On April 23, 2020, the U.S. Patent and Trademark Office Chief Economist released a report which analyzes the effects of USPTO actions to clarify patent eligibility standards in the wake of the U.S. Supreme Court’s Alice Corp. v. CLS Bank International ruling. The report indicates that the odds of receiving a Section 101 rejection for patent-ineligible subject matter increased by 31% in certain technology areas in the 18 months following the Alice decision, but decreased by 25% subsequent to January 2019 guidance on patent subject matter eligibility issued by the USPTO.
The 2019 USPTO Guidance
On January 7, 2019, the USPTO published in the Federal Register revised guidance to examiners and other USPTO personnel concerning the evaluation of subject matter eligibility under 35 U.S.C. § 101. 84 Fed. Reg. 50. The Revised Patent Subject Matter Eligibility Guidance (“2019 PEG”) modified the USPTO’s application of the Alice/Mayo framework by more carefully defining categories of abstract ideas and by requiring consideration of whether a claim involves a “practical application” of a judicial exception as a basis for patent eligibility. The USPTO supported its revised guidance, which deviates in some respects from the Federal Circuit’s case law applying the Alice/Mayo framework, by referencing foundational concepts of subject matter eligibility found in Supreme Court case law.
The 2019 PEG altered the prior Alice/Mayo analysis in two significant ways. First, in Step 2A, with only rare exceptions, the 2019 PEG provides that a claim will be considered to be directed to an “abstract idea” only if the claim recites subject matter in one of three groupings:
(a) Mathematical concepts — mathematical relationships, mathematical formulas or equations, mathematical calculations.
(b) Certain methods of organizing human activity — fundamental economic principles or practices (including hedging, insurance, mitigating risk); commercial or legal interactions (including agreements in the form of contracts; legal obligations; advertising, marketing or sales activities or behaviors; business relations); managing the personal behavior or relationships or interactions between people (including social activities, teaching, and following rules or instructions); or
(c) Mental processes — concepts that are performed in the human mind (including an observation, evaluation, judgment, opinion).
Second, the 2019 PEG provides that if a claim does not recite subject matter from one of the three groupings, or another judicially-recognized exception, then the claim is eligible. On the other hand, if the claim does recite subject matter from one of the abstract idea groupings, the guidance provides that it is only “directed to” an abstract idea if the claim does not include a “practical application” of the subject matter.
The USPTO Report Analyzing Effects of Guidance
In a statement released in conjunction with the report, “Adjusting to Alice: USPTO patent examination outcomes after Alice Corp. v. CLS Bank International,” (the “Report”) the USPTO stated that its 2019 guidance had “brought greater predictability and certainty” to impacted technologies. According to USPTO Director Andrei Iancu, “We have heard anecdotally from both examiners and applicants across the entire spectrum of technologies that our 2019 guidance on Section 101 greatly improved the analysis in this important area of patent law.” Director Iancu added that “The Chief Economist’s report now confirms this general perception, especially with its critical finding that uncertainty decreased by a remarkable 44%.”
Some of the key findings in the Report include:
1. For Alice-affected technologies, the chances of receiving a first office action rejection with a rejection for patent-ineligible subject matter increased by 31% in the 18 months following Alice, as illustrated in the following chart from the Report.
2. For Alice-affected technologies, uncertainty about patent subject matter eligibility determinations in the first action stage of patent examination increased by 26% in the 18 months following Alice.
3. As demonstrated by the following chart from the Report, in the one year following the issuance of the 2019 PEG, the likelihood of receiving a first office action rejection for patent-ineligible subject matter decreased by 25% for Alice-affected technologies.
4. In addition, the Report provides that uncertainty about determinations of patent subject matter eligibility in the first action stage of patent examination for the relevant technologies decreased by 44% over the first year following publication of the 2019 PEG compared to the previous year.
In sum, the Report suggests that the USPTO’s guidance has helped to establish a more consistent and predictable examination process. According to USPTO Chief Economist Andrew Toole, “The primary economic function of the patent system is to provide an incentive for greater innovation.” He added that “Using an evidence-based approach, our report highlights the significant impact of the Supreme Court’s Alice decision on patent examination outcomes and the important stabilizing role played by the USPTO. This is what innovators and investors need to confidently promote entrepreneurship, create jobs, and advance science and technology.”