Section 101 and the Growing Alice Backlash

by McDonnell Boehnen Hulbert & Berghoff LLP

35 U.S.C. § 101 states that "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof" is patent-eligible.  However, the Supreme Court has traditionally acknowledged the existence of several exceptions to these categories -- namely that laws of nature, natural phenomena, and abstract ideas are not patentable in and of themselves.  Despite the Court's warnings that one should "tread carefully in construing this exclusionary principle lest it swallow all of patent law," and that "all inventions . . . embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas," lower courts and the USPTO have often viewed these exceptions with a wide lens.

In the nearly two years since the Alice Corp. v. CLS Bank decision, this lens has grown dramatically for certain types of inventions.  For instance, in 2015, approximately 70% of all patents challenged under Alice in district courts were invalidated, while the monthly § 101 rejection rates for USPTO Technical Centers 3620, 3680, and 3690 were over 85% for most of the year.[1]  These sobering statistics are due to the new subject matter eligibility test set forth in Alice.  Particularly, one must first determine whether the claim at hand is directed to a judicially-excluded law of nature, a natural phenomenon, or an abstract idea.  If so, then one must further determine whether any element, or combination of elements, in the claim is sufficient to ensure that the claim amounts to significantly more than the judicial exception.  Notably, generic computer implementation of an otherwise abstract process does not qualify as "significantly more."

The Court refrained from explicitly defining the scope of abstract ideas, and provided only limited examples of what might be "significantly more" than a judicial exclusion.  As a consequence, the Alice test is inherently subjective, and is often applied in a conclusory fashion.  Perhaps because of this subjectivity, as well as the thousands of claims shot down under Alice, we may be seeing the beginning of a backlash against applying the test too strictly.

In April, David Kappos, the former USPTO Director, stated that "[i]t's time to abolish Section 101, and the reason I say that is that Europe doesn't have 101 and Asia doesn't have 101 and they seem to be doing just fine in constraining patent-eligible subject matter."  Kappos was concerned that the same software and biotech fields that have been the most impacted by Alice are also "the crown jewel of the innovation economy" and that patentees may be inclined to seek protection in other countries instead of the U.S. for these types of inventions.  This may lead to foreign competitors of U.S. companies taking advantage of the relatively weak U.S. patent protection in these areas, and being able to exploit such technologies without being subject to an actionable remedy.

Kappos is now in private practice, and thus one might argue that he is biased toward a strong U.S. patent system.  But he is far from the only member of the patent community to raise issues with Alice.  Indeed, federal judges and the USPTO administration, neutral parties who apply the law as they understand it, seem to be pushing back at the Alice juggernaut.

Judge Sue Robinson of the District of Delaware recently wrote four opinions upholding the validity of patents challenged under § 101 (Improved Search LLC v. AOL, Inc., Intellectual Ventures I LLC v. Ricoh Americas Corp., Network Congestion Solutions, LLC v. U.S. Cellular Corp., and SRI International Inc. v. Cisco Systems Inc.).  Prior to these decisions, the District of Delaware had the highest rate of finding patents invalid based on Alice in the entire country.  Judge Robinson was critical of the Supreme Court's patent-eligibility jurisprudence, writing that "most of the patent claims now being challenged under § 101 would have survived such challenges if mounted at the time of issuance, [but] these claims are now in jeopardy" and that "it is less than clear how a § 101 inquiry that is focused through the lens of specificity can be harmonized with the roles given to other aspects of the patent law (such as enablement under § 112 and non-obviousness under § 103)."

Is Judge Robinson resisting the broad application of Alice?  Or are these four rulings, all coming down within a month of one another -- with three on the same day -- merely a coincidence?

The Federal Circuit recently found claims to be patent-eligible post-Alice for only the second time in Enfish, LLC v. Microsoft Corp.  In this decision, however, the Court made a point of strongly reiterating the patentability of properly-claimed software inventions, noting that "[w]e do not read Alice to broadly hold that all improvements in computer-related technology are inherently abstract."  Further, the Federal Circuit criticized the District Court from which this case was appealed, noting that, when carrying out prong one of Alice, "describing the claims at such a high level of abstraction and untethered from the language of the claims all but ensures that the exceptions to § 101 swallow the rule."

The latter quote may be a sign that the Court has heard the concerns from numerous parties about how the Alice test is being misapplied.  For instance, it is all too common for a judge or a USPTO examiner to: (1) view a claim at a 10,000 foot level to remove from it all devices and machines, (2) this subjective "gist" of the remaining aspects of the claim is declared abstract, and (3) when the devices and machines are examined separately from this gist of the claim, they are determined to be no more than routine and conventional, adding no patentable weight.  Following such a formula, virtually any software or business method claim can be rendered invalid.  But, as pointed out in Enfish, this formula fails to follow the Supreme Court's directive that we must consider claims as an "ordered combination" when carrying out prong two of the test.

Which brings us to the USPTO.  On May 6th, the Office published a memorandum entitled Formulating a Subject Matter Eligibility Rejection and Evaluating the Applicant's Response to a Subject Matter Eligibility Rejection.  The memo states that "it is particularly critical to address the combination of additional elements, because while individually-viewed elements may not appear to add significantly more, those additional elements when viewed in combination may amount to significantly more than the exception by meaningfully limiting the judicial exception."  As noted in the USPTO's July 2015 Update Appendix 1: Examples, under Alice, the claims in Diamond v. Diehr are patent-eligible only when considered as an ordered combination: "when viewing the claim as a whole, the combination of all these steps taken together, including the constant determination of the temperature of the mold, the repetitive calculations and comparisons, and the opening of the press based on the calculations, amount to significantly more than simply calculating the mold time using the Arrhenius equation because they add meaningful limits on use of the equation."

In issuing this memo, the USPTO seems to be requiring that examiners provide more detailed written memorializations of their Alice analyses as part of the examination records.  Particularly, some (but certainly not all) examiners have been rejecting claims under Alice without explicitly considering all elements of the claim, without reviewing these elements as a whole or an ordered combination, and while omitting any discussion of dependent claims.

The USPTO is likely recognizing these procedural problems.  Notably, with respect to the latter, the memo states that "the eligibility of each claim should be evaluated as a whole using the two-step analysis detailed in the Interim Eligibility Guidance" (emphasis added).  When required to make the Alice analysis more explicit, examiners may find that fewer claims are invalid.

Ultimately, it may take months to determine how all of this will play out.  Examiners are just beginning to be trained on the memo, and the USPTO may have to publish a significant update to its overall § 101 guidance to account for Enfish.  Further, district court interpretation of Enfish remains to be seen, but undoubtedly patentees in litigation will be advocating that the Federal Circuit has changed its approach to Alice in a major way.  Also, Judge Robinson's recent decisions may have persuasive weight on other judges presiding over patent cases.

On the policy level, Kappos's words may grab the attention of Congress.  In view of the current election cycle, members of the legislature now realize that there is a strong protectionist sentiment in certain constituencies, and that the weakening affect that Alice has on the patent system will not play well with software and biotech businesses seeking to secure their investments in technology from foreign competitors.

Within the course of two months, four sources have provided reasoned criticisms of procedural and substantive aspects of Alice.  It seems that the § 101 pendulum is finally swinging back to a more moderate view of subject matter eligibility.

[1] Statistics derived in part from

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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