University of Minnesota Law School University of Minnesota Law School
Scholarship Repository Scholarship Repository
Minnesota Law Review
2020
Eligible Subject Matter at the Patent Office: An Empirical Study of Eligible Subject Matter at the Patent Office: An Empirical Study of
the Influence of Alice on Patent Examiners and Patent Applicants the Influence of Alice on Patent Examiners and Patent Applicants
Jay P. Kesan Wang, Runhua
Follow this and additional works at: https://scholarship.law.umn.edu/mlr
Part of the Law Commons
Recommended Citation Recommended Citation Kesan, Jay P. Wang, Runhua, "Eligible Subject Matter at the Patent Office: An Empirical Study of the Influence of Alice on Patent Examiners and Patent Applicants" (2020). Minnesota Law Review. 3212. https://scholarship.law.umn.edu/mlr/3212
This Article is brought to you for free and open access by the University of Minnesota Law School. It has been accepted for inclusion in Minnesota Law Review collection by an authorized administrator of the Scholarship Repository. For more information, please contact [email protected].
527
Article
EligibleSubjectMatteratthePatentOffice:AnEmpiricalStudyoftheInfluenceofAliceonPatentExaminersandPatentApplicants
JayP.Kesan†andRunhuaWang††
Introduction............................................................................................................528I.TheSupremeCourtDecisioninAliceCorp.v.CLSBank..................536
A. TheAliceDecisionRegardingEligibleSubjectMatter.........5371. AbstractIdeaandStatutoryLimits.....................................5372. ImplementationbythePTO...................................................543
B. UncertaintiesinEligibleSubjectMatter....................................5451. InnovationandUncertaintiesCreatedbythe
LanguageofJudicialExceptions...........................................5452. UncertaintiesintheFederalCourts....................................5463. UncertaintiesatthePTO..........................................................5504. PreviousEmpiricalStudiesofOfficeActionsby
thePTO............................................................................................5525. RevisedGuidancefromthePTOtoReduceThese
Uncertainties.................................................................................553II.EmpiricalStudyoftheImpactofAliceonPatentProsecution...555
A. DataandMethodology......................................................................5551. DataSourcesandStudyObjects...........................................5562. DescriptiveAnalyses..................................................................5593. Methodology..................................................................................564
B. RegressionResults..............................................................................5681. CorrelationBetweenAliceRejectionsandOther
StatutoryRejections...................................................................5682. Difference-in-DifferenceRegressionResults..................573
III.Implications....................................................................................................588
† JayP.KesanisProfessorandH.Ross&HelenWorkmanResearchScholarattheUniversityofIllinoisatUrbana-Champaign.Copyright©2020byJayP.Kesan.
†† RunhuaWangisanEmpiricalIntellectualPropertyFellowatIllinoisInsituteofTechnologyChicago-KentCollegeofLaw.Copyright©2020byRunhuaWang.
528 MINNESOTALAWREVIEW [105:527
A. Increased§101RejectionsbyUSPTOPatentExaminers...............................................................................................5881. Bioinformatics..............................................................................5892. BusinessMethods.......................................................................5903. SoftwareArtUnits......................................................................591
B. TheAbilityofPatentApplicantstoOvercome§101Rejections................................................................................................5931. DifficultiesinOvercoming§101Rejectionsin
Bioinformatics..............................................................................5932. DiverseReactionsinBusinessMethodsand
Software..........................................................................................596C. TheFutureofShiftingTransactionCoststothePTO...........599
Conclusion...............................................................................................................604Appendices..............................................................................................................605
AppendixA......................................................................................................605AppendixB......................................................................................................608AppendixC......................................................................................................608AppendixD.....................................................................................................615
INTRODUCTIONInMay2019,SenatorsTillisandCoonsandRepresentativesCol-
lins,Johnson,andStiversdraftedabilltoreform35U.S.C.§101ofthePatentActtoaddressissuesrelatedtopatenteligibility.1SincetheSu-premeCourtrulinginAliceCorp.v.CLSBank,2theindustryhasbeenconfronting uncertainties in the prosecution of patent applicationsandinpatentenforcementasaresultofthelawgoverningpatenteli-gibility,whicharguablyharms innovation.3In thenextyearor two,Congressisonceagainlikelytobeunderpressuretoaddresseligiblesubjectmatterreform,astheU.S.SupremeCourthasrecentlychosennottorevisitthistopicbydenyingcertiorari inaseriesofcasesin-volvingpatentablesubjectmatterinboththesoftwareandbiotech-nologyfields.4
1. Sens.TillisandCoonsandReps.Collins,Johnson,andStiversReleaseDraftBillTexttoReformSection101ofthePatentAct,THOMTILLISU.S.SENATORFORN.C.(May22,2019), https://www.tillis.senate.gov/2019/5/sens-tillis-and-coons-and-reps-collins-johnson-and-stivers-release-draft-bill-text-to-reform-section-101-of-the-patent-act[https://perma.cc/KU5S-LRDV]. 2. AliceCorp.Pty.Ltd.v.CLSBankInt’l,134S.Ct.2347(2014). 3. SeeGeneQuinn,TheRoadForwardforSoftwarePatentsPost-Alice,IPWATCH-DOG (Feb. 25, 2015), http://www.ipwatchdog.com/2015/02/25/the-road-forward-for-software-patents-post-alice[https://perma.cc/UWM5-KL2G]. 4. TheSupremeCourthasrecentlydeniedcertiorariintheseelevenpatenteli-gibilitypetitions:Berkheimerv.HPInc.,881F.3d1360(Fed.Cir.2018),cert.denied,
2020] IMPLICATIONSOFALICE 529
EligiblesubjectmatterinpatentlawisathresholdrequirementofpatentabilityandreferstosubjectmatterthatcanlegitimatelybethesubjectofaU.S.patent.5Patentlawacceptsfourcategoriesofin-ventions—machines,articlesofmanufacture,compositionsofmatter,andprocesses—asproperlybeingthesubjectofaU.S.patent.6Byju-dicial exceptions, however, abstract ideas, natural phenomena, andlawsofnaturearecategoricallyexcludedfrompatentprotection.7Ithas been difficult to definewhat the three categories of exclusionsmeaninpractice,partlybecausethemeaningsoftheseexclusionsareunclear.Asaresult,courtshavestruggledtospecifylegalteststoop-erationalizetheseexclusions.
140S.Ct.911(2020);VandaPharms.Inc.v.West-WardPharms.Int’lLtd.,887F.3d1117(Fed.Cir.2018),cert.denied,140S.Ct.911(2020);AthenaDiagnostics,Inc.v.MayoCollaborativeServs.,LLC,915F.3d743(Fed.Cir.2019),cert.denied,140S.Ct.855(2020);PowerAnalyticsCorp.v.OperationTech.,Inc.,748F.App’x334(Fed.Cir.2019),cert.denied,140S.Ct.910(2020);CellspinSoft,Inc.v.Fitbit,Inc.,927F.3d1306(Fed.Cir.2019),cert.denied,140S.Ct.907(2020);ChargePoint,Inc.v.SemaConnect,Inc.,920F.3d759(Fed.Cir.2019),cert.denied,140S.Ct.983(2020);TradingTechs.Int’l, Inc.v. IBGLLC,767F.App’x1006(Fed.Cir.2019),cert.denied,140S.Ct.955(2020);TradingTechs.Int’l,Inc.v.IBGLLC,921F.3d1084(Fed.Cir.2019),cert.denied,140S.Ct.954(2020);SRIInt’l,Inc.v.CiscoSys.,773F.App’x1090(Fed.Cir.2019),cert.denied,140S.Ct.1108(2020);Maxell,Ltd.v.FandangoMedia,LLC,779Fed.App’x745(Fed.Cir.2019),cert.denied,140S.Ct.2509(2020);Reesev.SprintNextelCorp.,774F.App’x656(Fed.Cir.2019),cert.denied,140S.Ct.2507(2020).
Thus,patenteligibilityisstillacontinuingproblemunaddressedbytheSupremeCourtwhichperhapsopensthedoorforCongresstoact.SeeViewsfromtheTop: IPLeadersSoundOffonSupremeCourt’sRefusal toWade intoPatentEligibilityDebate,IPWATCHDOG(Jan.13,2020),https://www.ipwatchdog.com/2020/01/13/views-from-the-top-ip-leaders-sound-off-on-supreme-courts-refusal-to-wade-into-patent-eligibility-debate[https://perma.cc/HY2U-LUM3](criticizingthepassivereactionsoftheSupremeCourtandtheFederalCircuitthatwillharmthedomesticeconomyandtechnologydevelopmentintheU.S.,whichshouldbetakencareofbyCongress);seealsoGeneQuinn,AWindowIsOpen toSaveU.S.Patents—Don’tLet ItSlamShut, IP-WATCHDOG(Feb.2,2020),https://www.ipwatchdog.com/2020/02/02/window-open-save-us-patents-dont-let-slam-shut [https://perma.cc/7EVD-UUFR] (urging Con-gresstohandlethechaosaboutpatenteligibilitycausedbythejudicialsystemforin-novation). 5. SHUBHAGHOSH,RICHARDS.GRUNER&JAYP.KESAN,INTELLECTUALPROPERTY:PRI-VATERIGHTS,THEPUBLICINTEREST,ANDTHEREGULATIONOFCREATIVEACTIVITY289(3ded.2016)(“Section101ofthePatentActdescribestheinventionsanddiscoverieseligibleforpatentprotection,alsoknownas‘patentablesubjectmatter.’”). 6. 35U.S.C.§101(“Whoeverinventsordiscoversanynewandusefulprocess,machine,manufacture,orcompositionofmatter,oranynewandusefulimprovementthereof,mayobtainapatenttherefor,subjecttotheconditionsandrequirementsofthistitle.”). 7. Gottschalkv.Benson,409U.S.63,67(1972)(“Phenomenaofnature,thoughjustdiscovered,mentalprocesses,andabstractintellectualconceptsarenotpatenta-ble,astheyarethebasictoolsofscientificandtechnologicalwork.”).
530 MINNESOTALAWREVIEW [105:527
Since2010, theU.S.SupremeCourthasmadethree forays intodefiningthejudicialexclusionsinBilski,Mayo,andAlice.8Thesecasesmotivatedthedraftingofthe“Coons-Tillis”billtoreform§101ofthePatentAct.9Mostrecently,in2014,theU.S.SupremeCourtaddressedtheabstractideasexceptionandoutlinedatwo-parttestfordetermin-ing thescopeofpatent-eligiblesubjectmatter inAlice.10In the firststep,theCourtaskswhetherthepatentclaimatissueisorincorpo-rates an abstract idea.11 If not, the claim is patent-eligible.12 If theclaiminvolvesanabstractidea,however,thesecondstepapplies,andtheCourtaskswhethertheabstractideahasbeentransformedintoaninventiveconceptbyincludingadditionallimitationstothepatentclaim,therebyrenderingtheclaimeligibleforpatentprotection.13
TheAlicedecisionhasbeenineffectforoverfiveyears.14Thereissignificantscholarlydebateaboutwhetherthecurrentlawaddress-ing eligible subject matter after Alice creates uncertainties andwhetherAlice fails to providemeaningful guidance. Some scholarsworrythattheAliceframeworkharmsinnovation.15Becauseofuncer-taintiesinpatentingstandards,inventorsmayprefertohavetheirin-novationsprotectedundertradesecretlawinsteadofrelyingonthecurrentpatentregime.16Moreover,financiersandventurecapitalists
8. Bilskiv.Kappos,561U.S.593 (2010);MayoCollaborativeServs.v.Prome-theusLab’ys,Inc.,566U.S.66(2012);AliceCorp.Pty.Ltd.v.CLSBankInt’l,134S.Ct.2347(2014). 9. SeeSens.TillisandCoonsandReps.Collins,Johnson,andStiversReleaseDraftBillTexttoReformSection101ofthePatentAct,supranote1(“Noimplicitorotherjudicially created exceptions to subjectmatter eligibility, including ‘abstract ideas,’‘lawsofnature,’or‘naturalphenomena,’shallbeusedtodeterminepatenteligibilityundersection101,andallcasesestablishingorinterpretingthoseexceptionstoeligi-bility are hereby abrogated.”);MichaelBorella,Senate Subcommittee on IntellectualPropertyHoldsHearingsonProposedRevisionsto35U.S.C.§101,PAT.DOCS(June17,2019), https://www.patentdocs.org/2019/06/senate-subcommittee-on-intellectual-property-holds-hearings-on-proposed-revisions-to-35-usc-101.html [https://perma.cc/S4C6-XRE2] (“Themotivationbehind thebill and thesehearingswas thewide-spreadunderstandingthataseriesofSupremeCourtdecisionsinthelastdecade...had‘madeahash’ofpatenteligibility.”). 10. AliceCorp.Pty.Ltd.,134S.Ct.at2355(citingMayo,566U.S.at75–80). 11. Id. 12. Id. 13. Id. 14. Id.at2347. 15. See,e.g.,Quinn,supranote3(interviewingScottAlterwhobelievesthatAliceis“arguablynotagooddecision,”foritharmsinnovationincentivesanddoesnotre-wardandprotectinnovation). 16. SeeJoannaBrougher&KonstantinM.Linnik,PatentsorPatients:WhoLoses?,32NATUREBIOTECHNOLOGY877,880(2014)(suggestingthatsomeinventorsmayhave
2020] IMPLICATIONSOFALICE 531
relyonthepredictabilityofthepatentlawsandtheavailabilityofpa-tentprotectiontoassesstheeconomicviabilityoftheinnovationsinwhichtheymightinvest.17Accordingly,investorspreferreliableandreasonableexpectationsregardingthelawthatgovernspatenteligi-bilitysotheycanminimizeeconomiclossandmaximizeeconomicef-ficiency.18Notall scholars,however,agree thatAliceharms innova-tion.MarkLemley argues that stringent restrictionspreventing thepatentingofabstractinventionswillresultinamorecompetitivere-search and development (R&D) environment. 19 Jason Schultz andBrianLovebelievethatpatentsareusedasadefensiveweaponandthusarelesslikelytobetheresultofadesiretoprotectinvestmentsinR&Dorrewardinnovation.20JoshuaSarnoffisinfavorofthecur-rentjudicialexclusionsthatprotect“thepublicdomainofscience,na-ture,andideas”from“unwarrantedencroachment.”21Thesescholarlydebateswerereflectedinthehearingsonproposedlegislationtore-formpatentlaw.22ItiscurrentlyunclearifabillabrogatingAliceand
theirinventionsprotectedunderthetradesecretmechanisminsteadofpatentunderthiscircumstance). 17. See Ognjen Zivojnovic,Patentable SubjectMatter AfterAlice–DistinguishingNarrow Software Patents from Overly Broad Business Method Patents, 30 BERKELEYTECH.L.J.807,838(2015)(suggestingthatwemustweighthebenefitbroughtbythisinventionagainstthesocialcostofagrantedpatent). 18. SeeBenDugan,MechanizingAlice:AutomatingtheSubjectMatterEligibilityTestofAlicev.CLSBank,2018U.ILL.J.L.TECH.&POL’Y33,41(2018)(arguingthatrea-sonableandreliablepredictionbasedonAlicecansaveasignificantamountoftimeandcost). 19. MarkA.Lemley,MichaelRisch,TedSichelman&R.PolkWagner,LifeAfterBilski,63STAN.L.REV.1315,1331(2011). 20. JasonM.Schultz&BrianJ.Love,BriefofAmiciCuriaeLaw,Business,andEco-nomicsScholarsinSupportofRespondentsinAliceCorp.Pty.Ltd.v.CLSBankInterna-tional,etal.,4N.Y.U.J.INTELL.PROP.&ENT.L.358,366(2015). 21. TheStateofPatentEligibilityinAmerica,PartI:HearingBeforetheSubcomm.onIntell.Prop.oftheS.Comm.ontheJudiciary,116thCong.13–23(2019)(statementof Professor Joshua D. Sarnoff, Professor of Law, DePaul University), https://www.judiciary.senate.gov/imo/media/doc/Sarnoff%20Testimony.pdf [https://perma.cc/R9KQ-C9CX](criticizingthe“Coons-Tillis”billforharminginnovationbyitsoverpro-tectionofpatentsinsteadofpreservingthepublicdomain). 22. SeeBorella,supranote9;seealsoJasonRantanen,GuestPostbyProf.Ghosh:AFitter Statute for the Common Law of Patents, PATENTLY-O (Aug. 1, 2019), https://patentlyo.com/patent/2019/08/fitter-statute-patents.html [https://perma.cc/BBQ6-ZQ8X](arguingthatthe“Coons-Tillis”billwouldlimitjudicialexceptionstothePatentActandwouldlikelybefoundunconstitutional);Briefof19LawProfessorsasAmiciCuriaeinSupportofPetitionforaWritofCertiorari,Sequenom,Inc.v.AriosaDiagnos-tics, Inc.,788F.3d1371(Fed.Cir.2015) (Nos.2014-1139,2014-1144) (noting thatlowercourtshave invalidatedpatents thatare legitimatebecause theyhavemisap-pliedtheAlicetest).
