Alice: Benevolent Despot or Tyrant? Analyzing Five Years of Case Law Since Alice v. CLS Bank: Part I

By Robert Sachs
August 29, 2019

“In the past five years, 781 unique patents have been held invalid in whole or in part by the federal courts. Compared with the five years prior to Alice, there has been a 1056% increase in the number of decisions finding ineligible claims, and a 914% increase in the number of invalidated patents.”

https://depositphotos.com/72819617/stock-illustration-angry-queen-and-king.htmlAn older version of this article was originally commissioned for and published in IAM. It features in issue 96 of the magazine, which came out in June 2019 (www.iam-media.com)  

It’s been five years since the Supreme Court remade the law of patent eligibility in Alice Corp Pty Ltd v. CLS Bank Int’l. As we all know, in Alice the Supreme Court dictated that patent-eligible subject matter is determined based on a two-step test. First, one determines whether the claim is directed to a “judicial exception” to Section 101, specifically a law of nature, an abstract idea or a natural phenomenon. (I italicize law of nature because the Supreme Court’s decision in Mayo turned this extra-judicial concept–which has been used in the scientific and philosophical literature for over 600 years(!)–into a scientifically incoherent legal term of art.  See Prometheus Unbound I: The Untethering of Laws of Nature and Patent Eligibility from Scientific Reality.”)  If so, then one looks for the ineffable “something more,” to wit, an “inventive concept” that transforms the otherwise ineligible claim into a patent eligible application of the judicial exception.

The application of this test under Queen Alice’s reign has drastically altered the patent landscape. Over 1,000 patents have been invalidated by the federal courts and the U.S. Patent and Trademark Office’s (USPTO’s) Patent Trial and Appeal Board (PTAB), while over 60,000 patent applications have been abandoned before the USPTO following rejections for patent ineligible subject matter. Patents and portfolios in many fields – particularly software and biotechnology – have declined in value or simply become unsaleable at any price.

Defenders of Queen Alice and her critics go back and forth endlessly, driven by differing permutations of ideology, technology, judicial philosophy and business goals. I have contributed my share to those discussions, no doubt. But today, let’s get down to data and see what has really happened under Queen Alice’s rule.

Section 101 Litigation Since Alice

Figure 1 summarizes the litigation landscape of Section 101-related decisions from July 2014 to June 2019.

Figure 1

In that period, there were 838 federal court decisions based on Section 101 motions. Overall, those motions were successful (either at the district court or on appeal to the Federal Circuit) about 62% of the time–successful here being a determination that one or more of the patent claims was invalid as ineligible subject matter.

In particular, motions on the pleadings (including motions to dismiss) were granted 57.6 % of the time. The Federal Circuit has been particularly vigorous in applying the Alice test, finding patent eligible subject matter in just 15% of appeals. In the past five years, 781 unique patents have been held invalid in whole or in part by the federal courts.

Then and Now: Section 101 Motion Explosion

Now these numbers are interesting, but they lack context. Figure 2 provides the relevant context, by comparing Section 101 decisions and litigated patents in the five years preceding Alice with the data in Figure 1.

Figure 2

The left two columns compare the number of federal court Section 101 decisions between June 2009 and May 2014 (“Pre-Alice: Decisions”) to the number of such decisions in between July 2014 and June 2019 (“Post-Alice: Decisions”), broken down by eligibility outcome. The two right columns compare the number of patents litigated under Section 101 in the Pre-Alice and Post-Alice periods, again broken down by outcome.

Most obvious is the massive growth in ineligible outcomes: a 1056% increase in the number of decisions finding ineligible claims, and a 914% increase in the number of invalidated patents. The number of Section 101 decisions increased 730% after Alice with a 659% increase in the number of litigated patents. This explosion of activity makes prescient Judge Plager’s caution in Myspace v. Graphon Corp. (2012) that the courts should exercise “judicial restraint in the face of what has become a plethora of opinions adding to our § 101 jurisprudence.” Indeed, the number of Federal Circuit Section 101 opinions went from just 19 before Alice to 156, an increase of 732%. And as Judge Plager lamented in 2012, before Alice, so it remains five years on, only more so: “Our opinions spend page after page revisiting our cases and those of the Supreme Court, and still we continue to disagree vigorously over what is or is not patentable subject matter.”

