Patent examination outcomes Post-Alice seem to improve after USPTO guidance

On June 19, 2014, the U.S. Supreme Court reached a unanimous decision in Alice Corp. v. CLS Bank International that altered the law on patent subject matter eligibility. Alice Corp., the patent owner, argued that its patent claims directed to a computer-implemented financial settlement system were valid because they did not fall into the patent-in­eligible category of “abstract ideas.” Rejecting the patent owner’s arguments, the Court held the claims patent ineligible on the basis that generic computer implementation does not transform a patent-ineligible abstract idea into a patent-eligible invention. In doing so, the Court effectively broadened the scope of inel­igible subject matter and created uncertainty in the business and legal communities. Ambiguity in the language of the Alice standard and in the scope of technologies involving “abstract ideas” made it difficult to predict how and where the stan­dard would be applied.

By broadening the scope of subject matter perceived as being ineligible, Alice is likely to have differential effects across technologies, with some inventions that were previously considered to be patent eligible no longer qualifying for patent protection. Higher levels of uncertainty may also negatively impact previously issued patents by lowering their expected value, reducing patent purchases and licens­ing transactions, and limiting opportunities to obtain entrepreneurial financing.

The Alice decision increased USPTO subject matter eligibility rejections

The early implementation of Alice led patent examin­ers to increase rejections based on patent-ineligible subject matter relative to all first office action decisions and increased uncer­tainty in the first action stage of patent examination in affected technologies. According to a report published by the United States Patent and Trademark Office (USPTO), the likelihood of receiving a first office action with a rejection for patent-ineligible subject matter increased by 31% in the 18 months following the Alice decision in various “Alice-affected” technology areas. The report further highlights how recent actions undertaken by the USPTO have brought greater predictability and certainty to the determination of patent eligibility.

USPTO examiner guidance reversed the upward trend in subject matter eligibility rejections

One of the ways the USPTO adjusts to major changes in the U.S. patent system is to issue examination guidance documents. These documents assist exam­iners by interpreting the law and by setting policy guidelines on how to apply legal concepts in the examination process. For patent subject matter eligi­bility related to Alice, the USPTO provided Preliminary Examination Instructions on June 25, 2014, and issued a more substantive 2014 Interim Guidance on Patent Subject Matter Eligibility in December of that year. These documents attempted to align patent exam­ination practice with established law. However, the Alice-induced increase in first office action Section 101 rejections persisted until the USPTO’s April 2018 Berkheimer memorandum titled “Change in Examination Procedure Pertaining to Subject Matter Eligibility, Recent Subject Matter Eligibility Decision (Berkheimer v. HP, Inc.)” and further reduced after the publication of the 2019 Revised Patent Subject Matter Eligibility Guidance (2019 PEG).

The Figure below shows the recent trend in the percentage of first office action Section 101 rejections for patent applications in Alice-affected technologies and in other technologies from 2017 through 2019. The first vertical bar (dashed red line) marks the date of the April 2018 Berkheimer memorandum and the second vertical bar (solid red line) marks the date of the 2019 PEG.

Source: USPTO

In early 2017, the percentage of first office actions including a Section 101 rejection for Alice-affected technologies was trending upward. The Berkheimer memorandum changed the direction of this trend. Prior to the release of the Berkheimer memorandum, exam­iners had been instructed to conclude that an element (or combination of elements) was a well-understood, routine, conventional activity when the examiner could readily conclude that the element was widely prevalent or in common use in the relevant industry. The examiner, however, was not required to support this conclusion with any factual evidence. Following the Berkheimer memorandum, the new guidance required examiners to make a factual determination as to whether claim elements were common and routinely used. For Alice-affected technologies, the Berkheimer memorandum induced a statistically significant drop in the rate of first office action Section 101 rejections.

The 2019 PEG caused a further, and much larger, decrease in the percentage of first office action Section 101 rejections in Alice-affected technologies. One of the USPTO’s goals with the 2019 PEG was to clarify the legal distinctions between claims directed solely to abstract ideas and claims that included abstract ideas but integrated those abstract ideas into a prac­tical application. The 2019 PEG synthesized the law and added clarity and structure to the decision-mak­ing process when implementing the Alice standard in two important ways. First, the guidance clarified that abstract ideas are grouped as mathematical concepts, certain methods of organizing human activity, and mental processes. Second, the guidance explained that a claim that recites an abstract idea is not “directed to” the abstract idea if the claim as a whole integrates the abstract idea into a practical application.

According to the USPTO report, after one year, the 2019 PEG reduced the chances of receiv­ing a first office action rejection for patent-ineligible subject matter by 25% for Alice-affected technologies. Although uncertainty in the first action stage of patent exam­ination started to decrease following the release of the Berkheimer memorandum, the 2019 PEG, however, had a much larger, statisti­cally significant effect on examination uncertainty, particularly in Alice-affected technologies.

The evidence suggests that the 2019 PEG provided clarity and structure to the decision-making process, thereby reducing the degree of variability observed across examiners in subject matter eligibility determi­nations. For patent applicants, this finding indicates a more consistent and predictable examination process.