The USPTO harms the economy with over-aggressive, haphazard Alice-based 101 rejections

By Louis Hoffman
February 7, 2016

uspto-madison-main-copy2The Patent Office solicited comments on its July 2015 Update on Subject Matter Eligibility (Section 101), and 30 comments were submitted in late October and are available on the PTO’s website. Comments here. Ninety percent of the commenters have suggested that the PTO examiners are issuing “abstract idea” Section 101 rejections of patent applications, using Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347, 2356 (2014), too aggressively or too haphazardly or arbitrarily. The same result happened with comments received before the Guidance. Earlier comments here.

A common thread is the lack of constraint on examiners in making Alice-type rejections, particularly in computer and business-method arts, and the lack of consistency and predictability in this area. There is a widespread concomitant concern that Section 101 can be easily applied to prevent patents from issuing in wide swaths of technology. I share those concerns. Most recent Hoffman comment to PTO here.

I have spoken in the last several months to a number of experienced examiners who are tasked with making (or declining to make) Section 101 rejections. One common examiner remark is that, despite the Section 101 training and the July 2015 Guidance Update, PTO material still gives examiners the opening to make rejections any time they want to do so. Examiners say that they can always find some language in the PTO explanations, categories, or examples, which they can apply or analogize to virtually any claim an applicant wishes to patent.

The results are that patent allowance rates have plummeted, particularly in Group 3600, which examines nearly all computer-related or Internet-related inventions, as several recent published articles have shown statistically, both at the Board level and in the examining corps. E.g., wonderland-statistics-alice. I have heard several high-ranking PTO officials say that the high rejection rate might be temporary. They reason that it is understandable that there would be many rejections of patents challenged at the Board through CBM procedures that contain claims written pre-Alice, plus the “bad patents” would likely be challenged first. Likewise, there could be many examiner rejections of applications first written pre-Alice.

But the rejection rate shows no sign of slacking, so that explanation doesn’t really fly. A more cogent reason for low allowance is that the Office’s training materials provide little discipline or explanation of circumstances in which an examiner should not make a 101 rejection. Coupled with supervisor focus on not “missing” a proper Alice-type rejection, the cautious examiner can be expected to make rejections wholesale, and “stick” to rejections more often than not.

It is poor patent policy to have broad areas of technology deemed patent-ineligible entirely, or ineligible without the high cost of attorney time to argue, and likely appeal, amorphous Alice-type rejections. This is particularly so as to technology that is central to the United States economy. Invention is central to U.S. economic might, and as our economy moves away from the “old line” manufacturing strength of the past, the U.S. has become especially strong in fields dependent on software technology and business methods. Strengths of the current U.S. economy include social media, the Internet, and the service economy, especially financial services. We are also strong in biotech. Yet those are precisely the fields most heavily damaged by Section 101 Alice-type rejections.

Some people working in the “software” field believe that patents should not issue at all, categorically, in that area. Most reasonable observers with strong knowledge of the patent system disagree with that philosophy. It is not the purpose of this series to convince the skeptics to change their minds about “software patents” generally. If we start from the presumption that Congress and the Courts have decided against banning this (or other) patents categorically, though, then it follows that the task of the PTO is to judge which patent claims are eligible and which are not. Few would disagree with the goals of predictability and internal logic in making such decisions.

The Courts, even while issuing decisions against patent eligibility, have recognized the danger of overuse of Section 101 rejections. See, e.g., Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347, 2356 (2014) (abstract idea exception would “swallow all of patent law” if it were interpreted too simplistically), aff’g CLS Bank Int’l v. Alice Corp. Pty. Ltd., 717 F.3d 1269, 1313 (Fed. Cir. 2013) (Moore, J., dissenting in part) (worrying that overbroad application of Alice could cause “the death of hundreds of thousands of patents, including all business method, financial system, and software patents as well as many computer implemented and telecommunications patents”).

Despite a difficult string of court decisions, therefore, the PTO should not “go overboard” in allowing its examiners to make rejections beyond what the courts require. Allowing excessive Alice-type rejections amounts to a “give away” to the public domain of U.S. technology that could be protected, and that is particularly damaging because it is happening preferentially in the very fields of U.S. economic strength.

I hope to provide separately specific explanations of why the PTO, despite the guidance and updates, still does not have the Alice problem under control, especially as to the “abstract ideas” rejections in the computer and Internet fields, where problems most strongly exist.