The Devil is in the Data

Let’s unpack the post-Alice data over time in Figure 3:

Figure 3

Figure 3 shows the data from Figure 1 broken down by quarter, along with indications of significant Federal Circuit opinions. Over time, the percentage of decisions finding patents ineligible has been slowly declining and leveling out on a quarterly basis as shown by the four-quarter rolling average of the percentage of decisions finding patents ineligible, which now hovers around 50% per quarter. In four of the past five quarters the number of decisions finding eligible subject matter have surpassed those finding ineligible subject matter.  From the standpoint of patentees, one could say the situation is improving—but that’s like coming out of the storm shelter after a devastating nor’easter, looking up and saying the weather has cleared—the damage is on the ground and cannot be undone.

I attribute this trend to a number of factors, most significantly the reduction of patent cases with claims that were weak to begin with (i.e., patents with claims that were either overly broad and likely obvious, or lacking in enablement, or other technical problems). This trend suggests that Section 101 has been effectively used as a proxy by the courts to invalidate these kinds of patents. Thus, over time patentees, as well as contingency fee-based litigation firms, have become more selective in the patents that they assert. In addition, we see the decline sharpen following Berkheimer v. HP and Aatrix Software v. Green Shades Software in February 2018, in which the Federal Circuit clarified that in the second step of the Alice test, “[w]hether something is well-understood, routine, and conventional to a skilled artisan at the time of the patent is a factual determination,” and thus imposed some requirements for factual evidence when invalidating a patent under Section 101.  Finally, I suspect that the district courts have become more nuanced in their approach to Section 101 motions, denying motions now that they would have more readily granted right after Alice, as they get better at the fine art of knowing-it-when-they-see-it.  I’ll compare the pre- and post- Berkheimer data further in Part II of this article.

Nonetheless, it would be a mistake to infer that there is a “pro-eligibility” trend starting. That fewer “bad” patents are being asserted and the rules of the game are now more highly evolved does not imply that Queen Alice’s rule is somehow waning.  We still have inconsistent and seemingly arbitrary rulings from the Federal Circuit, as well as strong disagreement between the Federal Circuit judges themselves.  Just see the eight concurrences and dissents in the court’s denial of rehearing en banc in Athena Diagnostics v. Mayo Collaborative Services (2019).

Courtly Motions and Appeals

Figure 4 shows the breakdown of post-Alice data according to the type of motions.

Figure 4

Here we see that motions for judgment on the pleadings (JOP) are more successful overall by a wide margin over motions to dismiss (MTD). This suggests that patent defendants are best served by filing their motions at this stage.  Interestingly, the Federal Circuit has affirmed JOP motions 79.3% of the time, while affirming the MTDs 87.5% of the time.

Figure 5 details the impact of Berkheimer v. HP and Aatrix Software v. Green Shades Software, showing distinct declines in the success of JOPs and MTDs after those decisions. Again, we see that the Federal Circuit affirms MTDs post-Berkheimer at a higher rate than JOPs (though the spread is the same over time).


Figure 5

Data from the Federal Circuit

Turning back to the Federal Circuit, Figure 6 details the different types of decisions for Section 101 appeals:

Figure 6

Nevertheless, when it comes to appeals, the Federal Circuit has been essentially consistent in upholding lower court decisions of ineligibility. Figure 6 graphically shows that the Federal Circuit affirms lower 89% of lower court decisions invalidating patents (91% affirmance pre-Berkheimer and 83% affirmance post-Berkheimer).  The majority of these affirmances (64%) are non-precedential and thus effectively cannot be appealed to the Supreme Court, no matter how close or cloudy the decision, or vigorous the dissent.

Interestingly, while the lower courts have denied Section 101 motions over 200 times (thus finding eligible subject matter), only a relatively small number (10) of these decisions have  been appealed to the Federal Circuit, with the court affirming them 70% of the time.