532 MINNESOTALAWREVIEW [105:527
other judicial exceptionswill be enacted, and thewidespread con-cernsaboutAlicepersist.
WhiletheAlicetestforeligiblesubjectmatterismostapplicableto computer-implemented inventions (i.e., computer software), 23lowercourtdecisionspost-AliceshowthatnoneofthepatentclaimsinanytechnologyareaaresparedfromreviewundertheAliceframe-work (e.g., an improved high-performance computer memory sys-tem).24Businessmethodsthataresoftware-implementedandinvolvethe Internet often develop new types of e-commerce.25 Patents onbusinessmethods,asubjectareasimilartothepatentatissueinAlice,maybeeligibleforpatentprotection,unlesstheymerelyinvolveanabstractideaandareinsufficientlytiedtoaparticularreal-worldim-plementation.26 Ognjen Zivojnovic believes that Alice kills all purebusiness methods patents because all business methods patentsmerelyreciteanabstracteconomicpracticeandsimplyemployagen-eral purpose computer to implement the businessmethod.27 PeterMenellagreesthattheU.S.ConstitutionandthePatentActwerenotmeanttoprotectbusinessmethods.28Bycontrast,AlexDejeanarguesthat technologicalapplications, suchasonlineshopping, individual-izedadvertising,andautomatedcustomerservice, ledtoatransfor-mation in the patent-eligibility of computer-implemented subjects,
23. TysverBeckEvans,ApplyingStepOneoftheAlice/MayoTest,BITLAW:GUID-ANCE,https://www.bitlaw.com/guidance/patent/applying-step-one-of-Alice-Mayo-test.html [https://perma.cc/68MY-66ZQ] (indicating “[a]ll three of the identifiedshadowtestsseemmostapplicabletocomputer-implemented”inventions,althoughtheymaybeapplicabletootherareasaswell). 24. HungH.Bui,ACommonSenseApproachtoImplementtheSupremeCourt’sAl-iceTwo-StepFrameworktoProvide“Certainty”and“Predictability,”100J.PAT.&TRADE-MARKOFF.SOC’Y165,230(2018). 25. Nam Kim, Software and Business Method Inventions After Alice, SHEPPARDMULLIN (Sept. 23, 2016), https://www.intellectualpropertylawblog.com/archives/software-and-business-method-inventions-after-alice[https://perma.cc/64TB-2YCC](“Businessmethodsrefertomethodsofdoingbusiness,includingnewtypesofe-com-merce,insurance,banking,etc.,oftenimplementedassoftwareincomputersandin-volvingtheInternet.”). 26. Bilskiv.Kappos,561U.S.593,608–09(2010);seealsoZivojnovic,supranote17,at813(explaininghowcourtsdonotapprovepatenteligibilityforsoftwarethatdoesnotaccompanynewandusefulhardware);MarkA.Lemley,SoftwarePatentsandtheReturnofFunctionalClaiming,2013WIS.L.REV.905,962(2013)(notingthatmostbutnotallFederalCircuitdecisionsafterBilskihavedeniedsoftwarepatentclaims). 27. Zivojnovic,supranote17,at827. 28. PeterS.Menell,FortyYearsofWonderingintheWildernessandNoClosertothePromisedLand:Bilski’sSuperficialTextualismandtheMissedOpportunitytoReturnPatentLawtoItsTechnologyMooring,63STAN.L.REV.1289,1312–13(2011)(“Thereisnoreasontobelievethat‘businessmethods’havebecomeascienceortechnologyfittingthefunctionalpatentmoldduringthecourseofthepasttwocenturies.”).
2020] IMPLICATIONSOFALICE 533
includingbusinessmethods.29Along the same lines,DavidReardonandGeneQuinnurgethatAlicemustbereversedbecausethetrans-formativecharacteristicsofsoftwarearetechnologicalinnature.30
In addition to software and businessmethods,Alice has nega-tivelyimpactedpatenteligibilityinbiotechnology(e.g.,biocomputingandbioinformatics).31HallieWimberlysuggeststhatCongressortheSupremeCourtshouldbroadenthescopeofpatentsubjectmatterel-igibilitybecauseofthehighburdenplacedonbiotechnologicalinven-tionsafterAlice.32TheBiotechnologyIndustryOrganization(BIO)andPharmaceutical Research and Manufacturers of America (PhRMA)botharguethattherestrictionsoneligiblesubjectmatterafterAliceshouldbeloosened.33
TheAlice test impacts theentire lifecycleofapatent, includingpatentapplicationpreparation,patentprosecutionintheU.S.PatentandTrademarkOffice (PTO), andpatent enforcement in the courtsandinpost-issuanceproceedingsinthePTO.34Thiscreatessignificant
29. AlexDejean,ACritiqueoftheSupremeCourtHoldinginAliceCorpv.CLSBankwithNewRhetoric,12COLLOQUY52,59(2016). 30. DavidReardon&GeneQuinn,AliceisDueforReversal:ScienceProvesItsRea-soning Unsound, IPWATCHDOG (Mar. 21, 2019), http://www.ipwatchdog.com/2019/03/21/alice-due-reversal-science-proves-reasoning-unsound[https://perma.cc/5P36-XY9B](claimingthatallactivesoftwareisastransformativeas“DNA[m]anipu-lation,a[f]orge,or[p]harmaceuticals”). 31. EugeneKim,BiotechPatentEligibility:ANewHope,2017COLUM.BUS.L.REV.1157,1160(2017)(“[T]hisframeworkwasusedtodenypatenteligibilityforanon-invasivemethodof accessing fetalDNAusingpreviouslydiscardedcell-free cffDNAand amethod for gene detection by amplifying and analyzing significantly shorter‘non-codingregionsknowntobe linked to thecodingregion’of interest.”);seealsoAriosaDiagnostics,Inc.v.Sequenom,Inc.,788F.3d1371(2015)(holdingthataprena-talfetalDNAtestwasnotpatenteligiblebecauseitwasdirectedatanaturalphenom-enon);GeneticTechs.Ltd.v.MerialL.L.C.,818F.3d1369(2016)(holdingthatapatentfordetectionofgeneticvariationswasinvalidbecauseitwasdirectedatlawofnature);LidiaYamamoto,DanielSchreckling&ThomasMeyer,Self-ReplicatingandSelf-Modi-fyingProgramsinFraglets,2BIO-INSPIREDMODELSNETWORK,INFO.,&COMPUTINGSYS.159(2007)(“Artificialchemicalcomputingmodelsaregainingincreasingprominenceinthe design of bio-inspired software with self-organizing and emergent proper-ties....”). 32. HallieWimberly,Comment,TheChangingLandscapeofPatentSubjectMatterEligibility and Its Impact onBiotechnological Innovation, 54HOUS.L.REV. 995,1025(2017)(“Consideringtheoutspokendissatisfactionwiththestrictstandard,thetimeisaptforeithertheSupremeCourttorevisitthematterandbroadenthescopeofpa-tentsubjectmattereligibilityorforCongresstostepinandreiteratetheideathatpa-tentablesubjectmattershouldbegivenbroadscope.”). 33. Id.at1020. 34. Dugan,supranote18,at41.
534 MINNESOTALAWREVIEW [105:527
uncertaintiesinalloftheseproceedings.35PaulGugliuzzaandLemleyempiricallyreviewed104FederalCircuitdecisionsonpatentablesub-jectmatterafterAlice.36LemleyandSamanthaZyontzalsoempiricallyreviewed808federalcourtdecisionsaboutpatentablesubjectmatterafterAlice.37DataontheimpactofAliceonpatentprosecutionarealsobeing updated on blogs by patent practitioners and commentators(e.g.,BilskiBlog,IPWatchdog,andthelike).38Thatsaid,thereislim-itedempiricalworkfocusingontheuncertaintiesinpatentprosecu-tionsystematically.TherearenostudiesregardingAlice’simpactonpatentexaminersatthePTOinvarioustechnologycenters,noronpa-tent applicants’ responses to theAlice regime or patent applicants’ability toovercomeeligible subjectmatter rejectionsduringpatentprosecution.39
ThisArticlepresentsacausalempiricalstudyofAliceandcare-fullyexploreshowAliceimpactspatentexaminersandpatentappli-cantsinvarioustechnologyareas.Itconsidershowpatentapplicantsemploydifferentstrategies(e.g.,filingamendedpatentclaims,filingnewpatentapplications,orchoosingtoabandonorneverseekpatentprotection)toovercomePTOrejectionsforineligiblesubjectmatterbycomplyingwithAlice.ThestudydeploysdataofallthePTOofficeactions over the five-year period between 2012 and 2016, roughlytwoyearsbeforeandaftertheAlicedecisionin2014.Itcoversatotalof4.48millionpatentofficeactionsandpatenteeresponses.Thestudyalsocontainsdetailsregardingartunitsandthespecificgroundsfortherejectionsgivenbypatentexaminers.Ourmethodologiesincludelogisticregressionsanddifference-in-difference(D-i-D)regressions.Logisticregressionsaredeployedtoexploretheassociationbetween
35. SeeJasperL.Tran,TwoYearsAfterAlicev.CLSBank,98J.PAT.&TRADEMARKOFF.SOC’Y 354,358–59 (2016) (showing statistical evidence that thePTABand theFederalCircuitinvalidatedalargeproportionofpatentsafterAliceunder§101). 36. PaulR.Gugliuzza&MarkA.Lemley,CanaCourtChangetheLawbySayingNothing?,71VAND.L.REV.765,767(2018). 37. MarkA. Lemley& Samantha Zyontz, DoesAlice Target Patent Trolls? (un-publishedmanuscript)(onfilewithauthors). 38. See, e.g., Robert Sachs, Alice: Benevolent Despot or Tyrant? Analyzing FiveYearsofCaseLawSinceAlicev.CLSBank:Part1,IPWATCHDOG(Aug.29,2019),https://www.ipwatchdog.com/2019/08/29/alice-benevolent-despot-or-tyrant-analyzing-five-years-of-case-law-since-alice-v-cls-bank-part-I[https://perma.cc/ZG37-PEDG](findingthattheAlicetesthasresultedinasignificantnumberofrejectionsforpatentineligiblesubjectmatterandabandonedapplications). 39. But seeColleenChien& JiunYingWu,DecodingPatentable SubjectMatter,2018PATENTLY-OPAT.L.J.1(Oct.16,2018),https://patentlyo.com/media/2018/10/Chien.Decoding101.2018.pdf[https://perma.cc/M3JQ-KH6U](presentingastatisticalanalysisofofficeactions).
2020] IMPLICATIONSOFALICE 535
thepatentclaimrejectionsunderAliceandstatutoryrejectionsgivenbyexaminersunder35U.S.C.§§101,102,103,and112(a)–(f).Thisstudyalsoexploresthecorrelationbetween§101rejectionsandtheotherstatutoryrejectionsbecausetheAlicedecisionimplicatesnov-elty,obviousness,writtendescription,enablement,andclaimdefinite-nessunderthePatentAct.ThestudydeploysD-i-Dregressionstoex-plorewhetherAliceresultsinmore§101rejectionsinthesoftware,business methods, and biotechnology areas, and sub-categorieswithin those three areas. Patent applications in themanufacturingsectorareselectedas thecontrolgroupbecausetheyarerarelyre-jectedundertheabstractideasexclusionandarethereforeveryun-likelytobeaffectedbyAlice.Thestudycomparespatentapplicationsinthecontrolgroupwiththepatentapplicationsinthreetechnologyareas—business methods, bioinformatics, and software—and in-cludesbroadandnarrowdefinitionsforthesecategories.
ThestudydemonstratesthattheU.S.SupremeCourt’sdecisioninAliceimpactspatenteligibilityindifferenttechnologyareastodiffer-entdegrees.Moreover,theimplementationofthedecisionbythePTOstrengthenedtheeffectsofthedecision.Inallthreebroadtechnologyareasthatwestudied,applicantsreceivedmoreAlicerejectionsand§101rejectionsafterAlice;theyarepositivelyassociated.Alicerejec-tionsarenotalwayspositivelyassociatedwithothertypesofstatu-toryrejections,however.Moreover,patentapplicantsinallthreetech-nology areas filed fewer patent applications post-Alice, with thegreatest reduction occurring in bioinformatics. Patentees adjustedtheirpatentingstrategiesafterAlice.Somestrategieseffectivelyover-came§101rejections,butothersdidnot.
Aliceplacesthehighestcostofpatentingonbioinformatics.40Ap-plicationsforbioinformaticsreceivedmanymore§101rejectionsbe-causeofAlice,andtheapplicantsalsoexperienceddifficultiesinover-comingtheserejections.Similarly,applicationsforbusinessmethodsreceivedmore§101rejectionsbecauseofAlice.41Nevertheless,aver-age applicants in business methods learned from Alice, receivingfewer§101rejectionswhentheyfiledapplicationspost-Alice.Appli-cantsinthebusinessmethodsofe-commerceandfinance,however,stillfounditdifficulttoovercome§101rejectionsbothpost-Aliceandwhenrespondingtotheexaminers’initialroundofrejectionsunder§101.Alicealsoimposedvaryingdegreesofcostofpatentingfordif-ferenttypesofsoftwareinventions(e.g.,cryptographyandsecurity,
40. SeeinfraPartIII.A.1. 41. SeeinfraPartIII.A.2.
536 MINNESOTALAWREVIEW [105:527
databasesandfilemanagement,GUIanddocumentprocessing,com-puterarchitecture,digitalandopticalcommunication,computernet-works,telecommunications,digitalcameras,recordingandcompres-sion,computergraphicsprocessing, telemetryandcodegeneration,and artificial intelligence (AI)). Some art units related to softwarefacedhighercostsofpatentingafterAlice,42butAlicemightnotbeadirectorsignificantreasonforthe increasinguncertainties inotherartunitsrelatedtosoftware.OurempiricalresultsportrayamurkypictureofhowAliceplaysoutindifferenttechnologysectors—quiteunworkableinseveralsectors,yetprovidingpredictableguidanceinafewareas.
PartIofthisArticleintroducestheeligiblesubjectmattertestun-derAliceandexplainshowithasbeenimplementedbycourtsandthePTO,includingthePatentTrialandAppealsBoard(PTAB)andpatentexaminersinexparteprosecution.ThetestfordeterminingwhetherapatentclaimisabstractunderAlice,therebyfallingwithinajudicialexceptionto35U.S.C.§101,shouldnotbefaciallyconfusedwithotherstatutory patentability requirements, such as novelty in § 102 andnon-obviousnessin§103.Unfortunately,theAlicedecisionitselfcre-atesmany uncertainties in this regard, in addition to uncertaintiessurroundingitsapplicationtodifferenttypesofpatentclaimsanddif-ferent technologicalsubjectmatters.Part IIdiscussesourempiricalstudydesign,includingdataandmethodology,andanalysis.Wepro-videadescriptiveanalysisofthedataandacausalanalysiswiththeregressionresults.PartIIIdiscussestheimplicationsoftheempiricalresults,explainingtheeffectsofAliceonthetechnologiesintheareasofbioinformatics,businessmethods,andsoftware.
I.THESUPREMECOURTDECISIONINALICECORP.V.CLSBANKTheSupremeCourt’sdecisioninAlicehasbeenappliedbylower
courtsandimplementedbythePTO.43Intheprocessofapplyingandimplementingthelaw,concernshavearisenabouttheuncertaintiesAlicecreated.ThisPartfirstexplainstheAlicetestandhowthePTOhasimplementedit.Then,itintroducestheconcernsexpressedinpre-viousstudiesabouttheimpactofAlicewithinthejudicialsystemand
42. SeeinfraPartIII.A.3. 43. MemorandumfromAndrewH.Hirshfeld,DeputyComm’rforPat.Examina-tion Pol’y, U.S. Pat. & TrademarkOff. to the Pat. Examining Corps (June 25, 2014),https://www.uspto.gov/sites/default/files/patents/announce/alice_pec_25jun2014.pdf[https://perma.cc/GJ7M-WNS4].SeegenerallyGugliuzza&Lemley,supranote36;AliceCorp.Pty.Ltd.v.CLSBankInt’l,134S.Ct.2347(2014).
2020] IMPLICATIONSOFALICE 537
thePTO,includingthePTAB,andhowthejudicialsystemandthePTOhavetriedtoovercometheseconcerns.
