New USPTO Guidelines for Software Patent Eligibility

USPTO Releases New Guidelines on Patent-Eligible Subject Matter

Anyone who has had a patent application examined during the last few years in which software of any form is part of the invention can likely relate to the challenges that have accompanied such an application. In 2014, the Supreme Court issued a decision in Alice Corp. v. CLS Bank International, 573 U.S. 208, 134 S. Ct. 2347 (2014), which held that the claims directed to a computer-implemented method of mitigating “settlement risk” in a financial transaction were invalid. In short, the Supreme Court ruled that the claims were directed toward an abstract idea, which is not patentable, and that merely implementing the abstract idea on a general-purpose computer did not rise to the level of patentable subject matter. While the Supreme Court may arguably have made the correct decision in Alice, in practice, the effects of this decision spread well beyond the scope of subject matter that was intended to be restricted from patentability.

After the decision in Alice, there was a dramatic rise in rejections from the Patent Office on the basis of unpatentable subject matter under Section 101 in art units dealing with software-related inventions. In those art units, the rejection rate of applications on the basis of unpatentable subject matter reportedly increased from an average of 1 in 4 applications to an average of 3 in 4 applications. “It has been my experience,” explains Eric Schlevensky, shareholder at Boyle Fredrickson, “that rejections based on Section 101 have been inconsistently applied. Claims in one application may be rejected as containing unpatentable subject matter, while claims in another application having similar scope as those in the first application may be allowed as containing patentable subject matter. An Examiner’s interpretation of Section 101 and what constitutes patentable subject matter is subjective, relying, for example, on what the Examiner deems is an abstract idea. The primary purpose of many Section 101 rejections appears to be rejecting claims that include software rather than rejecting claims that attempt to broadly claim an abstract idea.” This uneven and, arguably, inappropriate application of Section 101 as the basis for rejecting claims in a patent application has created uncertainty and additional expense in the application process.

Fortunately, it appears that the Patent Office has recognized the problem and recently issued new guidelines regarding patent subject matter eligibility that should resolve many of the issues surrounding rejections under Section 101. The guidelines instruct how the Examiners are to apply the existing two-step test, as set forth in Alice, by which patentable subject matter is identified. Before examining the changes made in the new guidelines, we will first examine the challenges of the existing two-step test set forth in Alice.

The first step defined by Alice considers whether the claimed subject matter is directed toward one of the four statutorily defined categories of patentable subject matter, namely: process, machine, manufacture, or composition of matter. If the claim is directed toward one of the statutorily defined categories, the subject matter of the claims is initially presumed to be patentable. The second step defined by Alice considers whether the claims, although directed toward a statutorily defined category of patentable subject matter, are also directed toward a judicial exception to patentable subject matter. The judicial exceptions are abstract ideas, laws of nature, and natural phenomenon. If the claims are directed toward a judicial exception, the subject matter of the claims is no longer considered patentable.

Analysis of the second step in Alice is further broken down into two parts. In Step 2A, a determination is made whether the claimed subject matter recites a judicial exception to the four statutorily defined categories. If the claims recite a judicial exception, then the claimed subject matter is not, by itself, patentable. In step 2B, a second determination is made whether the claimed subject matter recites additional elements that amount to significantly more than the judicial exception and, therefore, render the claimed subject matter patentable. Under this existing two-part test set forth in Alice, the determination of what constitutes a judicial exception and what constitutes significantly more than the judicial exception has been poorly defined and subject to the interpretation of individual Examiners, causing uncertainty as to whether claims will or will not be deemed patentable subject matter.

The new guidelines provide instruction as to how the Step 2A analysis of Alice is to be performed for abstract ideas and remove much of the subjectivity previously inherent in analyzing this type of judicial exception. The clarified instruction defines a further two-prong analysis of Step 2A that should provide more certainty for an applicant of what constitutes patentable subject matter.

The first prong of the new analysis instructs an Examiner to identify whether the claimed subject matter falls under one of three newly enumerated groupings of subject matter that qualify as abstract ideas. The guidance lists a) mathematical concepts, b) certain methods of organizing human activity, and c) mental processes as subject matter that constitutes an abstract idea. If a claim does not recite subject matter that falls under one of the enumerated groupings of subject matter, the subject matter of the claim is patentable and no further analysis is required.

If the claim recites subject matter that does fall under one of the enumerated groupings and, therefore, is a judicial exception to patentable subject matter, the second prong of the new analysis instructs the Examiner to determine whether the identified judicial exception is integrated into a practical application of that exception. If the identified judicial exception is integrated into a practical application and is not an attempt to monopolize the judicial exception, the claim is directed toward patentable subject matter.

This new two-prong analysis should provide more certainty to applicants with software-related inventions. In particular, claims that include software ordinarily should be identified as patentable subject matter. The majority of software claims that have been rejected under the existing two-part test set forth in Alice claim subject matter that does not fall within one of the newly identified groupings of subject matter and, therefore, are not abstract ideas. Even those applications in which a portion of the steps performed by software may arguably fall under the new groupings, the claimed subject matter typically includes additional limitations that clearly define a practical application of the function being performed rather than an attempt to broadly claim the abstract idea. As a result, the number of initial rejections under Section 101 should return to or approach the levels seen prior to Alice and eliminate much of the uncertainty that has been present over the past five years.

1 – 35 U.S.C. § 101 statutorily defines patentable subject matter
2 – See https://patentlyo.com/patent/2018/10/impact-patent-prosecution.html