In-Depth

In 2014, the United States Supreme Court handed down its decision in Alice Corporation Pty. Ltd. v. CLS Bank International, et al., 573 U.S. 208, which significantly altered the patentability of software, business methods, and e-commerce technologies (hereinafter referred to as “software”). This decision sent shockwaves through the industry, with some early commentators suggesting that Alice would be the death of software patents. While those initial claims proved to be hyperbolic, commentators were correct in their assessment that the case would make obtaining software patents significantly more challenging.

Section 101 of the Patent Act confers patent eligibility on “any new and useful process, machine, manufacture, or composition of matter.” Over the years, courts have clarified that these four categories necessarily exclude laws of nature, natural phenomena, and abstract ideas from patent protection. However, the line between patentable and unpatentable subject matter in practice is not always clear. Software, for example, can often straddle the line between an unpatentable abstract idea and a patentable process because it involves the use of algorithms (unpatentable abstract ideas) in combination to produce a desired result (a patent-eligible process).

To distinguish software with real technical merit from software that merely implements abstract ideas on general-purpose computers, the Court in Alice applied a two-part test:

1. Determine whether the claims at issue are directed to a patent-ineligible concept, and
2. If so, determine whether the claim’s elements, considered both individually and in combination, are sufficient to ensure that the patent in practice amounts to significantly more than a patent on the ineligible concept itself.

The second step of this test (sometimes referred to as the “significantly more” factor or the “inventive step” factor) has proved to be notoriously difficult for lower courts and the United States Patent and Trademark Office (USPTO) to interpret due to its inherent subjectivity. Rather than providing a bright-line rule, the Alice test allows the person or court making the determination to exercise discretion when evaluating whether there is anything significantly more than the abstract idea in a particular claim.

Due to this lack of clear guidance from the Court, the USPTO has operated with an abundance of caution when examining software patent applications, often issuing Alice rejections to any applications with claims that even remotely resemble software. One possible explanation for this zeal is that the USPTO is engaged in a delicate balancing act between two competing policy objectives. One is the need to eliminate overly broad software patents that nonpracticing entities often weaponize against small businesses with limited resources. The other is the need to ensure that legitimate software innovations remain patentable, as software is a critical component of our economy. Disagreement between examiners and applicants over the patentability of software claims often arises from the tension between these two objectives.

Whatever the reasons behind the confusion, Alice has had a profound impact on software patent practice and significantly altered the software industry’s standing at the USPTO. Applicants and the attorneys who represent them have been forced to respond and adapt to this new reality in different ways, with varying degrees of success. In this study, we will examine Fish & Richardson’s software patent practice—how we were instrumental in developing the law underpinning Alice, how our attorneys handle Alice rejections, and what the future might hold for software patent practice.

Fish & Alice: A Long History

Alice did not come out of nowhere.

The two-step test the Court applied in it was the culmination of a line of patent eligibility cases that began with Mayo Collaborative Services v. Prometheus Labs, Inc., 566 U.S. 66 (2012). Fish represented Mayo in that case and first developed the two-part test that the Court adopted in it for evaluating the patentability of claims directed to laws of nature. Fish advocated for the use of this test in Mayo because our goal was to establish a single standard—a “grand unifying approach”—that could apply to all patent eligibility determinations. In the years that followed, that goal was realized when the Court applied Fish’s two-step test to natural phenomena in Association for Molecular Pathology v. Myriad Genetics, 569 U.S. 576 (2013) and, finally, to abstract ideas in Alice.

After Mayo, we sprang into action under the (correct) assumption that the Court would eventually extend its reasoning to patents directed to abstract ideas and that this could have potentially significant consequences for our software clients. Accordingly, our attorneys began drafting their applications with the Mayo factors in mind to circumvent as many future challenges as possible. To stay abreast of the latest post-Alice legal developments, we also launched the Fish Alice Tracker, the first case tracker of its kind to monitor subsequent district court, Federal Circuit, and Patent Trial and Appeal Board (PTAB) Alice decisions. By developing the legal standard that formed the basis of Alice, preemptively incorporating its reasoning into our software patent applications, and proactively documenting the lower courts’ application of it, we have always kept our clients one step ahead.

The State of Alice Practice at the USPTO

Despite our early involvement in developing and implementing the Alice framework, our clients have not been immune from its effects at the USPTO. For many attorneys, a particularly challenging aspect of software patent practice is that the USPTO’s application of Alice is inconsistent from examiner to examiner and even from examiner to examiner within the same art unit. Practitioners find that some examiners will readily withdraw an Alice rejection if the applicant makes a well-reasoned response, while others will not withdraw an Alice rejection no matter what the applicant does. Although it has been over four years since Alice was decided, the consensus among frequent software patent applicants is that examiners are not much better at applying the decision consistently than they were when it was issued.

This long-standing inconsistency may be explained at least partially by the nature of the Alice decision and Alice rejections themselves. Unlike other types of rejections, Alice rejections are rooted primarily in legal rather than technical reasoning. Because many examiners are not attorneys and have not been trained to make legal determinations, the jurisprudential aspect of Alice can often present a challenge for examiners when they believe they are required to issue a rejection based on it. While it is by no means the case that non-lawyers are incapable of making legal determinations, as a practical matter, many examiners are being asked to make determinations that are arguably outside the scope of their expertise. As a result, the line between patentable and unpatentable subject matter that Alice and its precursor cases intended to clarify is still blurry.

As one Fish attorney characterized Alice practice, “it’s a continually moving target, and the target doesn’t get any clearer.”

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