A. THEALICEDECISIONREGARDINGELIGIBLESUBJECTMATTERThisSectionexplainstheAlicedecisionandhowithasbeenim-
plementedbythePTO.Itdealswiththeabstractideaexceptiontopa-tenteligibilitywithatwo-steptest,butAliceitselfdoesnotclearlyde-fine what constitutes an abstract idea. 44 The Alice opinion alsoappears to implicate other statutory requirements forpatentabilitysuch as novelty and non-obviousness.45 In implementing Alice, thePTOprovidedsomestepstodefineabstractideasandfurtherspecifytheAlicetest.46
1. AbstractIdeaandStatutoryLimitsTheU.S.SupremeCourtappliedatwo-steptestinAlicetodeter-
minepatent-eligiblesubjectmatterunder§101byemployingthecon-ceptofapatent-ineligibleabstractidea.47Thefirststepinthetwo-steptestistodeterminewhethertheclaimsatissuearedirectedtopatent-ineligibleconceptssuchaslawsofnature,naturalphenomena,andab-stractideas.48Iftheclaimsincludeapatent-ineligible“abstractidea,”thesecondstepistoexaminewhethertheclaimsfailtotransformthat“abstractidea”intoapatent-eligibleinventionthroughtheadditionofan“inventiveconcept.”49
The two-step test inAlice couldarguablybe seenasprovidinggreaterclaritytopatenteligibilitystandardsinharmonywithotherforeignpatentregimes,butinreality,itsapplicationcomeswithmanychallenges. Under Article 52 of the European Patent Convention(EPC), discoveries, scientific theories, mathematical methods, aes-theticcreations,schemes,rulesandmethodsforperformingmentalacts,playinggames,ordoingbusiness,programsforcomputers,andpresentationsof information,shouldnotberegardedas inventions;however,additionaltechnicalfeaturesrecitedintheclaimscanconferpatent eligibility. 50 Although China, Japan, and South Korea treat
44. SeegenerallyAliceCorp.Pty.Ltd.,134S.Ct.2347. 45. SeeinfraPartI.A.1.b–c. 46. See2014InterimGuidanceonPatentSubjectMatterEligibility,79Fed.Reg.76,418(proposedDec.16,2014)(tobecodifiedat37C.F.R.pt.1). 47. AliceCorp.Pty.Ltd.,134S.Ct.at2352. 48. Id.at2355(citingMayoCollaborativeServs.v.PrometheusLab’ys,Inc.,566U.S.66,75–78(2012)). 49. Id.at2357(quotingMayo,566U.S.at72–73). 50. Bui,supranote24,at267.
538 MINNESOTALAWREVIEW [105:527
computer-related inventions and business methods slightly differ-ently,theytreatallpatentapplicationssimilartoEurope,i.e.,asbeingeligibleif“technicalcharacteristics”arepresent.51
Comparedtothepatentlawsincountriesthatfocusonindustrialapplicabilityfordefiningeligiblesubjectmatter,thetwo-steptestinAliceishardlyabrightlinerulethatdelineateswhatsubjectmatterispatent-eligibleandwhatisnot.52Asaresult,eventhoughthefourstat-utorycategoriesofinventions(e.g.,process,machine,manufacture,orcompositionofmatter)recitedin§101areclear,the“abstractidea”exceptionunderAlicerenderstheapplicationof§101vagueandun-certain.53
a. “AbstractIdea”asa§101IssueTheU.S.SupremeCourtinAlicedidnotdefinetheprecisescope
of the categories of “abstract ideas” or explain how to determinewhetherthepatentclaimcontainedan“abstract idea.”54Thevague-nessoftheconceptof“abstractidea”maybetracedbacktoArticleI,Section 8, Clause 8 of the U.S. Constitution, which is the basis forproviding exclusive rights for inventions and creations and for§101.55MallaPollackpointsout that thisArticle itselfdoesnotex-plainhowonedecideswhichdiscoveriespromotetheprogressoftheusefularts.56
ScholarssuchasShubhaGhosh,RichardGruner,andJayKesansuggestthatinsteadofinterpreting§101todeterminewhatispatent-able,itisbettertoaskaboutwhatisexcludedfrompatentabilityby
51. Id. 52. SeeAliceCorp.Pty.Ltd.,134S.Ct.at2357. 53. SeeSachs,supranote38. 54. SeeAliceCorp.Pty.Ltd.,134S.Ct.at2357;seealsoBrougher&Linnik,supranote16,at877–78(describinghowtheAlicedecisionisunclear“eventomostexperi-encedpatentattorneys”). 55. AccordU.S.CONST.art.1,§8,cl.8(“TopromotetheProgressofScienceandusefulArts,bysecuringforlimitedTimestoAuthorsandInventorstheexclusiveRighttotheirrespectiveWritingsandDiscoveries.”);35U.S.C.§101(“Whoeverinventsordiscoversanynewandusefulprocess,machine,manufacture,orcompositionofmat-ter,oranynewandusefulimprovementthereof,mayobtainapatenttherefor,subjecttotheconditionsandrequirementsofthistitle.”).SeegenerallyMallaPollack,WhatIsCongressSupposedtoPromote?:Defining“Progress”inArticleI,Section8,Clause8oftheUnitedStatesConstitution,orIntroducingtheProgressClause,80NEB.L.REV.754,755–59(2001)(suggestingthattheoriginalproblemsinfrontofcourtsarecreatedbytheterm“progress”intheConstitution). 56. Pollack,supranote55,at755–59,770–71(explainingwhat“progress”inAr-ticleIoftheConstitutionmeansbutrealizingthatpeopledonotunderstandthelan-guageinbothlegislationbasedonthisArticleandinjudicialproceedings).
2020] IMPLICATIONSOFALICE 539
§101.57OthercommentatorslikeAnnalVyasandIlijaIlijovskithinkthattheconceptof“abstractidea”shouldbedirectlyrejectedbytheSupremeCourtoramendedbyCongress.58Stillotherssuggestthatifaclaimusescomputersmerelyasatool(e.g.,describessomedesiredoutcome,orstartswithdata, thenappliesanalgorithmandreportssomeresults), then theclaimshouldbe ineligible.59Thus, therearesignificant concerns regardingwhat “abstract idea”means inAlice,andhowtoapplytheAlicetesttoovercomethishurdletopatenteli-gibility.60
b. AbstractIdea,Preemption,and§112TheSupremeCourtcreatedjudicialexceptionsto§101inO’Reilly
v.Morsetoavoidthepreemptionofnaturallawsandfundamentalcon-cepts,andaccordinglykeptlawsofnature,naturalphenomena,andabstract ideas excluded frompatentability.61Preemption issues areraisedwhenthescopeofprotectionaffordedbythepatentclaimsarepotentiallysobroadandvaguethatfurthertechnologicalinnovationmightbepreemptedbythosepatentclaimsatissue.62Preemptionis-suesalsoimplicatetherequirementsof§112(a)and(b).63Itmaybethatthepatentclaimsatissuearesobroadthattheyarenotsupported
57. GHOSHETAL.,supranote5,at289(explaininghowtointerpretthestatutorylanguagein§101). 58. AnnalD.Vyas,AliceinWonderlandv.CLSBank:TheSupremeCourt’sFantasticAdventureintoSection101AbstractIdeaJurisprudence,9AKRONINTELL.PROP.J.1,17–18(2016)(believingthatAlicemuddled§101jurisprudence,whichcreatesuncertain-tiesinpatentability);IlijaIlijovski,PerfectingU.S.PatentableSubjectMatter-MergingtheEuropeanApproachandtheAmericanPrinciples,19CHI.-KENTJ.INTELL.PROP.178,185,204–05(2020)(proposingthatCongressshouldlearnfromtheE.U.experienceandrevisethevaguelanguageof§101tohaveexplicitexclusions). 59. SeeBrougher&Linnik,supranote16,at880(arguingthatcourtsarelookingforastandardthatadded-toabstractideasconstituteenoughforqualifyingpatenta-bility). 60. SeeRobMerges,Symposium:GoAskAlice—WhatCanYouPatentAfterAlicev.CLS Bank?, SCOTUSBLOG (June 20, 2014, 12:04 PM), https://www.scotusblog.com/2014/06/symposium-go-ask-alice-what-can-you-patent-after-alice-v-cls-bank[https://perma.cc/QQH3-GVV8]. 61. SeeGuyGosnell&JimCarroll,CLSBankInt’lv.AliceCorporationProvidesLit-tleGuidancefromFederalCircuiton§101EligibilityofMethod,ComputerReadableMe-dium, and Computer System Patents, 130 BANKING L.J. 720, 721 (2013); O’Reilly v.Morse,56U.S.62(1854)(holdingthatan“abstractidea”isineligibleforpatenting). 62. SeeO’Reilly,56U.S.at113(describingthedangerofpermittingoverlybroadpatents). 63. 35U.S.C.§112(a)–(b)(specifyingrequirementsforthepatentspecificationregardingitswrittendescription,includingtherequirementforlanguageenablingoth-ers“tomakeandusethesame,”bestmodeofusein§112(a),andtherequirementsfordefinitenessofpatentclaimsunder§112(b)).
540 MINNESOTALAWREVIEW [105:527
bythetechnicaldisclosure(i.e.,thepatentspecification),raisingwrit-ten description and enablement concerns under § 112(a), or thatclaimsarenotsufficientlydefiniteunder§112(b).64
TheSupremeCourtinAliceprominentlynotedthepolicyconcernofpreemptionraisedbyabstractpatentclaims.65JosephCraignotesthattheFederalCircuitalsorequirespatentclaimspecificitytoreducepreemptionconcernsintheireligibilityanalysisunderAlice.66Forex-ample,inInternetPatentsCorp.v.ActiveNetworkInc.,theFederalCir-cuitheldthataninventiondirectedatasolutiontothetechnicalprob-lem of data loss in browsing websites failed to claim a technicalsolution in sufficiently concrete terms to limit preemption, therebyrendering itpatent-ineligibleunderAlice.67Moreover,AndrewChinhighlightstheissuesofpreemptionconcernsonthesoftwareindus-try.68ChinarguesthatthepreemptionconcernsinAlicefailtoprovideclearguidanceforpatent-eligibility.69
Scholarsseemtoagreethattheinteractionbetween§§101and112isnotaproblemcreatedbyAlice.70Apatentmaypreempttheuseofanabstractidea,whichmayharminventorsandthepatentindus-try.71Thepreemptionconcernisthatnon-practicingentities(NPEs)preferpatentsthataresobroadorvaguethattheymaycovercom-monlyusedtechnologies.72Asaresult,StephanieToyosbelievesthat
64. Id.(requiringpatentapplicantstodraftapatentdescriptionwhichisprecise,conciseandthatwillenableotherstomakeandusetheinvention);seealsoLemleyetal.,supranote19,at1331(describingthedefinitenessconcernsof§112). 65. ButseeMemorandumfromRobertW.Bahr,DeputyComm’rforPat.Examina-tionPol’y,U.S.Pat.&TrademarkOff. tothePat.ExaminingCorps3(Apr.19,2018),https://www.uspto.gov/sites/default/files/documents/memo-berkheimer-20180419.PDF[https://perma.cc/WSJ8-UDVS](indicating that thePTOdoesnotrequiretheelementstosatisfy§112(a)inStepBanalyses). 66. SeeJosephA.Craig,DeconstructingWonderland:MakingSenseofSoftwarePa-tents inaPost-AliceWorld,32BERKELEYTECH.L.J.359,376–77(2018)(arguingthatAlicecreatesuncertaintiesinthejudicialsystem);see,e.g.,McRO,Inc.v.BandaiNamcoGamesAm.Inc.,837F.3d1299,1314–15(Fed.Cir.2016)(rulingthatclaimsshouldbesufficientlyspecifictoconferpatenteligibility). 67. SeeInternetPats.Corp.v.ActiveNetworkInc.,790F.3d1343,1348(Fed.Cir.2015). 68. AndrewChin,SoftwarePatentingandSection101’sGatekeepingFunction,inCAMBRIDGEHANDBOOKOFTHELAWOFALGORITHMS(forthcoming2020) (manuscriptat15–20). 69. Id.at3,17. 70. AliceCorp.Pty.Ltd.v.CLSBankInt’l,134S.Ct.2347(2014). 71. Cf.Bilskiv.Kappos,561U.S.593,611–12(2010)(denyingpatentsforanab-stractidea). 72. SeeJamesBessen,WhattheCourtsDidtoCurbPatentTrolling—ForNow,AT-LANTIC (Dec. 1, 2014), https://www.theatlantic.com/business/archive/2014/12/
2020] IMPLICATIONSOFALICE 541
AlicelimitsanNPE’sabilitytoownbasicandeverydayideasthataremerelyimplementedwithacomputer.73Likewise,JeffreyLefstinar-guesthattheeligibilityofpatentsandotherfundamentalprinciplesofpatentability (i.e., §§ 102, 103, or 112) are historical tools used bycourtstodealwiththepreemptionissue.74Alice,then,wasnotarea-sonforexcludingpatentabilitybecauseofpreemptionconcerns,butaresultoftheambiguousimplicationofthatrationale.75Indeed,inre-centcasessuchasBerkheimerv.HPInc.,76AatrixSoftwareInc.v.GreenShadesSoftwareInc.,77andMyMailv.ooVoo,78theFederalCircuitclar-ifiedthatthedeterminationofpatenteligibilityunder§101mayre-quirepreviousconstructionofcriticalanddisputedclaimterms.79
c. AbstractIdea,InventiveConcept,and§§102and103ManyscholarsnotethattheSupremeCourtinAlicedecidedthe
issueofpatenteligibilityunder§101bybleedingintothenoveltyandnon-obviousness requirements under §§ 102 and 103. John DuffycommentsthatthejudicialexceptionsinAlicewereinterpretedliber-allyandexpansively,soastohavethepotentialto“swallowallofpa-tentlaw.”80Additionally,MariaSinatrasuggeststhatAlice’svagueandambiguous language regarding abstract ideas further blurs and
what-the-courts-did-to-curb-patent-trollingfor-now/383138[https://perma.cc/5AHM-QTQ5]. 73. StephanieE.Toyos,Comment,AliceinWonderland:ArePatentTrollsMortallyWoundedbySection101Uncertainty,17LOY.J.PUB.INT.L.97,99(2015)(“AlicecanbeseenasanefforttoreturnthepatentsystemtoabalancebylimitingNPEs’abilitytoownbasic,everydayideas.”). 74. See JeffreyA.Lefstin,TheThreeFacesofPrometheus:APost-Alice Jurispru-denceofAbstractions,16N.C.J.L.&TECH.647,664–69(2015)(introducingthattheideaofpreemptionofpatentsoriginatedfromEnglandbutisliberallyappliedbytheU.S.courts). 75. Seeid.at669(believingthatpreemptionis“notaviablecandidatefortheroleof inventiveconcept”but ismerelyareflectionofhowthecourtsapplypreemptionthroughinventiveconceptanalyses). 76. Berkheimerv.HPInc.,881F.3d1360,1370(Fed.Cir.2018). 77. AatrixSoftwareInc.v.GreenShadesSoftwareInc.,890F.3d1354,1364(Fed.Cir.2018). 78. MyMail,Ltd.v.ooVoo,LLC,934F.3d1373,1375(Fed.Cir.2019). 79. See,e.g.,id.(“Becausewedeterminethatthedistrictcourterredbydecliningtoresolvetheparties’claimconstructiondisputebeforeadjudgingpatenteligibility,wevacateandremand.”). 80. SeeJohnDuffy,OpinionAnalysis:TheUncertainExpansionofJudge-MadeEx-ceptions to Patentability, SCOTUSBLOG (June 20, 2014, 12:46 PM), https://www.scotusblog.com/2014/06/opinion-analysis-the-uncertain-expansion-of-judge-made-exceptions-to-patentability[https://perma.cc/DMG5-8TKC](believingthattheCourtdidnotprovideaclearguidanceforpatenteligibilitybutmadeabroadjudge-madelimitationonpatentability).
542 MINNESOTALAWREVIEW [105:527
interjects§§102and103requirements into the§101analysis.81Anegativeconsequenceofblurringtheeligibilityandpriorartdistinc-tionsinpatentlawisincreasedtransactioncostsinbothpatentlitiga-tion andpatent examination, as patent eligibility counterclaims (orthroughmotionstodismissunderRule12(c))andPTO§101rejec-tions play an increasingly important role.82Indeed, afterAlice, it iscommontoseethatcourtsanalyzeclaimtermsforjudgingnoveltyornon-obviousnessunder§§102and103inordertodeterminepatent-eligibilityunder§101.83Manydistrictcourtshaverequireddefend-antstoarguearoundnovelty/anticipationunder§102andobvious-nessunder§103beforeaheavydebateover§101.84
Bycontrast,thePTOdoesnotthinkthattheAlicetestaddresses§§102or103.85Section102addressesnoveltyand§103addressesthe issue of obviousness, and PTO examiners compare the patentclaimstothepriorartunderthoserequirements.86Butthoserequire-mentsaredifferentfromthe“additionalelements”inthetwo-steptestinAlice.87Therefore,regardlessofwhethertheSupremeCourtfurtherdefineswhatconstitutesan“abstract idea” in the future,until then,
81. SeeMariaR.Sinatra,DoAbstractIdeasHavetheNeed,theNeedforSpeed?:AnExamination of Abstract Ideas afterAlice, 84FORDHAML.REV.821, 841, 849 (2015)(showingthatdistrictcourtsusedthetermsof“conventional,”“longprevalent,”“rou-tine,”and“wellknown”intheirdecisionscitingAlice). 82. SeeSchultz&Love,supranote20,at360,366(believingthatthesubstantiveconditionsofpatentabilityin§§102,103,and112havemuchgreaterlitigationcostscomparedtothelitigationcostwithrespectto§101). 83. SeeRobert Sachs, Twenty-TwoWays Congress Can Save Section 101, BILSKIBLOG (Feb. 12, 2015), https://www.bilskiblog.com/2015/02/twenty-two-ways-congress-can-save-section-101 [https://perma.cc/4N6T-NKA6] (introducing how a§101patenteligibilityissuemergedwiththecriteriaofotherpatentstatutes,includ-ing§§102and103);Parkerv.Flook,437U.S.584,600(1978)(Stewart,J.,dissenting)(criticizingthatpatenteligibilityin§101shouldnotimportintoitsinquirythecriteriain§§102and103);Diamondv.Diehr,450U.S.175,211(1981)(Stevens,J.,dissenting)(admittingthefailureofthecourtsinrecognizing“thecriticaldifferencebetweenthe‘discovery’requirementin§101andthe‘novelty’requirementin§102”). 84. SeeMatthewBultman,GilstrapChangesPlayingFieldwithPatentEligibilityRule,LAW360(Aug.14,2019,7:44PM),https://www.law360.com/articles/1188573/gilstrap-changes-playing-field-with-patent-eligibility-rule[https://perma.cc/7MME-NY3L](“Thereareanumberofcourts, theEasternDistrictofTexas included,withlocalrulesrequiringdefendantstopresentinvaliditycontentionsbasedonanticipa-tionandobviousnessearlyoninacase.”). 85. SeeMemorandum from Robert W. Bahr, supra note 65 (“The question ofwhetheradditionalelementsrepresentwell-understood,routine,conventionalactiv-ityisdistinctfrompatentabilityoverthepriorartunder35U.S.C.§§102and103.”). 86. Seeid. 87. Seeid.
