving validity disputes are now governed by newly

By: Stuart P. Meyer

A recent episode of NPR’s “Planet Money” was entitled “The Case Against Patents.”  Several notable commentators in that episode questioned whether patents help or hinder innovation, whether history supports the benefits of a patent system, and whether patent terms should be tinkered with to determine the amount of protection that is optimal from various socio-economic perspectives.  I am delighted every time this issue is brought up, since the appropriate balance of rights between innovators and society is anything but static.  As reasonable royalty rates fluctuate under case law, as infringement and validity standards shift, and as patents become commodities traded outside of traditional M&A situations, the fulcrum is certain to shift in one direction or the other. 

The Supreme Court gave more than a little consideration to such issues in Alice v. CLS Bank.  In fact, the very focus of this unanimous opinion was on this balance:

We have described the concern that drives [the judicially-created exclusion for laws of nature, natural phenomena and abstract ideas] as one of pre-emption.  … Laws of nature, natural phenomena, and abstract ideas are “‘”the basic tools of scientific and technological work.”’” (slip op. at 5-6)  


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By: Robert R. Sachs

On the final day of its 2013 term, the Supreme Court issued some interesting orders in Section 101 cases dealing with computer-implemented business methods. 

First, in WildTangent, Inc. v. Ultramercial, LLC (13-255), the Court granted certiorari, vacated, and remanded back to the Federal Circuit for reconsideration in view of Alice.  This is important because the Federal Circuit twice affirmed the patent eligibility of Ultramercial's claims, first back in 2011, Ultramercial, LLC v. Hulu, LLC, 657 F.3d 1323 (Fed. Cir. 2011), and then again in 2013 after the Supreme Court vacated that decision and remanded in view of Mayo.  Ultramercial, Inc. v. Hulu, LLC, 722 F.3d 1335 (Fed. Cir. 2013).  In the second decision, Judge Rader attempted to reconcile his theory of patent eligiblity with that of Judge Lourie.  Now that Judge Rader has retired, the case will be decided by just Judges Lourie and O'Malley.  If these judges do not agree on the eligiblity of Ultramercial's claim–a likely outcome–then an additional judge will be assigned.  How Ultramercial turns out will very likely depend on which judge is assigned–resulting in yet another panel dependent outcome.  


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By: Robert R. Sachs

On January 31, 2014, Fenwick & West and the Center for the Protection of Intellectual Property (CPIP) at George Mason University School of Law held a roundtable on Patentable Subject Matter at Fenwick’s Silicon Valley office. 

Our approach to this roundtable was different from the typical conference or roundtable on patent

By: Robert R. Sachs, Daniel R. Brownstone

Last week, we filed two amicus briefs with the Supreme Court in Alice Corp. v. CLS Bank, one on behalf of Advanced Biological Laboratories (ABL), and one for Ronald M. Benrey (Benrey). It goes without saying that this is the bellwether case for the patent eligibility of software. The question

By: Robert R. Sachs

In July 2012, two panels of Federal Circuit issued decisions regarding patentable subject matter for computer implemented business methods, CLS Bank Int’l v. Alice Corp. No. 2011-1301 (Fed. Cir. July 9, 2012), and Bancorp Services v. Sun Life Assurance Co. of Canada, No. 2011-1467 (Fed. Cir. July 26, 2012). The decisions demonstrated conflicting approaches various members of the court apply to this question. On what appears to be similar business methods patents, the two panels came to opposite decisions—the CLS panel finding the claims patent-eligible, and the Bancorp panel holding not.

In October 2012, the Federal Circuit vacated the CLS panel decision, granted CLS’s motion for en banc review. The en banc order posed two questions for the parties to address:

a. Whether a computer-implemented invention is a patent ineligible “abstract idea”; and when, if ever, does the presence of a computer in a claim lend patent eligibility to an otherwise patent-ineligible idea?

b. In assessing patent eligibility under 35 U.S.C. § 101 of a computer-implemented invention, should it matter whether the invention is claimed as a method, system, or storage medium; and should such claims at times be considered equivalent for §101 purposes?

On February 8, 2013, the court heard oral arguments from CLS, Alice, and the Solicitor General. Most surprisingly, no one attempted to actually answer the underlying questions here: What is an abstract idea? How do you know when a claim recites one? Instead, what was offered up as a “test” by both parties was whether the claim recites “significantly more” than just having a computer apply a (still undefined) abstract idea. This is just another ‘I know it when I see it test,’—just like Potter Stewart’s test for obscenity in Jacobellis v. Ohio. “Significantly more” provides no objective, analytical method to identify what is patent eligible. In this series of posts, we will explore some of the issues and problems raised by these questions, and offer the outlines of an objective answer and methodology.


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