I hope that the PTO takes seriously the need to rein in the examining corps’ over-use of Section 101 rejections via further revisions and clarifications of meaning of its Updated Guidance. The guidance provided examiners can be improved so that it is not so easily viewed as a Rorschach test allowing support for rejections in all circumstances. Getting control of the problem of inconsistent and over-aggressive rejection, arising from amorphous instructions about the Section 101 test, represents good patent policy and will benefit the U.S. economy.

The Author

Louis Hoffman

Louis Hoffman is a patent attorney licensed to practice law in California and Arizona, before numerous U.S. District Courts, before the Federal Circuit and Ninth Circuit Courts of Appeals and in the U.S. Patent Office. Since 1991, Louis has advised independent inventors, small and mid-sized companies, and start-ups on protecting patents, copyrights, and trademarks through the law firm of Louis J. Hoffman, P.C., now known as the Hoffman Patent Firm. Please CLICK HERE to visit Louis' firm profile page.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 13 Comments comments. Join the discussion.

  1. IPdude February 7, 2016 1:27 pm

    The USPTO (by way of M. Lee, a proxy for G) is carrying out a political agenda to dilute, if not destroy, IP rights that threaten the bottom line for major software companies. Reason, evidence and the like will not persuade M. Lee to approach this issue in a balanced manner. She and her real boss (G) realize they must fully leverage their current position to destroy property rights. A couple of reasons why: 1. With a weak IP market, startups (especially those w/o scale) are not defensible. So, no need to acquire these businesses. Instead, steal their innovations with impunity. In fact, post AIA, G’s acquisitions have dropped dramatically. 2. With an 85% kill rate for issued patents and single digit allowance rates post Alice, there is no recourse once IP is stolen. The current administration and USPTO leadership needs to change for there to be meaningful change in the IP market. This is a political issue. The economy has nothing to do with it.

  2. JNG February 7, 2016 1:44 pm

    Excellent article Louis, you hit the nail on the head. The problem is, the PTO is quick to pick up any Court latitude that authorizes a rejection, but is completely tone deaf when you try to get them to understand the limits of such rulings. At this point its hard to dismiss this recent behavior by the PTO as anything than opportunism to pump up their disposition rate; its easy for them to crank out 101 rejections compared to substantive rejections, almost no work is involved. They are almost all cut/paste form and any discussion of the “merits” is formulaic and disconnected from anything concrete. In short, its become the drug of choice for almost every office action involving SW that I’ve seen recently. Until the CAFC starts to rein some of this in the epidemic will continue. As an aside, I’ve noticed several PTAB cases that show a lot more consideration than what we are getting from the Examiner corp so there looks to be more support there.

  3. Night Writer February 8, 2016 9:32 am

    >> its easy for them to crank out 101 rejections compared to substantive rejections, almost no work is involved.

    This is the key to Alice. The SCOTUS intentionally merged 101/102/103/112 with no fact finding for SJ. It makes it trivial for any fact finder to invalidate or not grant a claim. Really outrageous conduct on the part of the SCOTUS.

  4. A Rational Person February 8, 2016 10:29 am

    Louis, thank you for your thorough article and comments you sent to the USPTO.

    Night@3

    Really no need for 102, 103 and the 112 enablement requirement since Alice.

    With virtually no negative consequences, an Examiner can simply state that the parts of a claim or an entire claim as being abstract, an application or conventional. Unlike under 35 USC 102 or 35 USC 102, there is no prohibition on basing a rejection under 35 USC 101 on conclusory statements, so why even bother doing any significant search?

    Plus, the PTAB appears to reverse 103 rejections much more often than 101 rejections, so an Examiner has every incentive to make a 101 rejection in addition to if not instead of a 103 rejection.

    I wonder if Examiners in the mechanical and chemical arts will eventually pick up on the idea that 35 USC 101 gives them a chance to clear their dockets in a hurry and lower their PTAB reversal rates.

  5. Ron Hilton February 8, 2016 10:36 am

    Just more evidence that the real dynamic in current US politics and economics is more one of big vs. small, establishment vs. grassroots, megacorp vs. startup than the usual left vs. right narrative. The left would solve the problem with bigger government, the right with bigger business. Both are wrong.

  6. A Rational Person February 8, 2016 10:49 am

    @Everyone

    Under the current Alice subject matter eligibility guidelines, would it at least sometimes be possible to get allowed claims on a new cash register or calculator, but have the a method of use claim for the new cash register or calculator be determined to be patent ineligible?