2020] IMPLICATIONSOFALICE 543
practitionersmayusethePTO’sGuidancetodeterminethescopeofeligiblesubjectmatter.88
2. ImplementationbythePTOOnJune25,2014,sixdaysaftertheAlicedecisionwasissuedby
theU.S.SupremeCourt,thePTOissuedPreliminaryExaminationIn-structionsinviewofthiscase.89TheinstructionsexplainthattheSu-premeCourtheldthatclaimsinvolving“abstractideas,”particularlycomputer-implemented“abstract ideas,”arepatent-ineligibleunder§101. 90 The instructions provide four examples of abstract ideas,learningfromtheAlicedecision,including(1)fundamentaleconomicpractices, (2) certain methods of organizing human activities, (3)ideasthemselves,and(4)mathematicalrelationshipsorformulas.91ThePTOnotedthatAliceisanextensionofMayobecausetheframe-workoftheAlicedecisionwascurrentlybeingusedbythePTOtoex-amineclaimsinvolvinglawsofnatureafterMayo“buthadnotbeenusedforclaimsinvolvingabstractideas.”92
InDecember2014,sixmonthsafterAlicewasdecided,thePTOformallyimplementedtheAlicedecisionbyissuingInterimEligibilityGuidance(InterimGuidance)tothepatentexaminingcorps.93TheIn-terimGuidancemergesothertestsforpatent-eligibilityissuedbytheSupremeCourtinMyriad,94Mayo,95andBilski96anddevelopsatwo-steptest.97Thefirststep(Step1)istodetermineifthepatentclaimisdirectedtoaprocess,machine,manufacture,orcompositionofmattersoastobepatent-eligibleunder§101.98Ifnot,theclaimisstatutorilynon-eligible and rejected without consideration of those judicial
88. SeeBrooksKenyon,DeferenceRunsDeep:TheIllEffectsofAlice,B.C.INTELL.PROP.&TECH.F. 6 (2016), http://bciptf.org/wp-content/uploads/2016/03/EiC-Edit-7-pages-Brooks-Kenyon-Spring-2016-Deference-Runs-Deep-The-Ill-Effects-of-Alice-1.pdf[https://perma.cc/3MRY-VZGQ](introducingtheimportanceofthePTOguid-ance). 89. MemorandumfromAndrewH.Hirshfeld,supranote43. 90. Id.at1. 91. Id.at2–3. 92. Seeid.at1–2.SeegenerallyMayoCollaborativeServs.v.PrometheusLab’ys,Inc.,566U.S.66(2012). 93. SeeInterimGuidanceonSubjectMatterEligibility,79Fed.Reg.76,418(pro-posedDec.16,2014)(tobecodifiedat37C.F.R.pt.1). 94. Ass’nforMolecularPathologyv.MyriadGenetics,Inc.,569U.S.576(2013). 95. MayoCollaborativeServs.,566U.S.66. 96. Bilskiv.Kappos,561U.S.563(2010). 97. InterimGuidanceonSubjectMatterEligibility,79Fed.Reg.at74,619–21. 98. Id.at74,621.
544 MINNESOTALAWREVIEW [105:527
opinions.99 The second step is a two-part test (Steps 2A and 2B),whichdealswithjudicialexceptions;itapplieswhentheclaimspassStep1.100ItcomparesAlicetothosethreeearlierSupremeCourtdeci-sionsonpatent-eligibilityissues.101
Step2AinthePTOInterimGuidancedetermineswhetherthepa-tent claim is directed to a judicial exception, such as an “abstractidea.”102TheInterimGuidanceexpandsthefourexamplesofabstractideasinthePreliminaryExaminationInstructionstomanyexamplesof abstract ideas.103 Notably, “software is not automatically an ab-stractidea.”104Forsoftwareclaimsthatmayincludeanabstractidea,examinersare instructedto furtheranalyzetheclaimasawholetodeterminepatenteligibility.105
Iftheclaimisdirectedtoanexceptionforabstractideas,natureornaturalphenomena,ornature-basedproducts,Step2Bisappliedtodeterminewhethertheclaimamounts tosignificantlymorethantherelevant judicialexceptions.106InStep2B, ifapatentclaimasawholedoesnotreciteadditionalelementsthatamounttosignificantlymorethantherelevantjudicialexceptions,theclaimisnotpatent-eli-gibleandisrejectedunder§101.107IftheclaimpassesStep2B,itwillbefurtherexaminedunder§§101(utility,inventorship,anddoublepatenting),102(novelty),103(non-obviousness),and112(enable-ment,writtendescription,bestmode,andclaimdefiniteness,amongothers).108Whenaclaimisrejectedbecause it fallswithina judicialexception, the PTO Interim Guidance requires that the examinersidentifythespecificjudicialexceptionintherejection.109
Anysubsequentofficeactionsonthemeritsareusuallyfinalre-jections.110However, ifexaminersrejectapatentclaimunder§101afterStep2B,whichdoesnotrequireapplicantamendments to theclaim,thenewgroundsforrejectionarenon-final.111Meanwhile,the
99. Id.; U.S. PAT. & TRADEMARK OFF., MANUAL OF PATENT EXAMINING PROCEDURE§2106(I)(9thed.2020). 100. SeeInterimGuidanceonSubjectMatterEligibility,79Fed.Reg.at74,621. 101. Id.at74,619. 102. Id.at74,622. 103. Id. 104. U.S.PAT.&TRADEMARKOFF.,supranote99,§2106.04(a). 105. InterimGuidanceonPatentSubjectMatterEligibility,79Fed.Reg.at74,622. 106. Id. 107. Id.at74,624. 108. Id.at74,625. 109. Id.at74,622. 110. U.S.PAT.&TRADEMARKOFF.,supranote99,§706.07(a). 111. Id.
2020] IMPLICATIONSOFALICE 545
applicantswillthenbegivenanopportunitytorespondtotheofficerejectionforthoseexistingclaims.112
B. UNCERTAINTIESINELIGIBLESUBJECTMATTERInpractice,practitioners,inventors,andscholarscomplainabout
howAlicecreatesuncertaintiesinpatentlitigationandprosecution113thatthenharminnovation.ThisSectionfirstaddressestheimpactofAliceoninnovationandthenreviewsthesystemsofthefederalcourts,thePTAB,andtheexaminationapproachofthePTOtoillustratetheuncertaintiesimposedbyAlice.Lastly,thisSectionexplainshowthoseinstitutionshavetriedtoovercomeormitigatetheuncertaintiesin-herentintheAlicetest.
1. InnovationandUncertaintiesCreatedbytheLanguageofJudicialExceptions
ItisunclearwhethertheAlicedecisionbenefitsorharmsinnova-tion.SomescholarsurgethatAliceharmsinnovation.SinatrabelievesthatthejudicialexceptionofAlice,withits“sweepinglanguage,” in-creasesthetransactioncostsforpatentapplicantsatthePTO,whichthenharmsthewholerewardsystemthatisdesignedtospurinnova-tion.114Inventorsandinvestorsdemandclearinstructionfromcourtsratherthanconflictingandambiguousdecisions.115DanielCahoyar-guesthatthevaguelanguageinAliceitselfcausesuncertainty,deter-ringinvestmentandharminginnovation.116
Bycontrast,somescholarsdonotthinkthatrestrictionsonpa-tenteligibilitydeterinnovation.PamelaSamuelsonandJasonSchultzurge thatpatentscannotprovideenoughofarewardto incentivizeinnovationinbusinessmethods.117Sinatradoesnotbelievethatthe
112. Id. 113. See,e.g.,DanielR.Cahoy,PatentlyUncertain,17NW.J.INTELL.PROP.1,34–36(2019).SeegenerallyPaulMichel&JohnBattaglia,FlawsintheSupremeCourt’s§101PrecedentandAvailableWaystoCorrectThem,IPWATCHDOG(Apr.27,2020),https://www.ipwatchdog.com/2020/04/27/flaws-supreme-courts-%c2%a7101-precedent[https://perma.cc/F82E-3BJJ](reviewingtheSupremeCourtcasesconcerningpatenteligibilityandofferingwaystoimprove§101jurisprudence). 114. SeeSinatra,supranote81,at844,849–854(explainingthattheCourtblursandinterjects§102and§103rejectionsinto§101analysis). 115. SeePaulMichel,TheSupremeCourtSapsPatentCertainty,82GEO.WASH.L.REV.1751,1753(2014)(declaringthattheSupremeCourtlacksabroaderperspectiveontheinteractionbetweenthePTO,courts,inventors,andinvestors). 116. SeeCahoy,supranote113,at32–37. 117. SeePamelaSamuelson&JasonSchultz,“Clues”forDeterminingWhetherBusi-nessandService InnovationsAreUnpatentableAbstract Ideas, inPERSPECTIVESONPA-TENTABLESUBJECTMATTER8,18–19(MichaelAbramowicz,JamesE.Daily&F.ScottKieff
546 MINNESOTALAWREVIEW [105:527
uncertaintiescreatedbyAliceharminnovationinsoftware.118Instead,shebelievesthattheinefficiencyinpatentexaminationcreatedbyAl-icecandeter“patenttrolls”soastobeefficientinabroadersense.119Moreover,thelackofprivateincentivestoencourageinnovationinbi-otechnologyorsoftware,asaresultofMayoandMyriad,maynotnec-essarily harm innovation.120LisaOuellette suggests that companiesarestillincentivizedbyinducementfromthepublicsector,suchastaxcredits,governmentdirectgrants,governmentcontracts,orprizes.121
2. UncertaintiesintheFederalCourtsTheFederalCircuithadintroduceda“manifestlyevident”stand-
ardtoevaluatewhetherapatentclaimisapatent-ineligibleabstractidea.122SamuelRegerbelievesthatthismanifestlyevidentstandardcan reduce litigation costswhen courts applyAlice.123Practitionersandscholarshavepresentedempiricalevidencesuggestingtheexist-enceofsignificantuncertaintyregardinghowAliceshouldbeappliedby the Federal Circuit and other federal courts when those courts
eds.,2015)(arguingthatbusinessmethodsarenotcostlyandshouldbeunderthepro-tectionoftradesecretsratherthanpatents). 118. SeeSinatra,supranote81,at849(explainingthattheprocessofpatentexam-inationtakestoolongtoprovideprotectionforsoftware,whichdevelopsfasterthantheprocessofexamination). 119. Id.“Patenttroll”pejorativelyreferstocompaniesthatacquirepatentsbutdonotdeploytheseacquiredpatentsinresearch,production,orcommercializationandgenerateincomefrommonetizingsaidacquiredpatentsbyenforcingthemorattempt-ingtoenforcethemagainstothers.Samuelson&Schultz,supranote117,at27. 120. SeegenerallyLisaLarrimoreOuellette,PatentableSubjectMatterandNonpa-tent Innovation Incentives, 5U.C.IRVINEL.REV.1115(2015) (arguing thatMayo andMyriadharmedpatentinnovationincentivesbecauseoftheCourt’sfailuretoprovideclearguidanceonpatentablesubjectmatterbutthatotherinnovationincentivesunderthepublicsectorcouldsupplementthisfailure);MayoCollaborativeServs.v.Prome-theusLab’ys,Inc.,566U.S.66(2012);Ass’nforMolecularPathologyv.MyriadGenetics,Inc.,569U.S.576(2013). 121. Ouellette, supra note120, at 1125–26 (introducinghow thepublic sectorsfunctiontoprovideinnovationincentives). 122. Thecourtcontroversiallyheldthatwhenit isnotmanifestlyevidentthataclaimisdirectedtoapatent-ineligibleabstractidea,thatclaimmustbedeemedpatent-eligiblesubjectmatter.CLSBankInt’lv.AliceCorp.Pty.Ltd.,685F.3d1341,1352(Fed.Cir.2012). 123. SamuelReger,It’sNotSoObvious:HowtheManifestlyEvidentStandardAffectsLitigationCostsbyReducingtheNeedforClaimConstruction,1TEX.A&ML.REV.729,739–40(2014)(arguingthatunderthecurrentfact-specificrequirements,itmaybe-comecommonplaceforcourtstoengageinformalclaimconstruction,acostlypre-trialprocess,todecidewhethertherequirementsofAlicearemet).
2020] IMPLICATIONSOFALICE 547
implementtheAlicedecision.124Forinstance,JoeMullinobservedthatintheEasternDistrictofTexas,whereNPEshaveahigherwinratecomparedtootherdistricts,Alicedidnotcausethiscourttorulemorefrequently againstNPEsor “patent trolls.”125Further,morepatentssurvivedpost-Alice126eventhoughthenumberofpatentapplicationsfiledbyNPEshasrecentlydropped.127Moreover,afterDaniKassre-viewedthecostofIPlitigationovermanyyears,sheconcludedthatAlicecontributestothedecreaseinpatentlitigationandtheincreaseinthecostofIPlitigationamonglargecompanies.128RobertSachsre-viewedallfederalcourtdecisionsfromthedateoftheAlicedecisiontoJuly1,2015,andfoundthatfederaldistrictcourtsandtheFederalCircuitinvalidated66.1%ofallpatentsand76.7%ofallclaimschal-lengedunder§101.129SachsrecentlyextendedthedatatoJune2019andfoundthat62%ofthecasesregardingpatentablesubjectmatterinfederaldistrictcourtsandtheFederalCircuitinvalidatedthosepa-tents.130This rate is slightly lower than the judicial data from fouryearsago.131
GugliuzzaandLemleyreviewed104casesonpatentablesubjectmatterdecidedbytheFederalCircuitbetweenJune20,2014,andJune19,2017.132Theirdatapresentatoughstoryforpatentees:theFed-eral Circuit is very likely to invalidate claims based on patentable
124. See,e.g.,Gugliuzza&Lemley,supranote36,at780(observingtheuncertain-tiesinthejudicialsystembyempiricallyreviewingthecasedecisionsmadebythefed-eralcircuitsafterAlice). 125. JoeMullin,ManyPatent-HoldersStopLookingtoEastTexasFollowingSupremeCourt Ruling, ARSTECHNICA (Oct. 12, 2017, 2:50 PM), https://arstechnica.com/tech-policy/2017/10/patent-cases-in-east-texas-plunge-more-than-60-percent [https://perma.cc/JXN4-XNJL]. 126. Id. 127. MarkCurriden,PatentFilingsPlummetinEastTexas,CHRON(May22,2018,5:30 AM), https://www.chron.com/business/article/Patent-filings-plummet-in-East-Texas-12932436.php[https://perma.cc/793P-GWNX]. 128. Dani Kass, IP Litigation More Costly, Risky Than Ever Before, MoFo Says,LAW360 (Aug. 8, 2019, 9:25 PM), https://www.law360.com/articles/1186755/ip-litigation-more-costly-risky-than-ever-before-mofo-says[https://perma.cc/V9F2-SPGB](“Theactualnumberofsuitsisdiminishingthough,whichthefirmattributedinpart to theU.S.SupremeCourt’sTCHeartland andAlicedecisions,bothofwhichmadeitharderforplaintiffsinlitigation.”). 129. RobertSachs,#AliceStorminJune:ADeeperDiveintoCourtTrends,andNewData on Alice Inside the USPTO, BILSKI BLOG (June 30, 2015), https://www.bilskiblog.com/2015/06/alicestorm-a-deeper-dive-into-court-trends-and-new-data-on-alice-inside-the-uspto[https://perma.cc/XB5H-E6XY]. 130. Sachs,supranote38. 131. Id.;Sachs,supranote129. 132. Gugliuzza&Lemley,supranote36,at782.