Focusing on just JOPs and MTDs, patentees have faced a major uphill battle over the last five years: they have lost before the district court about 57% of the time on these, and overall the Federal Circuit has affirmed 85% of such decisions.  Even post-Berkheimer the Federal Circuit affirms 72% of these motions.  Figure 7 details how the Federal Circuit handles appeals on motions on the pleadings (JOP and MTD), specifically.


Figure 7

There have been 75 appeals from JOPs and MTDs, and the Federal Circuit has affirmed 85% of them, with 47% of these being Rule 36 affirmances to avoid a written decision–-an outcome that is heavily criticized because it precludes the patentee from seeking Supreme Court review. This latter statistic is also particularly concerning if one takes seriously Berkheimer’s holding that Section 101 entails questions of fact in the Step 2 analysis—it means that the Federal Circuit is essentially acting as a fact finder in such cases, even though there is essentially little if any real record to go on.

When it comes to the USPTO’s Patent Trial and Appeal Board (PTAB), the Federal Circuit has been even more accommodating to patent defendants: it has affirmed 100% of PTAB covered business method reviews that invalidated the patents in suit, as well as 100% of appeals from ex parte decisions affirming Section 101 rejections of patent claims in pending applications.

Federal Circuit Decision Making Behavior

Figure 8 shows how the individual judges of the Federal Circuit have voted in Section 101 appeals:

Figure 8

Judge Moore and Judge Reyna have contended back and forth over the past five years for the most Section 101 decisions, with Judge Reyna leading as of June 2019 (36 decisions to Moore’s 35), though Judge Moore is more open to finding eligible subject matter (nine decisions vs. Reyna’s four). That said, at least Judge Reyna is less inclined to participate in a Rule 36 decision (36% vs. Moore’s 49%). Judge Dyk has the highest rate of participation in Rule 36 decisions (58%).  While none of the judges of the Federal Circuit can be called the numerical champions of patent eligible subject matter—Linn, Plager and Newman are the moral champions at least– Stoll and O’Malley come closest, both finding eligible subject matter in 24% of their decisions.

Figure 9 shows the activity of the District Courts in handling the most Section 101 motions.

Figure 9

As expected, Delaware and Eastern District of Texas have the highest volume of Section 101 motions and litigated patents (the figure is limited to courts that have decided at least ten Section 101 motions). These two courts have complementary rates of ineligibility outcomes, with Delaware finding ineligible subject matter in 58% of its decisions, while E.D. Texas finds ineligible subject matter in 42% of its decisions. The Western District of Texas can be said to be more “patent friendly,” with significantly lower rates of ineligible decisions (35%) and ineligible patents (30%). More surprising perhaps is the high rate of ineligibility outcomes in S.D. New York, and W.D. Washington.

Figure 10 shows the Section 101 activity of Federal District judges which, as expected, tracks Figure 9:

Figure 10

In the next part of this article I’ll examine how the courts handle specific types of technologies when deciding Section 101 motions.

The statistics in this article were derived in collaboration with my colleagues Christopher King and Cullan Bendig at Fenwick & West, LLP.

 

The Author

Robert Sachs

Robert Sachs is president at Robert R. Sachs PC. He is frequent commentator and speaker on patent eligibility. He started his own firm in 2017, leaving Fenwick & West LLP in San Francisco after 27 years of doing software patent prosecution and strategy for Silicon Valley clients. He is Vice Chair of the Intellectual Property Owners Association Section 101 Task Force and was one of the principle authors of the IPO’s proposed Section 101 legislation.

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 15 Comments comments. Join the discussion.

  1. Name withheld to protect the innocent August 29, 2019 8:00 pm

    Some other little tidbits to throw in based upon the numbers listed above. This is how the patent eligible decisions (%) stack up by the nominating president:
    Reagan: 10.0%
    Bush I: 6.3%
    Clinton: 11.8%
    Bush II: 15.1%
    Obama: 15.3%

    Mayer and Newman (Reagan appointees) are near polar opposites. Mayer is virulently anti-patent.

    Of the Obama nominees, Hughes and Chen are both at 8% and Reyna is at 10%, and they represent the worst from Obama. On the other hand, Wallach, O’Malley, and Taranto, and Stoll are considerably better.

    Prost (7%) is balanced by Moore (20%) for the Bush II appointees. All of the Bush I appointees, with the exception of Plager (who rarely participates), are bad.