    Historically, of course, if a product is patentable, a method of using the product is also patentable.

    But with a new cash register or a new calculator, you could be using these devices to perform conventional financial or mathematical calculations that are precisely the sort of methods that USPTO subject matter eligibility guidelines consider abstract and/or conventional. The only “new” thing in the method of use might be the new cash register or calculator that performs the method. Does the new cash register or new calculator by itself meet the “something more” requirement? Or maybe the USPTO decides that the new device does not meet “something more” requirement and a method of using a new product is no longer per se patentable, thereby upsetting decades of settled law.
    I could also imagine a similar scenario for a method of using a new drug.

    Alice and Mayo are poster children of many of the dangers of judges making up the law, including the fact that judges do not think through all of the implications of the new laws they make.

  7. JNG February 8, 2016 11:41 am

    As IPdude alludes to above, you only need peruse some of the 101 rejections that MSFT, IBM, SAS, Oracle, etc. are getting in their cases to understand how the PTO has silently put up a wall around Google’s giant money making advertising machines (Adwords, Adsense, etc.) – any case that mentions electronic advertising, no matter how many “technical” recitations – including by decoding a query, ascertaining intent, customizing an ad’s content, etc., are all being thrown in the heap as “fundamental economic business practices,” as if the Internet has been around since 1900. Google clearly is getting their money’s worth from the new leadership.

  8. Kill me now February 8, 2016 1:37 pm

    Great article!

    In my opinion, a major part of the problem has been caused by a high level (and apparently undocumented and undiscussed) USPTO policy decision to interpret “Alice” broadly.

    As a result of this unfortunate decision, the impact of every Federal court “Alice” rejection is further magnified it’s associated “penumbras” and “emanations”. Thus what might have been a few thumbtacks in the road is instead expanded into an ever growing black hole, with uncertain boundaries.

    I see no legal reason why a narrow (e.g. limited to the Alice fact pattern) approach could not have been used instead, or for that matter used in the future. A simple policy decision could do a lot of good here.

  9. Night Writer February 8, 2016 2:11 pm

    >>making advertising machines (Adwords

    @JNG: interesting. I have hit that wall with application in that space. Examiner does just that type of application and he told me he hasn’t allowed a claim in 18 months. You have to wonder if Lee is getting her fingers into this personally or what is the mechanism by which some of my application hit the 101 wall and other don’t when one skilled in the art wouldn’t see much difference between them. I was told that there are committees that were set up that won’t let applications get by 101 in some art units without their express permission.

    I get the feeling this 101 stuff has lots of secret wheels inside the PTO.

  10. Anon February 8, 2016 4:02 pm

    Who says that there are secret wheels inside the PTO?

    Why, the PTO itself.

    Look again at its response to the SAWS brouhaha. In its written response, it openly admits that SAWS was but one of many such programs.

    This is NOT a gut feeling type of thing….

  11. The Truth February 9, 2016 9:33 pm

    “Group 3600, which examines nearly all computer-related or Internet-related inventions”. Nearly all computer-related or internet-related inventions are actually handled by TC 2100 and 2600. I believe the author is confusing business methods with computer-related inventions. 3620, 3680, and 3690 deal with business methods and electronic commerce.

  12. B February 10, 2016 5:55 pm

    I have a business methods case currently pending in front of the Federal Circuit with a 101 Alice rejection. The rejection was purely conclusory and without evidence, and the PTAB affirmed while refusing to address the evidentiary or legal issues in my brief. My case isn’t unique. Research that I’ve performed shows a disturbing pattern of 101 Alice rejections made by or upheld by the PTAB that would be classified as arbitrary and capricious in any courtroom. SAWS apparently still lives in the PTO, and its reach extends to the PTAB.

  13. Robert Cole March 24, 2016 8:19 pm

    Aggressive PTO examiners regarding Alice 101 rejections is nowhere near as troubling as the 101 decisions some judges have handed down, they’re all over the map. No inventor wants to spend the time and money pursuing patents only to have their claims thrown of court and without an objective reason as to why.

    101 inquiries should not be allowed post issuance. Doing so is nothing short of the government going back on it’s word. Alice is ripe for abuse, unnecessary, fictional law. By this I mean false law, but held to be true because it’s expedient for infringers.

    Its STILL a great time to be an infringer of software (tech) patents and a horrible time to be an inventor leveraging the patents system. This must change.

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