548 MINNESOTALAWREVIEW [105:527
subject matter in cases appealed from the district courts and thePTAB.133Manyof thosedecisionsarenon-precedential.134In thirty-threeprecedentialopinionsoutofthetotal104decisionsreviewed,onlysevenopinions(21.2%)foundthepatentatissuetobevalid.135Ofthe104totaldecisions,patentsinonlyeightofthedecisions(7.7%)wereallowedtosurvivebytheFederalCircuit.136
Thetechnologiesinvolvedinthose104caseswereeitherinfor-mationtechnology(IT)orbiotechnology.137GugliuzzaandLemleyob-served that biotechnology ismore likely to survive eligibility chal-lenges post-Alice compared to IT.138This finding is consistentwithanotherstudyinwhichLemleyandZyontzreviewed808decisionsonpatentablesubjectmatterdeliveredbytheFederalCircuitandthefed-eral district courts. 139 There, federal courts invalidated patents in65.1%ofthe724softwareorITcases,butonlyinvalidated50%oftheseventy-sixbiotechnologyorlifesciencecases.140
Theaboveresults,however,donotmeanthatwhenitcomestobiotechnology,federalcourtsareprovidedclearguidanceunderAlice.AnempiricalstudybyLemleyandZyontzfoundthatbiosciencepa-tentsfaredbetterinthecourtswithrespecttoeligibility.141Lookingintotheprocess(i.e.,theAlice,Myriad,andMayodecisions)forhowcourts determine eligibility in biotechnology,142 Rebecca Eisenbergfoundthatthepolicyimplicationsofrestrictionsonpatenteligibilityareunclear.143EugeneKimargues thatalthough theFederalCircuitdecisioninCellzDirecthelpsbiotechnologypatentsnotdirectedatdi-agnostics,therearesignificantuncertaintiesinthedecisionsregard-ingdiagnosisandthetreatmentofdisease.144
133. Id.at783. 134. Id.at802. 135. Id.at782. 136. Id.at787. 137. Id.at774. 138. Id.at790. 139. SeeLemley&Zyontz,supranote37. 140. Id.at31. 141. Id. 142. Mayo Collaborative Servs. v. Prometheus Lab’ys, Inc., 566 U.S. 66 (2012);Ass’nforMolecularPathologyv.MyriadGenetics,Inc.,569U.S.576(2013);AliceCorp.Pty.Ltd.v.CLSBankInt’l,134S.Ct.2347(2014);seealsoInreBRCA1-&BRCA2-BasedHereditaryCancerTestPat.Litig.,774F.3d755,764(Fed.Cir.2014). 143. RebeccaS.Eisenberg,DiagnosticsNeedNotApply,21B.U.J.SCI.&TECH.L.256,274(2015). 144. Kim,supranote31,at1188(“AlthoughtheCellzDirectdecisionmighthelpbi-otechnologypatentsthatarenotdiagnostics,thereremainstensionoverthedisparity
2020] IMPLICATIONSOFALICE 549
Forartificialintelligenceandbigdata-relatedinnovations,AliceandsubsequentdecisionsbytheFederalCircuithavecastdoubtonwhethergrantedpatentsandnewpatentapplicationscansatisfythestill-evolvingAlice test forpatent eligibility.145PractitionersbelievethatAlicehasdramaticallyreducedthevalueofissuedpatentsinpar-ticulartechnologiesandchangedhowpatentapplicationsaredraftedand prosecuted.146That said, some practitioners are confident thattheuncertainties imposedbyAlicewilleventuallydiminishthroughevolving court decisions or new congressional legislation. 147 EventhoughAIandbigdatainnovationcanstillbeprotectedwithpatents,theuncertaintiessuggestthatpatentsarenotthebestmechanismtoprotecttheseinventions.148
InEnfish,LLCv.MicrosoftCorp.,acasethatispost-Alice,theFed-eralCircuitheldthat“softwarecanmakenon-abstractimprovementstocomputertechnologyjustashardwareimprovementscan.”149JerrySuvabelievesthatEnfishisamanifestationandapplicationofAlice’slegalclaim,whichfurtherclarifiesthatimprovementstoatechnolog-icalprocessortothefunctioningofthecomputeritselfarepatenta-ble.150However, even though the Federal Circuit has found severalcomputerpatentstobeeligibleinpost-AlicedecisionssuchasEnfishandBASCOM,151Kimcautionsthatthesamehasnotyethappenedinbiotechnologycases.152Evenworse, ina recent case,ElectricPowerGroupLLCv.AlstomS.A.,theFederalCircuitexpandedthefirststepoftheAlice test,holding that “collecting information, analyzing it, anddisplayingcertainresultsofthecollectionandanalysis”isanabstractideaoracombinationof“abstract-ideaprocesses.”153
in decisions regarding diagnosis and treatment of disease.”); Rapid Litig. Mgmt. v.CellzDirect,Inc.,827F.3d1042(Fed.Cir.2016). 145. DouglasH.Pearson,OgnianV.Shentov,CarlA.Kukkonen,AndrewWeissJef-fries&PatrickT.Michael,ProtectingArtificial IntelligenceandBigData InnovationsThrough Patents: Subject Matter Eligibility, JONES DAY (Mar. 2018), https://www.jonesday.com/protecting-artificial-intelligence-and-big-data-innovations-through-patents-subject-matter-eligibility-03-12-2018[https://perma.cc/Q7U9-D9R2]. 146. Id. 147. Id. 148. Id. 149. Enfish,LLCv.MicrosoftCorp.,822F.3d1327,1335(Fed.Cir.2016). 150. JerrySuvaII,SlaydenGrubertBeardPLLC,CLEPresentationattheStateBarofTexasAdvancedIntellectualPropertyLawCourse:PatentableSubjectMatterUp-datefromtheFederalCircuit(Feb.23,2017). 151. BASCOMGlob.InternetServs.,Inc.v.AT&TMobilityLLC,827F.3d1341(Fed.Cir.2016). 152. SeeKim,supranote31,at1181. 153. Elec.PowerGrp.LLCv.AlstomS.A.,830F.3d1350,1353–54(Fed.Cir.2016).
550 MINNESOTALAWREVIEW [105:527
The Federal Circuit has found it difficult to consistently deter-minepatent-eligibility.InAthenaDiagnostics,Inc.v.MayoCollabora-tiveServices,LLC,theFederalCircuitreleasedeightseparateopinionsregardingtheissueofsubjectmattereligibility:fourconcurredwiththedenialoftheenbancpetitionandfourdissentedfromthatdeci-sion.154Somedissentingjudgesarguedthatpatentsondiagnostickitsand techniques should be protected for inventiveness.155 However,somejudgesintheirconcurrencesinvitedtheSupremeCourtorCon-gress to fix the law governing patent eligibility.156Those disparateopinionsbroadlysuggestthattheFederalCircuitjudgesagreethatAl-iceandMayocreatedconfusion.157However,theU.S.SupremeCourthas repeatedlydeclined to re-visit the topicofeligible subjectmat-ter.158
3. UncertaintiesatthePTOThePTABhears appeals frompatent applicants engaged in ex
parte prosecution, post-issuance patent validity challenges filed bypetitioners,orthroughthepre-AIAexpartereexaminationsystem.159ThecurrentsystemreliesheavilyontheFederalCircuittoreviewthePTAB’sdecisionsonpatentvaliditychallenges,andtheinteractionbe-tweentheFederalCircuitandthePTABcanbringuncertaintiesfromthecourtstothePTAB.160Post-issuance,eligiblesubjectmatterchal-lengesunder§101canberaisedthroughmechanismssuchaspost-
154. Athena Diagnostics, Inc. v. Mayo Collaborative Servs., LLC, 927 F.3d 1333(Fed.Cir.2019). 155. Id.at1362. 156. Id.at1337. 157. Athenav.Mayo:ASplinteredFederalCircuitInvitesSupremeCourtorCongresstoStepUpon101Chaos,IPWATCHDOG(July8,2019),https://www.ipwatchdog.com/2019/07/08/splintered-federal-circuit-invites-supreme-court-review-athena-v-mayo/[https://perma.cc/4TJE-UYXL]. 158. E.g.,Athena Diagnostics, 915 F.3d 743, cert. denied, 140 S. Ct. 855 (2020);Berkheimer v. HP Inc., 881 F.3d 1360 (Fed. Cir. 2018), cert. denied, 140 S. Ct. 911(2020);VandaPharms.Inc.,v.West-WardPharms.Int’lLtd.887F.3d1117(Fed.Cir.2018),cert.denied,140S.Ct.911(2020);PowerAnalyticsCorp.v.OperationTech.Inc.,748F.App’x334(Fed.Cir.2019),cert.denied,140S.Ct.910(2020);CellspinSoft,Inc.v. Fitbit, Inc., 927 F.3d 1306 (Fed. Cir. 2019), cert. denied, 140 S. Ct. 907; (2020);ChargePoint,Inc.v.SemaConnect,Inc.,920F.3d759(Fed.Cir.2019),cert.denied,140S. Ct. 983 (2020);TradingTechs. Int’l, Inc. v. IBGLLC,767F.App’x1006 (Fed.Cir.2019),cert.denied,140S.Ct.955(2020);TradingTechs.Int’l,Inc.v.IBGLLC,921F.3d1084(Fed.Cir.2019),cert.denied,140S.Ct.954(2020);SRIInt’l,Inc.v.CiscoSys.,773F.App’x1090(Fed.Cir.2019),cert.denied,140S.Ct.1108(2020). 159. 35U.S.C.§6(a)–(b);Gugliuzza&Lemley,supranote36,at783–84. 160. RochelleCooperDreyfuss,GivingtheFederalCircuitaRunforItsMoney:Chal-lengingPatentsinthePTAB,91NOTREDAMEL.REV.235,258(2015).
2020] IMPLICATIONSOFALICE 551
grantreviews(PGRs)andcoveredbusinessmethodreviews(CBMs)atthePTAB.161Interpartesreviews(IPRs),amechanismwithinthePTAB to challengepatent validity, are farmorenumerous than theothermechanisms that challengepatent validity, such asPGRs andCBMs,andfarmoreprevalentthaninitiallypredictedbythePTO,butIPRs cannot be employed to raise subject matter eligibility chal-lenges.162About87%of thePTABpetitionschallengedpatents thatwerebeingenforcedindistrictcourtafterapre-suitinvestigation.163Under these circumstances, the former Federal Circuit Chief JudgePaulMichelbelievesthatAliceimposesmassiveuncertaintyoverthevalidityofcountlessthousandsofpatents,mostofwhichwereissuedlong before Alice or evenMayo.164 Likewise, Federal Circuit JudgeToddHughescontendsthatsuchuncertaintiesharmtheU.S.patentsystemandinnovationecosystem.165
TheseuncertaintiesmaynotbeeliminatedinthedualsystemsofthefederalcourtsandthePTO,includingthePTAB.PaulGugliuzzaex-plainsthatthejudicialsystemandthePTABadaptdifferentstandardsofproofanddifferentrulesofclaimconstruction(atleastforthepe-riodoftimethatisthefocusofthisstudy).166Gugliuzzacriticizedthedual proceedings for increasing litigation costs and incentivizing“wastefulproceduralmaneuvering,”therebyexacerbatingtheuncer-tainties.167
JasperTranstudiedthefrequencywithwhichAlicewascitedbythePTABandshowedthatAlicewascitedin198PTABdecisionsbyJune19,2015,and90.8%ofthosepatentswereinvalidatedthrough
161. Id.at235,244–49. 162. Id.at246–47,250tbl.1. 163. See id.;seealsoSaurabhVishnubhakat,ArtiK.Rai& JayP.Kesan,StrategicDecisionMakinginDualPTABandDistrictCourtProceedings,31BERKELEYTECH.L.J.45,73(2016)(“[T]hemajority(70%)ofIPRpetitionershavepreviouslybeendefendantsindistrictcourtlitigationsinvolvingthepatentstheynowchallenge.”). 164. SeeDreyfuss,supranote160,at256–58,275n.255. 165. Seeid.at276(notinguncertaintiesmay“chillinnovation”). 166. SeePaulR.Gugliuzza,QuickDecisionsinPatentCases,106GEO.L.J.619,642(2018)(makingcomparisonofdurationbetweentheproceedingstakenbythejudicialsystemandthePTAB).ButseeMichaelR.Houston&GeorgeE.Quillin,PTABAlignsItsClaimConstructionStandardtoPhillips,ReplacingBRI,FOLEY&LARDNERLLP(Oct.10,2018),https://www.foley.com/en/insights/publications/2018/10/ptab-aligns-its-claim-construction-standard-to-phi[https://perma.cc/ADA3-AZCE](explainingthatinNovember2018, thePTABrejected thebroadestreasonable interpretation(BRI)standardforclaimconstructionandadoptedthePhillipsstandardforclaimconstruc-tion,whichisthesamestandardasthatusedbythefederalcourts(citingPhillipsv.AWHCorp.,415F.3d1303(Fed.Cir.2005)(enbanc))). 167. Gugliuzza,supranote166,at642,657.
552 MINNESOTALAWREVIEW [105:527
thatprocess.168SamuelHayimandKateGaudrystudied500exparteappealdecisionsforappealsfiledpost-Alicethatwerewithinthetech-nologyareasofTechnologyCenters(TCs)2100,2400,2600,andbusi-nessmethodsandthatwererenderedbythePTABinthetwoyearsafterAlice.169They found that amere 16% of the initial rejectionsbasedonpatenteligibilitywere“fullyreversed”bythePTAB.170
AlthoughitisunclearwhetherthePTABshouldadoptthesamecriteriaascourts,RochelleDreyfussbelievesthatthePTABcanfur-nish a blueprint for clarifying the uncertainties because a narrow,clearscopeofpatentclaimscanreducethelitigationandtransactioncostsimposedbypatenttrolls.171Moreover,basedontheirreviewofalargenumberofFederalCircuitdecisions,GugliuzzaandLemleypre-dictthattherewillbenoincreaseinthepercentageofpatentsbeingupheldinappealsfromthePTABbecauseofthepeculiaritiesoftheadministrativeprocess.172TheybelievethatitisunlikelythattheFed-eralCircuitwillhearmanyappealschallengingthePTABrulingsthatconfirmpatentvalidity.173
4. PreviousEmpiricalStudiesofOfficeActionsbythePTOBesides the summary statistics that are published on various
blogs,174thesoleempiricalworkanalyzingofficeactionsissuedbythePTOwasconductedbyColleenChienandJiunYingWu.175ChienandWuperformedastatisticalanalysisofofficeactionsbetween2008and
168. JasperL.Tran,SoftwarePatents:AOne-YearReviewofAlicev.CLSBank,97J.PAT.&TRADEMARKOFF.SOC’Y532,540(2015)(“ThePTABhasupheld18patentappli-cationsandinvalidated178patentapplications—aninvalidationrateof90.8%.”). 169. SamuelHayim&KateGaudry,NearlyAllPost-AliceEligibilityRejectionsareAffirmed inWholeby thePTAB,KILPATRICKTOWNSEND(Feb.27,2018),https://www.kilpatricktownsend.com/-/media/Files/articles/2018/Article-1-SHKG.ashx[https://perma.cc/B2CV-89QF]; see alsoPatent Technology CentersManagement, U.S.PAT.&TRADEMARK OFF., https://www.uspto.gov/patent/contact-patents/patent-technology-centers-management [https://perma.cc/ES3G-UANS] (outlining that TC 2100 in-cludes computer architecture software and information security, TC 2400 includescomputernetworks,multiplex,cableandcryptographyorsecurity,andTC2600in-cludescommunications). 170. Hayim&Gaudry,supranote169(findingthat“fullaffirmancesweremuchmore common for applications assigned to a business-method art unit (full affir-mances=80%)ascomparedtoTC2100(61%),TC2400(55%)orTC2600(66%)”). 171. Dreyfuss,supranote160,at262. 172. Gugliuzza&Lemley,supranote36,at794–95. 173. Id. 174. See,e.g.,Sachs,supranote129. 175. SeeChien&Wu,supranote39(exploringtheproportionofrejectionsunder§101totheofficeactionsforindividualTechnologyCentersafterAlice).
2020] IMPLICATIONSOFALICE 553
mid-July2017 toexplore the roleofAlice inpatentexamination.176Theyobservedthatbusinessmethods,bioinformatics,andsoftwarepatent applicationswereabandonedmore frequentlywhen thepa-tentees receiveda§101 rejectionpost-Alice.177Theiranalysis indi-catesanincreasingrateof§101rejectionsintheexaminationofpa-tentapplicationsinbusinessmethods,bioinformatics,andparticularsoftwaretechnologies.178Theirresultsarealsoconsistentwithotheronlinesummarystatistics.Forexample,insomeartunitsinbusinessmethods,finalrejectionratesunder§101rosebetween35%and60%afterAlice,includinge-shopping,accounting,businessprocessing,in-centiveprograms,financeandbanking,retail,insurance/healthcare,operationsresearch,andreservations.179
InChienandWu’sempiricalstudy,theycountedthenumbersofpatentapplications,§101rejectionsimposedbythePTO,andpatentapplication abandonments by applicants. 180 However, directly ob-servingthefluctuationofthesenumberscannotsupportaconclusionthattheabandonmentswerecausedbyAlice.Theyalsodidnotindi-catehowpatentapplicantsadjustedtheirfilingandprosecutionstrat-egiespost-Alice.181OurempiricalresearchdesignwithD-i-DanalysispresentedinthisArticleobserves(1)whetherAlicewasacauseofthe§101rejectionsandthedecreaseinthenumberofpatentapplicationsand(2)whetherpatentapplicantsadjustedtheirfilingandprosecu-tionstrategiespost-Alice.