  2. Paul Cole August 30, 2019 2:24 am

    Congratulations on this ground-breaking and excellent paper.

    I plan to write a paper on TRIPS non-compliance when preparations for publishing the CIPA Guide, 9thEd. are complete in a few days time and to distribute it widely to responsible people both in the UK and in the US. In my view this is an important reference which will significantly strengthen the case to be put forward. So sincere thanks are due.

  3. Paul Cole August 30, 2019 2:37 am

    In relation to Judge Mayer we should recall a previous posting:

    https://www.ipwatchdog.com/2016/10/06/judge-mayer-step-down-federal-circuit/id=73567/

    From my distant perspective, I find it astonishing that a person originally with a science degree and having accepted a judgeship in the CAFC should be anti-patent as appears to be the case.

  4. UK Observer August 30, 2019 5:39 am

    Are you actually comparing with the right period? Do you need to account for the slightly reduced scope that came out of Bilski or should you be comparing it with the wild west (IMHO) approach to patenting that State Street brought about.

    On a personal view, Alice is much more aligned with the rest of the world. Its only my view but I would suggest that when we see US priority documents especially in the computing and business environments they now have much more credibility. Under State Street pretty much anything you saw, especially in the business method areas invarialbly got short schrift from the Examiner. It was never said but I always got the feeing the Examiners at national offices here took one look, wrote a standard report and were saying would you like to try and explain patent law to you US colleague. I do feel they were having a good chuckle at our expense.

    What we are seeing post Alice is more emphasis being place on what technically your application does. It goes a long way to help explain to the Examiner why they should allow it rather than invite yhe standard response. You need to tell a technical story not a business story is a useful strategy.

  5. Software Inventor August 30, 2019 8:39 am

    The data doesn’t lie!

    What a scam, a disgrace! The US patent system is officially dead.

    As an industry, let’s be sure to fully disclose and disseminate:

    USPTO: put this data on your home page; place disclaimer on all issued patents; Director Iancu, substitute into your keynote presentations

    Law Schools: Use this data in your lesson plans

    Bar Associations: Disseminate copies to all IP attorneys; require full disclosure by membership to prospective clients

    Attorneys: Disclose this data on all representation letters to prospective inventors

    US Treasury: Place disclaimer on all long bonds

    Inventors: it is your money that funds this industry, and you are being abused like this.

    Let’s start talking about what patents in this country really are: worthless

  6. TFCFM August 30, 2019 10:16 am

    Defenders of Queen Alice and her critics go back and forth endlessly…

    Who would “Defenders of … Alice” be?

    In a perhaps-unprecedented show of unanimity in the patent bar, I don’t believe I’ve heard — in five years — ANYBODY who insists that the Alice decision/test is an appropriate or workable one.

    The Federal Circuit, the Board at the USPTO, and district courts hold their noses and apply it (as they must). Litigants who win on account of Alice (like those who win for any other reason) are, surely, pleased — but even then, I haven’t heard them describe Alice as a proper, workable test.

    It is inevitable that patent-seekers will push the margins of the patent law wherever they see potential $$$. It seems to me that Congress simply has no alternative at this point than to sit down and make the hard decision about what kinds of technology shall be elgible for what kind of IP protection.

    In my view, it’s wise to consider a clear boundary (unlike Alice) for patentable subject matter, wherever that boundary may be drawn. I think it may also be wise to consider a new form of IP protection — intermediate between copyright-like and patent-like protection — for software/algorithms. Perhaps a petit-patent or utility-model type of protection which loosens the disclosure requirements, but also shortens the period and narrows the scope of protection.

  7. Anon August 30, 2019 11:15 am

    Alice is the Caligula of the patent world. Mad Empress.

  8. Fanc Bilburgh August 30, 2019 11:34 am

    There is no doubt they will fix 101 BUT “FAANG” will carve out a new loophole so they do not have to pay IP holders a license fee. Inventors have zero confidence Congress will get this right. Patents in America will remain dead and inventors are, and will be looking to other countries where real patent protection exists. Game over for America, Greed will kill it self and America is showing us how its done. Its hear breaking never the less. 🙁

  9. Pro Say August 30, 2019 1:50 pm

    Thanks Robert — excellent job indeed.