5. RevisedGuidancefromthePTOtoReduceTheseUncertaintiesEventhoughthePTOissuedguidelinestoimplementAlice,schol-
arsaresplitonwhethertheseguidelinesmaybeeffectiveineliminat-ingtheuncertaintiesarisingfromapplicationsoftheAlicetestinthecourts.182TranispersuadedthatthePTOgrantssoftwarepatents ifmeaningful limitations go beyond generally linking the use of an
176. Seegenerallyid. 177. Seeid.at16–17. 178. Seeid.at17(“101isplayinganincreasinglyimportantroleintheexaminationofsoftwareandmedicaldiagnosticspatents....[T]hevastmajorityofinventionsex-aminedbytheofficearenotsignificantlyimpactedby101.”). 179. Sachs,supranote129. 180. SeeChien&Wu,supranote39,at14(describingtheirmethodologyasade-scriptiveanalysis, rather thanadiff-in-diff regressionanalysis, even though theau-thorstermedtheirworkaD-i-Dstudybecauseadiff-in-diffanalysisrequiresaniden-tificationstrategy,whichtheworklacks). 181. Id. 182. CompareTran,supranote168,withKenyon,supranote88.
554 MINNESOTALAWREVIEW [105:527
abstract idea to a particular technological environment.183 By con-trast,BrooksKenyoncriticizesthePTO’sinternalguidelinesbecausetheyonlymirrortheFederalCircuit’sdecisionsonsoftware,resultinginanalarminglyhighrejectionrate.184Kenyonpredictsthatexamin-erswillhesitatetoissuepatentclaims,andsuchhesitationispremisedontheguidelinesandordersfromtheirsupervisorsintheexaminingcore.185Indeed, since theAlice decision, patent examiners have re-jectedastaggeringnumberofpatentapplicationsindifferenttechnol-ogyareasunder§101.186
Inordertoprovideclearguidancetopatentexaminersforevalu-atingsubjectmattereligibility,thePTOissuedRevisedPatentSubjectMatter Eligibility Guidance (Revised Guidance) in January 2019.187TheRevisedGuidancedoesnotrevisetheearlierInterimGuidanceforStep1,whichpertainstowhetherthepatentclaimfallswithinastat-utorycategory.188ItonlyrevisesSteps2Aand2BandtriestoclarifythejudicialexceptionsrelatedtoAliceandMayo.189
TherevisedStep2Arequiresmorethanaskingwhetherthepa-tentclaimsareabstractideasornotsoastofallwithinajudicialex-ception,asoutlinedintheearlierStep2A.190Itisnowatwo-prongtestthatinvolvesallowingpatentclaimsthatreciteajudicialexceptionifthejudicialexceptionisthenintegratedintoapracticalapplication.191Becauseofthissecondprong,examinersareinstructedtogiveweighttoalladditionalelementsintheclaim,includingwhethertheyarecon-ventionalwhenevaluatingwhether the judicialexceptionsare inte-gratedintoapracticalapplication.192
ThegoalofStep2BisclarifiedintheRevisedGuidancetofocuson evaluating whether the patent claims provide an inventive
183. Tran,supranote168,at537,541–42. 184. Kenyon,supranote88,at4–5. 185. Id.at5. 186. MichaelStein,USPTOUrgedtoReviseInterim§101GuidancetoRequireExam-iners to Present a Proper Prima Facie Case Supported by Factual Evidence, BAKERHOSTETLER: IP INTEL. (Mar. 23, 2015), https://www.ipintelligencereport.com/2015/03/23/uspto-urged-to-revise-interim-%C2%A7101-guidance-to-require-examiners-to-present-a-proper-prima-facie-case-supported-by-factual-evidence[https://perma.cc/R6R7-ZHUV];seealsoSachs,supranote129. 187. 2019RevisedPatentSubjectMatterEligibilityGuidance,84Fed.Reg.50(Jan.7,2019). 188. Id.at54. 189. Id.;seealsoMayoCollaborativeServs.v.PrometheusLab’ys,Inc.,566U.S.66(2012). 190. 2019RevisedPatentSubjectMatterEligibilityGuidance,84Fed.Reg.at54. 191. Id. 192. Id.at55.
2020] IMPLICATIONSOFALICE 555
concept.193Aninventiveconceptmaybepresentedwhentherearead-ditionalelementsthatadd limitationsthatarenotwell-understood,routine,conventionalactivitiesinthefield.194Itisnotenoughtopre-sent an inventive concept if the additional elements only generate“well-understood,routine,conventionalactivitiespreviouslyknowntotheindustry...atahighlevel.”195
II.EMPIRICALSTUDYOFTHEIMPACTOFALICEONPATENTPROSECUTION
DoesAlicecreatemoreuncertaintiesinpatentprosecution?Whatarethenatureandtheextentoftheseuncertaintiesacrossdifferenttechnologysectors,includingconsiderationofpatenteestrategiestoovercomeAlice-basedrejections?Toexplorethesequestions,thisAr-ticledevelopsacausalempiricaldesigntoestimatetheeffectoftheAlicedecisionanditsimplementationbythePTO.ThisPartfirstintro-ducesourdataandtheempiricalstudydesignandthenexplainsthevariousregressions’results.WefindthattheAlicedecisionaffectsdif-ferenttechnologyareastodifferentdegrees,andtheabilityofpatentapplicantstofilepatentapplicationstobettercomplywiththepatenteligibilityrequirementsunderAlicealsovariesacrosstechnologyar-eas.196Thus,patentsinsometechnologyareasaremorelikelytoberejectedunder§101duetoAlice.197
A. DATAANDMETHODOLOGYThisSectionintroducesourdatasources,thecodingstrategy,and
thecharacteristicsofthedata.Whilewehaveacomprehensivedata-baseofPTOofficeactions,wefocusonafewrelevantTechnologyCen-tersandartunitsandcloselystudypatentapplicationsfiledinthear-easof bioinformatics, businessmethods, and software.These threetechnologieshavereceivedanincreasingnumberofAlicerejections,andsomeofthemreceivedsignificantlymore§101rejectionspost-Alice.198
193. Id.at56;seealsoMemorandumfromAndrewH.Hirshfeld,supranote43. 194. 2019RevisedPatentSubjectMatterEligibilityGuidance,84Fed.Reg.at56. 195. Id. 196. SeeinfraPartII. 197. SeeinfraPartIII. 198. SeeChien&Wu,supranote39;Sachs,supranote129.
556 MINNESOTALAWREVIEW [105:527
1. DataSourcesandStudyObjectsForAlice,thepetitionforawritofcertiorariwasgrantedonDe-
cember6,2013.199ThejudgementwasissuedbytheSupremeCourtonJune19,2014.200OnDecember16,2014,thePTOformallyimple-mentedtheAlicedecisionbyupdatingitsGuidanceforpatentexamin-ersregardingsubjectmattereligibility.201Ourdataincludeeveryof-ficeactionissuedbythePTOintheperiodbetweenJanuary2012andDecember2016foratotalof4.48millionofficeactions.202Thetypesofofficeactionsincludenoticesofallowances, initialrejections,andfinal rejections inresponse topatentapplicationsandamendmentsfiledbypatentees.203Thespecificreasonsfortherejectionsofclaimsinclude§§101,102,103,and112(a)–(f),andreferencestocourtde-cisionsinAlice,Myriad,andMayo.204Iftherejectionsarefinalrejec-tions,applicantscanfileRequestsforContinuedExamination(RCEs)tocontinueprosecutiononthemerits.205
199. Alice CorporationPty. Ltd. v. CLSBank International, SCOTUSBLOG, https://www.scotusblog.com/case-files/cases/alice-corporation-pty-ltd-v-cls-bank-international[https://perma.cc/HMR5-HB6L]. 200. AliceCorp.Pty.Ltd.v.CLSBankInt’l,134S.Ct.2347(2014). 201. 2014 Interim Guidance on Patent Subject Matter Eligibility, 79 Fed. Reg.74,618(proposedDec.16,2014)(tobecodifiedat37C.F.R.pt.1). 202. See infra Parts II.A.2, II.B (data provided byReed Tech, a LexisNexis com-pany). 203. SeeinfraPartsII.A.2,II.B. 204. SeeinfraPartsII.A.2,II.B;seealsoAss’nforMolecularPathologyv.MyriadGe-netics,Inc.,569U.S.576(2013);MayoCollaborativeServs.v.PrometheusLab’ys,Inc.,566U.S.66(2012);Alice,134S.Ct.2347. 205. U.S.PAT.&TRADEMARKOFF.,supranote99,§706.07(h).
2020] IMPLICATIONSOFALICE 557
Table1.VariablesbyYearandAllSampleSizes AllOfficeActions FinalRejections All§101Rejec-
tionsFinal§101Rejec-
tions2012 1,043,846 238,031 69,083 10,2672013 787,625 200,078 38,226 8,0052014 401,930 65,023 39,230 5,1422015 1,022,696 249,092 106,436 34,7672016 1,220,784 305,225 105,203 32,512 Rejectionsbased
onAliceAll§102Rejec-
tionsAll§103Rejec-
tions All§112Rejections2012 60 306,713 550,160 227,7902013 55 198,386 423,427 161,0892014 4,460 152,235 211,768 106,1642015 22,148 349,693 574,238 280,6192016 30,558 301,431 651,595 291,254
Table1 shows thenumberofofficeactionsbetween2012and2016anddisclosesthespecificnumbersofrejectionsunderthedif-ferentstatutoryrequirementsandbasedonAlice.Table2showsthenumber of office actions by technology areas, addressing selectionbias concerns and supporting the robustnessof the empirical anal-yses. Patent applications are reviewed by patent examiners in
Table2.IndustryCategories,ArtUnits,andNumberofOfficeActionsIndustry Technology(ArtUnits) NumberofOfficeActions
ManufacturingDevices 3722-3727&3729 73,822Bioinformatics 1631&1639 11,513Bioinformatics(broad) 1630 60,991BusinessMethods 3600 575,009BusinessMethodsofFinance 3690 33,720BusinessMethodsofE-Commerce 3620&3680 95,583E-CommerceinHealthCare 3626&3686 16,233E-CommerceinCryptography 3621 4,767Software(general) 2100&2400&2600 1,407,377AI 2121&2129 13,303GraphicalUserInterfaceandDocumentProcessing 2140&2170 72,825
DataBasesandFileManagement 2150&2160 96,108CryptographyandSecurity 2430&2490 95,693ComputerArchitecture 2180&2110 89,717DigitalandOpticalCommunication 2630 47,608ComputerNetworks 2440&2450 106,351Telecommunications 2640 105,440DigitalCameras 2660 81,209RecordingandCompression 2480 58,912ComputerGraphicsProcessing 2610 49,165TelemetryandCodeGeneration 2680 57,265
558 MINNESOTALAWREVIEW [105:527
differentTechnologyCentersandartunitstoassessthetechnologicalnatureoftheinventioninthepatentapplications.206Artunitsaresub-setsofbroaderTechnologyCentersatthePTO.207
Thisstudyconductsanempiricalanalysisforthreedifferenttech-nologysectorsmostdirectlyaffectedbytheAlicedecision—bioinfor-matics,businessmethods,andsoftware.208Italsoincludessub-cate-gorieswithin those technology areas (e.g., specific art unitswithinthese three sectors).209 In the bioinformatics sector, this study ex-plorespatentapplicationsundertwomeasures.Itemploysanarrowdefinitionofbioinformaticsbychoosingspecificartunits1631and1639andabroaddefinitionofbioinformaticsunderthemoregeneralartunit1630.210Thisstudyalsoexplorespatentapplicationsdirectedatbusinessmethods,asdefinedinTC3600.211IttestssomespecificartunitswithinTC3600,includingartunits3620and3680fore-com-merceandartunit3690forfinance.212E-commerceisfurtherdividedintospecificartunitsforhealthcareandcryptography.213Finally,thisstudyexploressoftwarepatentapplications,broadlydefinedasthose
206. Patent Classification, U.S. PAT.& TRADEMARKOFF., https://www.uspto.gov/patents-application-process/patent-search/classification-standards-and-development[https://perma.cc/3BX6-CHTC]. 207. Id. 208. SeeinfraPartsII.A.2,II.B. 209. SeeinfraPartsII.A.2,II.B. 210. See infra Parts II.A.2, II.B; seealsoClassesArrangedbyArtUnit,U.S.PAT.&TRADEMARKOFF.,https://www.uspto.gov/patents-application-process/patent-search/understanding-patent-classifications/patent-classification[https://perma.cc/3BX6-CHTC](outliningartunit1631referstodataprocessingandartunit1639referstocombinatorialchemistrytechnology);TC1600ManagementRoster,U.S.PAT.&TRADEMARKOFF.,https://www.uspto.gov/patent/contact-patents/tc-1600-management-roster[https://perma.cc/VP5P-8KXV](explainingthatartunit1630re-ferstothetechnologysectorsofmolecularbiology,bioinformatics,nucleicacids,re-combinant DNA and RNA, gene regulation, nucleic acid amplification, animals andplants,andcombinatorial/computationalchemistry).SeegenerallyPatentClassifica-tion,U.S.PAT.&TRADEMARKOFF.,https://www.uspto.gov/patents-application-process/patent-search/classification-standards-and-development[https://perma.cc/3BX6-CHTC](explainingthedefinitionofartunitsreliesontheclassificationpro-videdbythePTO). 211. SeeinfraPartsII.A.2,II.B. 212. See infra Parts II.A.2, II.B; seealsoTC3600ManagementRoster,U.S.PAT.&TRADEMARKOFF.,https://www.uspto.gov/patent/contact-patents/tc-3600-management-roster[https://perma.cc/8MN6-P3XX]. 213. See infraParts II.A.2, II.B; seealsoTC3600ManagementRoster, supranote212.
2020] IMPLICATIONSOFALICE 559
applicationsinTC2100,TC2400,andTC2600.214Italsostudiesspe-cificartunitswithinthisbroadcategoryforsoftware.215
2. DescriptiveAnalysesFigure1belowshowstheproportionofPTOrejectionscitingAl-
ice over all office actions issued to patent applications in differenttechnologysectorsafterAlice.Figure2belowshowstheproportionof§101rejectionsoverallofficeactionsindifferenttechnologysectors.Thetwofiguresshowthefrequencywithwhichpatentexaminersre-jectedpatentapplicationsforpatentineligibilityunderAliceor§101.Figures1and2showthatpatentapplicationsinbioinformatics(un-derthenarrowdefinition)receivedbothmorerejectionsthatcitedAl-iceasareason(i.e.,Alicerejections)andmore§101rejectionscom-pared to patent applications in business methods or software.However, the narrower categories in businessmethods for financeande-commercereceivedmoreAlicerejectionsand§101rejectionscomparedtoallothertechnologyareas.
Inbioinformatics(narrowlydefined),24%ofallofficeactionsin-cludedAlicerejectionsforpatentapplicationsfiledbefore,butexam-inedafter,AlicewasdecidedbytheSupremeCourtorimplementedbythePTO.Thispercentagereduced toabout18%forpatentapplica-tionsfiledpost-Alice.BeforeAlicewasdecided,23.76%oftheofficeactions forapplications inbioinformatics included§101rejections.AftertheAlicedecision,60.97%of theofficeactions included§101rejectionsforapplicationsfiledbeforeAlicewasdecided,whichthendecreasedslightlyto58.48%forapplicationsfiledpost-Alice.About17.9%ofthefinaldecisionsforbioinformaticsincluded§101rejec-tionsbeforeAlicewasdecidedbytheSupremeCourt.Thisratewent
214. SeeinfraPartsII.A.2,II.B. 215. SeeinfraPartsII.A.2,II.B(highlightingthatthespecificartunitsincludeartunits2430and2490forcryptographyandsecurity,artunits2150and2160fordatabasesandfilemanagement,artunits2140and2170forgraphicaluserinterface(GUI)anddocumentprocessing,artunits2180and2110forcomputerarchitecture,artunits2630fordigitalandopticalcommunication,artunits2440and2450forcomputernet-works,artunits2640fortelecommunications,artunits2660fordigitalcameras,artunits2480forrecordingandcompression,artunits2610forcomputergraphicspro-cessing,andartunits2680fortelemetryandcodegeneration(firstcitingTC2400Man-agementRoster,U.S.PAT.&TRADEMARKOFF., https://www.uspto.gov/patent/contact-patents/tc-2400-management-roster[https://perma.cc/C4T8-TWXT];thencitingTC2100 Management Roster, U.S. PAT. & TRADEMARK OFF., https://www.uspto.gov/patent/contact-patents/tc-2100-management-roster[https://perma.cc/636H-EXHP]; and then citing TC 2600 Management Roster, U.S. PAT.& TRADEMARKOFF.,https://www.uspto.gov/patent/contact-patents/tc-2600-management-roster[https://perma.cc/3NZU-PMHF])).
560 MINNESOTALAWREVIEW [105:527
upto72.43%afterAlicewasdecidedfortheapplicationsfiledbeforeAliceand72.78%forapplicationsfiledafterAlice.
Figure1.TheProportionofAlice-BasedRejectionsasaFractionofAllOfficeActions
Figure2.TheProportionof§101RejectionsasaFractionofAllOfficeActions
Inbusinessmethods,13.87%oftheofficeactionsforapplicationsfiledbeforetheAlicedecision,butexaminedaftertheAlicedecision,citedAlice and imposed a rejection. This rate increased slightly to15.21%forapplicationsfiledbeforeAlicebutexaminedafterthePTOimplementation ofAlice. The rejection rate reduced significantly to
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
Bio-Inf
ormati
cs
Busine
ss M
ethod
s
Busine
ss M
ethod
s of F
inanc
e
Busine
ss M
ethod
s of E
-Com
merce
Software
(in g
enera
l) AI
Data B
ases a
nd File
Man
agem
ent
Cryptog
raphy
and S
ecurit
y
Compu
ter N
etwork
s
Teleco
mmunica
tions
Digital
Cam
eras
Compu
ter G
raphic
Process
ing
Telemetr
y and
Cod
e Gen
eratio
n
Rejections based on Alice as a fraction of all office actions for patent applications filed before Alice
Rejections based on Alice as a fraction of all office actions for patent applications filed after Alice
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
Software
(in ge
neral) AI
Data Base
s and F
ile M
anagem
ent
Cryptograp
hy an
d Secu
rity
Computer
Netw
orks
Telecom
municati
ons
Digital Cam
eras
Computer
Grap
hic Proces
sing
Telemetr
y and C
ode Gen
eratio
n
9.13% 8.88% 5.83% 5.42% 2.98%
7.56% 4.70% 6.30% 8.41% 3.57%9.41% 9.71% 6.57% 7.47%4.48%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
Bio-Inf
ormati
cs
Busine
ss M
ethod
s
Busine
ss M
ethod
s of F
inanc
e
Busine
ss M
ethod
s of E
-Com
merce
Softw
are (i
n gen
eral) AI
Graphic
al User
Inter
face a
nd D
ocum
ent P
rocess
ing
Data B
ases a
nd Fi
le M
anag
emen
t
Cryptog
raphy
and S
ecurit
y
Compu
ter A
rchite
cture
Digital
and O
ptica
l Com
munica
tion
Compu
ter N
etwork
s
Telec
ommun
icatio
ns
Digital
Cam
eras
Record
ing an
d Com
pressi
on
Compu
ter G
raphic
Proc
essing
Telem
etry a
nd C
ode G
enera
tion
Sec. 101 regections as a fraction of all office actions before Alice
Post-Alice Sec. 101 regections as a fraction of all office actions for patent applications filed before Alice
Post-Alice Sec.101 rejections as a fraction of all office actions for patent applications filed after Alice
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
Softw
are (
in ge
neral) AI
Graphical U
ser I
nterf
ace a
nd D
ocum
ent P
roce
ssing
Data B
ases an
d File
Man
agem
ent
Crypto
grap
hy an
d Secur
ity
Compu
ter A
rchite
cture
Digita
l and
Opti
cal C
ommun
icatio
n
Compu
ter N
etworks
Teleco
mmun
icatio
ns
Digita
l Cam
eras
Recording
and C
ompressio
n
Compu
ter G
raphic
Proce
ssing
Telemetr
y and
Cod
e Gen
eratio
n
2020] IMPLICATIONSOFALICE 561
3.49%forbusinessmethodpatentapplicationsfiledafterAlice,andsimilarlyshrankto3.46%forbusinessmethodapplicationsfiledafterthePTOimplementationofAlice.Thirty-onepercentoftheofficeac-tions forbusinessmethodpatentapplications included§101rejec-tionsbeforeAlicewasdecided;thisreducedto9.41%forthoseappli-cationsfiledpost-Alice.Consideringonlyfinalofficeactions,8.52%ofthosefinaldecisions(e.g.,allowancesorrejections)forbusinessmeth-odsincluded§101rejectionsbeforeAlicewasdecided.Thisratein-creaseddramatically to45.44%afterAlicewasdecided forapplica-tions filedbeforeAlice anddecreasedsharply to14.11%forpatentapplicationsfiledafterAlice.
Softwarereceivedrelativelyfewer§101rejectionsandAlicere-jectionscompared tobothbusinessmethodsandbioinformatics. Inthegeneralsoftwaresector,1.04%oftheofficeactionsincludedrejec-tionsunderAliceforapplicationsfiledbeforeAlicebutexaminedafterAlice.Thisrateincreasedslightlyto1.17%forapplicationsfiledbeforetheAlicedecisionwasimplementedbythePTO.Therejectionratein-creasedto1.7%forsoftwareapplicationsfiledafterAliceanditsim-plementationbythePTO.BeforeAlicewasdecided,10.75%ofallof-fice actions for software applications were § 101 rejections. AfterAlice, 10.93%of all office actions for applications filed beforeAlicewere§101rejections,whichthenincreasedslightlyto12.98%forap-plicationsfiledafterAlice.Moreover,6.47%offinaldecisions(e.g.,al-lowancesorrejections)forsoftwareapplicationsincluded§101re-jectionsbeforetheAlicedecision.Thisratewentupslightlyto9.73%afterAlicewasdecidedforapplicationsfiledbeforeAliceandto9.83%forapplicationsfiledafterAlice.
Patentapplicationsinthevarioussub-categorieswithinsoftwarereceivedAlicerejectionsand§101rejectionstovaryingdegrees.Inthespecificsoftwareartunits, theunit thatreceivedthemostAlicerejectionswascomputernetworks,inwhich3.31%ofallofficeactionsforpatentapplicationsfiledbeforeAlicewasdecided,butexaminedafterAlice,wereAlicerejections.Thisrateincreasedto5.66%forap-plicationsfiledaftertheAlicedecision.EighteenpercentofallofficeactionsforapplicationsincomputernetworksfiledbeforeAlicewasdecided,butexaminedafterAlice,were§101rejections.Thisratein-creased dramatically to 26.5% for applications filed post-Alice. Incryptography and security, 2.55% of office actions for applicationsfiledbeforeAlice,butexaminedafterAlice,wereAlicerejections,andthisincreasedto5.14%forapplicationsfiledpost-Alice.Eighteenper-centofallofficeactionsforapplicationsincryptographyandsecurityfiledbeforeAlicewasdecided,butexaminedafterAlice,were§101
562 MINNESOTALAWREVIEW [105:527
rejections,which then increased to 24.39% for patent applicationsfiledafterAlice.
Moreover, patent applications in computer networks, GUI anddocumentprocessing,databasesandfilemanagement,cryptographyandsecurity,andcomputergraphicsprocessingreceivedahighper-centage (about8–10%)of final rejectionsunder §101beforeAlicewasdecided.Therateincreasedto19.32%post-Aliceforapplicationsin cryptography and security filed before Alice and increased to22.53%forapplicationsfiledpost-Alice.Therateincreasedto18.18%after Alice was decided among applications in computer networksfiledbeforeAlice and increased to23.28% for applications in com-puter graphics processing filed post-Alice. Compared to these in-creasedpercentagesofrejections,patentapplicationsinGUIanddoc-ument processing, computer architecture, telecommunications, andrecordingandcompressiondidnotreceivemorefinalrejectionsun-der§101afterAlice.
Figure3.TheVariation/TrendforMonthlyNumberofPatentApplica-tions
Inabroadview,thenumberofpatentapplicationsdecreasedinbroadandnarrowbioinformatics,businessmethods,andsoftwareingeneral,asshowninFigure3above.BeforeAlice,therewere,onaver-age,392patentapplicationsfiledpermonthinbroadbioinformatics,withinwhichninetypatentapplicationswereinnarrowbioinformat-ics. AfterAlice, therewere about 339 patent applications filed permonth in broadbioinformatics, and thepatent applications filed in
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
2012 2013 2014 2015 2016 2017
Time (monthly)Manufacturing Broad Bio-Informatics Narrow Bio-Informatics Business Methods Software (in general)
Decision Date Implementation Date
2020] IMPLICATIONSOFALICE 563
narrowbioinformaticsdecreasedto81.Businessmethods-patentap-plicantsfiled4,206patentapplicationspermonthonaveragebeforeAlicebut filed3,843patentapplicationspermonthafterAlice.Soft-ware-patent applicants, on average, filed 8,780 patent applicationspermonthbeforeAlicebutfiled7,910patentapplicationspermonthafterAlice.Thetotalpatentapplicationsalsodecreasedby10.64%af-terAlice.From2012to2016,about26%ofthetotalpatentapplica-tionswerefiledinsoftware.About12%wereinbusinessmethodsandabout1%wereinbroadbioinformatics.
Table3reviewsthedecreaseinpatentapplicationnumbersbe-
foreandafterAlicebydifferenttimewindowsbecausethemarketandpatentapplicantsneededtimetoreacttoAliceandadjusttheirpatentstrategies.ComparingtheaveragenumberofpatentapplicationsfiledpermonthoneandahalfyearsafterAliceandoneyearaftertheAliceimplementationbythePTOtotheaveragenumberofpatentapplica-tions filedpermonthbeforeAlice,patentapplications inbroadandnarrow bioinformatics, businessmethods, software in general, andtheoverallindustrydecreasedatahigherlevelcomparedtotheear-liercomparisons.Thetotalpatentapplicationsfiledpermonth,onav-erage,fell29.56%afterAlice.Whilethe20.08%decreaseinpatentap-plications inbroadbioinformaticswas lower than thedrop in total
Table3.MeansofPatentApplicationsperMonthBetween2012and2016
Jan.2012-Alice
Alice-Dec.2016 Drop Jan.2012-
AliceJan.2016-Dec.2016 Drop
AllPatentApplica-tions 33843.55 30241.35 10.64% 33843.55 23837.83 29.56%BroadBioinformat-ics 391.93 338.87 13.54% 391.93 313.25 20.08%%ofAllPatentAp-plications 1.16% 1.12% 1.16% 1.31% NarrowBioinformat-ics 90.34 81.13 10.20% 90.34 79.50 12.00%%ofAllPatentAp-plications 0.27% 0.27% 0.27% 0.33% BusinessMethods 4206.00 3843.26 8.62% 4206.00 2961.83 29.58%%ofAllPatentAp-plications 12.43% 12.71% 12.43% 12.42% Software(ingen-eral) 8779.97 7910.36 9.90% 8779.97 6014.00 31.50%%ofAllPatentAp-plications 25.94% 26.16% 25.94% 25.23% Note: The datawere collected from the Patent Examination Research Dataset (Public PAIR).https://www.uspto.gov/learning-and-resources/electronic-data-products/patent-examina-tion-research-dataset-public-pair.
564 MINNESOTALAWREVIEW [105:527
applications,thedropsinbusinessmethodsandsoftwareingeneral,at29.58%and31.5%respectively,weregreaterthanthedecreaseinthetotalnumberofpatentapplications.
3. Methodology
a. LogisticRegressionsHowwererejectionsunderAlicegivenbypatentexaminersre-
latedtorejectionsunder§101andtorejectionsunderotherstatutorysectionssuchas§§102,103,and112intheinitialandfinaldecisionsmadebythePTO?InordertoexploretheassociationandthestrengthoftheassociationbetweentheAlicerejectionsandthestatutoryrejec-tions,thisstudyperformsaregressionanalysis.
Even though the language of Alice does not directly address§§102,103,or112,thesestatutesarerelevanttothepatentabilityofan invention andare implicatedby theAlice decision.216Therefore,thePTOrejectionsunderallfourstatutesshouldbeindividuallycon-trolledintheregressionanalysisasindependentvariables.Sincethepresenceorabsenceofeachstatutorycategoryinanofficeactionisbinary(zeroorone),thisstudyfirstdeployslogisticregressionsandincludes statutory rejections as independent variables to estimatewhetherarejectionunderAlicewasissued.
In logisticregressions,weobservetheassociationbetweenthepresenceofAlicerejectionsandanyoneofthefourcategoriesofstat-utoryrejections(i.e.,rejectionsbasedon§§101,102,103,or112)asaninitialorfinalrejectionwhentakingallofficeactionsregardingallfourstatutesintoaccount.Itisimportantforlogisticmodelstocontrolformonthandfortechnologycentersorartunitsasbeingfixed.Weaddedfixedcontrolsbecauseallthesefactorscouldbedirectorindi-rectreasonsforstrengtheningtheassociationbetweentheAlicerejec-tionsandanyonetypeofstatutoryrejection.217
b. Difference-in-DifferenceAnalysesWehaveobservedavariationin§101rejections(whichareei-
therinitialrejectionsorfinalrejections)amongallofficeactionsbe-foreandaftertheAlicedecision.218Specifically,moreinitialandfinalrejections were given by examiners under § 101 and Alice for
216. SeesupraPartI.A.1. 217. Comparedto logisticregressions, thechi-squaredtestperseusedtotestacorrelationbetweenvariablesinbinarydatacannottakethosereasonsintoconsider-ation. 218. SeesupraPartII.A.2.
2020] IMPLICATIONSOFALICE 565
applicationsinbioinformatics,businessmethods,andsoftwareaftertheAlicedecisionanditsPTOimplementation,regardlessofwhetherpatentapplicantsmodifiedthedisclosuresandclaimsintheirapplica-tionstobettercomplywiththeAlicedecision.219InordertoexplorewhethertheAlicedecisionplayedacausalroleintheincreaseininitialandfinal§101rejections,thisstudydeploysthemethodofdifference-in-difference(D-i-D)regressions.ThismethodisusedtoobserveiftheinterventionoftheAlicedecisionmadethosethreeareasoftechnol-ogyreceivemoreinitialandfinal§101rejectionscomparedtothosetechnologyareasthatwerenotaddressedbytheAlicedecision(e.g.,manufacturing)but thatused toreceive§101rejectionsatamuchlowerlevelintheirinitialandfinaldecisionsgivenbythePTO.Apar-alleltrendsassumptionneedstobetestedundertheD-i-Dmethodol-ogy:BeforetheAlicedecision,wasthevariationintheproportionof§101rejectionsinofficeactionsasafractionofallofficeactionsinthetechnologyareasthatwerenotimpactedbytheAlicedecisionparalleltothesamevariationforthethreetechnologyareasofinterest?AftertheAlice decision,was thisparallel trendmaintainedorwas itdis-rupted?
The interventionof theAlice decision is consideredunder twodates.Onedateisthemonth(June2014)whentheopinionwasdeliv-eredby theU.S. SupremeCourt,220and theotherdate is themonth(December2014)whenthePTOintroducedtheInterimGuidanceim-plementing the Alice decision.221 The two dates are separately de-ployedintheD-i-Dregressions.Theregressionresultsbetweenthetwodatessuggestadifferenceinhowtheopinionandimplementationeventsaffectedpatentapplicationsandtheofficeactionsissuedbypa-tentexaminers.
Weselectedthepatentapplicationsinmanufacturingdevicesandprocesses,machinetools,andhandtoolsinartunits3722–3727andinartunit3729asthecontrolgroup.Asthecontrolgroup,weexaminewhethertheyarelesslikelytobeaffectedbytheAlicedecision.Spe-cifically,thecontrolgroupofpatentapplicationsinmanufacturingde-vicesconsistentlyreceivedaverysmallnumberof§101rejections,whichwereatmost3.7%ofallofficeactionspermonthand0.06%ofallofficeactionsonaveragepermonthduringtheentireperiodfrom2012to2016.Wecomparedthiscontrolgroupwithourstudyobjectsof patent applications in business methods, bioinformatics, and
219. SeesupraPartII.A.2. 220. AliceCorp.Pty.Ltd.v.CLSBankInt’l,134S.Ct.2347,2347(2014). 221. 2014 Interim Guidance on Patent Subject Matter Eligibility, 79 Fed. Reg.74,618(proposedDec.16,2014)(tobecodifiedat37C.F.R.pt.1).
566 MINNESOTALAWREVIEW [105:527
software. Patent applications in these three technology areaswerethenconsideredas independent treatedgroups.222All these treatedgroupsreceivedmuchmoreinitialandfinal§101rejectionsbetween2012and2016thanthecontrolgroupandcomparedtoothertech-nologyareasoutsidethescopeofourdataselection.Figure4belowshowsthespecificmonthlyvaryingtrendsintheinitialandfinal§101rejections for the control group of manufacturing and the treatedgroupsofbusinessmethods,bioinformatics, andbusinessmethods.Notonlydidthefourgroupsreceive§101rejectionsintheirinitialandfinalPTOdecisionsatdifferentlevels,butthetreatedgroupsalsoreceivedmanymore§101rejectionsintheirinitialandfinaldecisionsgivenbythePTOafterAlicewasdecided.