    As these painful, undeniable facts prove beyond a shadow of a doubt, the unconstitutional Alice decision has been (and continues to be) a crushing blow to American innovation.

    Congress — September is almost here and Fall is just around the corner.

    Where are those eligibility reforms our Country so desperately needs?

  10. Anon August 30, 2019 3:07 pm

    My sister Anon (not the usual one) above expresses a sentiment with which I do not entirely disagree with.

    In fact, I also happen to agree with TFCFM above: “In a perhaps-unprecedented show of unanimity in the patent bar, I don’t believe I’ve heard — in five years — ANYBODY who insists that the Alice decision/test is an appropriate or workable one.” — but with a caveat.

    The caveat is that this applies to every single member of the bar that I personally deal with.

    However, there is a LOUD section of (purported) bar members (notably at that “other blog”) that runs exactly 180 degrees counter to this view expressed by TFCFM.

    It does not take much grey matter at all to figure out why.

  11. Night Writer August 31, 2019 6:55 am

    What Alice feels like is the complete upending of patent law. The Scotus just wiped out the entire patent statute and put a test upfront that incorporates all the sections of the Patent Act and attached them to a word “abstract” where the judge can decide whether to invalidate claims absent any previous case law and absent any facts. Alice is best thought of as equity. The Scotus put a test in that says if the judges feels the claims are too broad or cover technologies that the judge doesn’t like, then no problem. The judge may invalidate them by fabricating ridiculous arguments. And—be clear–with Alice any claim can be invalidated with judge arguments.

    It feels like a complete violation of the Constitution, the Rule of Law, and common decency.

    The justices did all this too based on the briefs they received. None of them have the slightest idea about how to think about innovation and science.

  12. Night Writer August 31, 2019 7:23 am

    @10 Anon

    Anon’s point about some patent attorneys claiming that Alice is rational and good for patent law points to the fact that many people are being paid to weaken and destroy patents. And the methods they use go far beyond lobbying Congress. We know that many academics receive money to write papers (e.g., there was an article about Google paying law professors as much as $60K to write a paper to an abstract written by Google) and we know other professors like Lemley admit to making many millions by weakening patents (e.g., Lemley’s wife is a former Google executive and Lemley has admitted that weakening patents has made him very rich).

    Plus we have people on the pharma said that desperate need patents and feel that their best hope is throw the rest of us off the boat to reduce the collateral damage they are receiving.

  13. angry dude September 3, 2019 10:21 am

    The fate of all mankind I see is in the hands of fools…

    “anything under the sun made by man” – that’s all it should be for “patent eligibility”

    hardware, software, chemicals, plants etc etc. – should not matter at all

  14. angry dude September 3, 2019 10:41 am

    TFCFM @6

    “I think it may also be wise to consider a new form of IP protection — intermediate between copyright-like and patent-like protection — for software/algorithms. Perhaps a petit-patent or utility-model type of protection which loosens the disclosure requirements, but also shortens the period and narrows the scope of protection”

    Dude, you have no clue whatsoever about the subject

    There is no software algo vs hardware distinction – once put on ASIC silicon chip or even re-programmable/re-configurable FPGA any computational algorithm becomes a pure hardware machine – without any “ifs”

    “software algorithm = hardware”

    Write it on your forehead and give it a rest already, pleeeeeaze

    P.S. Disclosure requirements should be considerably hardened, not loosened…
    Complete enablement, that is – working source code in the patent, or at least very detailed flowcharts or pseudo code
    AIA and Alice should be discarded, injunctions should be restored to pre-EBay state
    Alas, not gonna happen in this country full of people like you

  15. angry dude September 3, 2019 3:03 pm

    UK Observer @4

    “You need to tell a technical story not a business story is a useful strategy”

    Please define technical story vs business story in legal context

    Much healthier solution would be to stick to the original US Constitution as written by the Founding Fathers and to grant US patents for everything that “promotes the progress” – that is novel and unobvious

    It also uses particular word “discovery” – not “apparatus” or “gadget”

    It has to be useful of course, for utility patent, thus not abstract by definition

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