Groupdifferenceisabinaryvariable,wherezerorepresentsthecontrolgroupandonerepresentsthetreatedgroup.Timedifferenceisalsoabinaryvariable,whichcontrolsthetimepriortotheAlicede-cisionaszeroandthetimepost-Alice(decisionorimplementation)asone. InD-i-Dregressions, thecoefficientof the interactiontermbe-tweengroupdifferenceandtimedifferencesurrogatesaD-i-Deffect.Inamodeltoestimatetheprobabilityofreceivinga§101rejectionintheofficeactionsgivenbythePTO,apositiveD-i-Deffectorapositivecoefficient for the D-i-D effect with statistical significance suggeststhatAliceinducedagreaternumberof§101rejectionsforthetreatedgroupintheirinitialandfinaldecisionsgivenbythePTO.
222. InD-i-Danalysis,atreatedgrouporatreatmentgroupreferstothesamplesthatareexpectedtovaryduetothetreatment,suchasapolicychange.
2020] IMPLICATIONSOFALICE 567
Figure4.TheVariation/TrendforMonthly§101RejectionsasaFrac-tionofAllOfficeActions
0%
10%
20%
30%
40%
50%
60%
70%
80%20122013
20142015
20162017
Time
(monthly)
Manufacturing
Software (in general)
Business M
ethodsB
io-Informatics (narrow
)
Decision
Date
Implem
entationD
ate
568 MINNESOTALAWREVIEW [105:527
ThisstudysplitstheofficeactionsgivenaftertheAlicedecisionintotwogroups.Thiscodingstrategyallowsthestudytoobservehowpatentapplicantsattemptedtomodifythedisclosuresandclaimsintheirpatentapplications tobettercomplywith theAlicedecision,afeaturewhichwasnottakenintoaccountbyChienandWu.223Inourstrategy,onegroupreferstoapplicationsfiledbeforetheAlicedeci-sionbutexaminedafterAlice.Inthemodelsestimatingtheprobabilityofreceivinga§101rejectioninanofficeaction,theD-i-DeffectofAlicewithrespecttotheseofficeactionsshowshowtheexaminersstartedtakingintoaccounttheAlicedecision.TheothergroupreferstothosepatentapplicationsfiledaftertheAlicedecision.TheD-i-DeffectwithrespecttotheofficeactionsinthislattergroupshowshowapplicantsandtheirpatentattorneysreactedtoAliceinpatentprosecutioninad-ditiontothereactionstoAlicebyexaminers.AfterreviewingtheAliceeffectonall(initialandfinal)§101rejections,weseparatelyreviewedtheAliceeffectonfinalofficeactionsforpatentapplicationsthatini-tiallyreceived§101rejectionsintheinitialroundofofficeactionsinordertodeterminetheabilityofpatenteestoovercomethoseinitiallyreceived§101rejections.
InordertoexploretheimpactofAliceonpatentapplicationswiththeD-i-Dregressions,ouridentificationassumptionisthattherearenoreasonsoflawotherthantheAlicedecisionandtheimplementa-tionoftheAlicedecisionbythePTOthatnegativelyaffecttheapprovalofpatentapplicationsinbioinformatics,businessmethods,andsoft-ware.Moreover,beforeAlice,thevariationin§101rejectionsforbio-informatics,businessmethods,andsoftwareshouldbeparalleltothevariationof§101rejectionsformechanicalmanufacturing.Thispar-alleltrendshouldbebrokenbyAliceandits implementationbythePTO.
B. REGRESSIONRESULTS
1. CorrelationBetweenAliceRejectionsandOtherStatutoryRejections
This study deploys logistic regressions to explore the correla-tionsbetweentheAliceofficeactionrejectionsandthedifferentstat-utoryrejections.Section101rejectionsforalloftheartunitsforbio-informatics, business methods, and software were positivelycorrelatedtoAlicerejectionsatastatisticallysignificantlevel.Thissta-tisticalsignificancemeansthatpatentapplicationsthatwerefiledin
223. SeeChien&Wu,supranote39,at14(showingthatthedataandresearchcan-notindicatehowapplicantsadjustedtheirapplicationsafterAlice).
2020] IMPLICATIONSOFALICE 569
thesethreetechnologyareasandreceivedAlicerejectionsweremorelikelytobesimultaneouslyrejectedunder§101.AftertestingthedataofpatentapplicationsthatwerefiledinthethreetechnologyareasandreceivedofficeactionsafterthePTOimplementationofAlice,thede-greeofthecorrelationwassimilartothecorrelationwhendeployingthedataofpatentapplicationsthatreceivedofficeactionsrightafterAlicewasdecided.Inotherwords,theassociationbetweenAlicerejec-tionsand§101rejectionswasnotstrengthenedorweakenedasAlicewasimplementedbythePTOorwiththepassageoftimebefore2016.
TheartunitwiththestrongestassociationbetweenAlicerejec-tionsand§101rejectionsamongalltechnologyareaswasdigitalandopticalcommunication.224Digitalandopticalcommunicationwasanart unit where patent applications that received an Alice rejectionweremostlikelytoberejectedunder§101ininitialandfinaldeci-sions,comparedtootherartunitsthatalsoreceivedAlicerejections.Patentapplicationsincomputergraphicsprocessing,databasesandfilemanagement,cryptographyandsecurity,computernetworks,dig-italcameras,telemetryandcodegeneration,softwareingeneral,bio-informatics,andbusinessmethodsalsohadaverystrongassociationbetweenAlicerejectionsand§101rejections.Eventhoughartunitsforspecificcategoriesinbusinessmethodsforfinance,e-commerce,healthcare,andcryptographyalsohadastrongpositiveassociationbetweenAlicerejectionsand§101rejections,theassociationwasnotasstrongastheassociationingeneralbusinessmethodsorotherpre-viouslydiscussedartunitsforthespecificcategoriesinsoftware.
Therecordingandcompressionartunithadtheweakestpositiveassociation betweenAlice rejections and § 101 rejections. In otherwords, patent applications in recording and compressionwere theleastlikelytosimultaneouslyreceivemoreAlicerejectionsandmore§101rejections intheir initialor finaldecisionscomparedtoothertechnologyareas.Amongallofthetestedartunits,theonlyartunitwhereallcategoriesofstatutoryrejectionswerepositivelycorrelatedtoAlicerejectionswasdatabasesandfilemanagement.Thismeansthatpatentapplicationsindatabasesandfilemanagementwereal-waysmorelikelytoberejectedunderAliceregardlessofthetypeofstatutoryrejectionsthatwereissued.
In most of the other art units in the three technology areas,§§102,103,or112rejectionswereeithernegativelycorrelatedtoAl-icerejectionsornotcorrelatedtoAlicerejectionsatastatisticallysig-nificantlevel.Thissuggeststhatpatentapplicationsintheseartunits
224. ThespecificlogisticregressionresultsaredisclosedinAppendixB1infra.
570 MINNESOTALAWREVIEW [105:527
that receivedAlice rejections did not simultaneously receive otherstatutoryrejections.Specially,inbroadlydefinedbioinformatics,thefrequencyofreceiving§§102,103,and112rejectionswasnegativelycorrelatedtothefrequencyofreceivingAlicerejectionsintheinitialorfinaldecisions.Inotherwords,whenpatentapplicationsinbroadlydefinedbioinformaticsreceivedanincreasingnumberofstatutoryre-jectionsother than§101 rejections, theywere less likely tobe re-jectedunderAlice.Bycontrast, inbioinformatics,narrowlydefined,§102rejectionswerenotcorrelatedtoAlice rejectionsatastatisti-callysignificantlevel.Inbusinessmethods,thefrequencyofreceiving§§102 and 112 rejectionswas negatively correlated toAlice rejec-tions,but§103rejectionswerepositivelycorrelated toAlice rejec-tions.Thenegativecorrelationsuggeststhatwhenpatentapplicationsinbusinessmethodsreceivedanincreasingnumberof§§102and112rejections,theywerelesslikelytoreceiveAlicerejections.Whentheapplicationsreceivedanincreasingfrequencyof§103rejections,theywerealsomorelikelytoreceiveAliceand§101rejections.
2020] IMPLICATIONSOFALICE 571
Table4.LogisticRegressionstoPredictRejectionsUnderAlicePanel1.
Variables bioinfor-matics
businessmethods
businessmethodsoffinance
businessmethodsofe-com-merce
software(ingen-eral)
§101 6.000*** 5.292*** 4.591*** 4.341*** 5.143*** (0.581) (0.0842) (0.224) (0.0896) (0.0542) §102 0.148* -0.148*** -0.0843** -0.145*** -0.0217 (0.0822) (0.0178) (0.0412) (0.0225) (0.0245) §103 -0.457*** 0.0386** 0.142*** 0.0566** -0.0669** (0.0680) (0.0182) (0.0356) (0.0243) (0.0277) Obj. 6,636 205,006 17,820 54,523 711,048 R2 0.284 0.476 0.163 0.192 0.473
Panel2.
databases&file
manage-ment
cryptog-raphy&security
telemetry&codegenera-tion
digitalcameras
computernetworks
digital&op-ticalcommu-nication
§101 7.181*** 5.363*** 5.341*** 3.440*** 5.218*** 7.550*** (0.454) (0.173) (0.263) (0.131) (0.129) (0.999)
§102 0.0705 -0.227*** 0.0646 -0.312*** -0.0701 -0.556* (0.0732) (0.0610) (0.142) (0.110) (0.0534) (0.322)
§103 0.338*** 0.377*** 0.316** 0.523*** -0.607*** -0.265 (0.0908) (0.0821) (0.151) (0.120) (0.0585) (0.256)
Obj. 47,999 49,478 55,357 47,025 60,697 20,457R2 0.473 0.438 0.462 0.382 0.429 0.500Note:Month,artunit,and§112arealsocontrolledasfixed.***p<0.01,**p<0.05,*p<0.1.
Table 4 shows the correlations between § 101 rejections and
otherstatutoryrejectionsthatwerereceivedintheinitialorfinalde-cisionsandaretheindependentvariablesdeployedinthelogisticre-gressions.Notonlycouldthesestatutoryrejectionsshareanunderly-ingrationaleaddressedintheAlicedecisionitself,butthecovariationsamongthestatutoryrejectionshelpuslocatethetrueassociationbe-tweenthemandtheAlicerejections.Whenthecovariationorcolline-arityishigh,differentindependentvariablesmayrepresentthesamestatisticalinformationandneednotbeindependentlyexplored.225Re-garding§112, thisstudyspecifically focuseson§112(a)rejections(i.e., written description and enablement of specification 226 ) and§112(b)(i.e.,definitenessofclaims227)rejections.Inourdataofallof
225. SeeRekhaMolala,MLmuse:CorrelationandCollinearity—HowTheyCanMakeorBreakaModel,MEDIUM:CLAIRVOYANT(July15,2019),https://blog.clairvoyantsoft.com/correlation-and-collinearity-how-they-can-make-or-break-a-model-9135fbe6936a[https://perma.cc/TJ7C-NKG9]. 226. See35U.S.C.§112(a). 227. Seeid.§112(b).
572 MINNESOTALAWREVIEW [105:527
thePTOofficeactionsbetween2012and2016,examinersdidnotgiveany§112(e)or(f)228rejectionsforanytechnologyareas(notjustforthestudiedtechnologyareaslistedinTable1).Section112rejectionswereusuallygivenunder§112(b).
InalltestedtechnologyareaslistedinTable1otherthanmanu-facturingdevices (the controlgroup), the frequencyof§101 rejec-tionswaspositivelycorrelatedwiththe frequenciesof§§102,103,and112(b)rejections,regardlessofwhethertheofficeactionswereissuedbeforeorafterAlice.Inotherwords,apatentapplicationthatwasrejectedunder§101wasalso likelytoreceiveanother§§102,103, and 112(b) rejection. In bioinformatics, narrowly defined, thecorrelation between § 101 rejections and § 112(b) rejections wasmuch stronger than the correlation between § 101 rejections and§102rejections.Inothertechnologyareas,thelattercorrelationwasmuchstrongerthantheformercorrelation.Patentapplicationsinnar-rowly defined bioinformatics that received a § 101 rejection weremorelikelytoreceiveonemore§112(b)rejectionthantoreceiveonemore§102rejection.Bycontrast,patentapplicationsinothertech-nologyareasofbroadlydefinedbioinformatics,businessmethods,orsoftwarethatreceiveda§101rejectionweremorelikelytoreceiveonemore§102rejectionasopposedtoreceivingonemore§112(b)rejection.
Thecorrelationbetween§101rejectionsand§112(a)rejectionswasweakerthanthecorrelationbetween§101rejectionsandotherstatutoryrejections(i.e.,§§102,103,and112(b)),exceptfortheofficeactionsforbusinessmethodpatentapplicationsafterAlice.Itmeansthateventhoughpatentapplicationsthatreceiveda§101rejectionwere likely to receiveonemore§112(a) rejection, thisprobabilitywas lower thantheprobabilityofsimultaneouslyreceivinganotherstatutoryrejectionotherthan§112(a).Amongtheofficeactionsis-sued after Alice, the correlation between § 101 and § 112(a) wasstrongerthan(1)thecorrelationbetween§101rejectionsand§102rejections and (2) the correlation between § 101 rejections and§112(b)rejections.
Thecorrelationbetween§101rejectionsand§112(a)rejectionsvariedamongtechnologyareas.Insomesub-categoriesoftechnologyareas,includingbusinessmethodsoffinance,AI,andcomputerarchi-tecture, there was no correlation between § 101 rejections and§112(a)rejectionsatastatisticallysignificantlevelamongtheofficeactions that were issued either before or after Alice. In these
228. Id.§112(e)–(f).
2020] IMPLICATIONSOFALICE 573
technologyareas,wedidnot find thatapatentapplicationrejectedunder§101wasalsolikelytosimultaneouslyreceivea§112(a)re-jection. Innarrowlydefinedbioinformatics,digitalandopticalcom-munication,computernetworks,digitalcameras,andtelemetryandcodegeneration,therewerepositiveassociationsbetween§101re-jections and §112(a) rejections at a statistically significant levelamongofficeactionsissuedafterAlice.Indatabasesandfilemanage-mentandcryptographyandsecurity,therewerepositiveassociationsbetween§101rejectionsand§112(a)rejectionsatastatisticallysig-nificantlevelamongtheofficeactionsissuedbeforeAlice,whichweremuchweakercomparedtotheassociationbetween§101rejectionsandotherstatutoryrejections(e.g.,rejectionsunder§§101,102,and112(b)).
2. Difference-in-DifferenceRegressionResults229WhencomparingofficeactionsissuedbeforeandafterAlicefor
applications filed before the Alice decision in order to explore thecausaleffectoftheAlicedecisiononexaminers,thecoefficientsfortheinteractiontermintheD-i-Dregressionsarepositiveandstatisticallysignificantinthemodelstoestimatetheprobabilityofinitiallyandfi-nallyreceivinga§101rejectioninbusinessmethods,bioinformatics,andtheartunit fortelemetryandcodegeneration.Whileaparalleltrendofreceiving§101rejectionsbetweenthecontrolgroup,whichreferstopatentapplicationsinmanufacturingdevicesandprocesses,andthetreatedgroupsbeforeAlicecannotbeprovenasshowninFig-ure4andFigureA1,230becauseofthefluctuationsin§101rejectionsreceivedbythetreatedgroups,thedifferenceinthelevelofreceiving§101rejectionsbetweenthecontrolgroupandthetreatedgroupsarestable,suggestingacounterfactualtrendtocomplementtheparalleltrendassumption.231
Duetoanextremelylowprobabilityofinitiallyandfinallyreceiv-ing§101rejectionsinthecontrolgroup,thecomparisonofinitiallyandfinallyreceiving§101rejectionsbetweenthetreatedgroupsandthecontrolgroupmaybesimplifiedandunderstoodasthelikelihoodofinitiallyandfinallyrejectingapplicationsinthetreatedgroupunder
229. TherobustnesscheckfortheD-i-DmodeldesignisincludedinAppendixDinfra. 230. SeeinfraAppendixAfig.A1. 231. SeegenerallyAriellaKahn-Lang&KevinLang,ThePromiseandPitfallsofDif-ferences-in-Differences:Reflectionson16andPregnantandOtherApplications,38J.BUS.&ECON.STAT.613(2020)(emphasizingthatthenatureoftheparalleltrendassump-tionistoshowacounterfactualtrend).
574 MINNESOTALAWREVIEW [105:527
§101.Therefore, thosepositivecoefficientssuggestthatAlicemadepatent applications in those technology areasmore likely to be re-jectedunder§101intheinitialorfinaldecisions.Meanwhile,thepos-itivecoefficients,interpretedasapositiveD-i-Deffect,surrogateneg-ativeeffectsofAliceonpatentapplications:patentapplicationsweremorelikelytoberejectedduetoAlice.
ThecoefficientsfortheD-i-DeffectoftheimplementationofAlicehaveasimilardegreeofstatisticalsignificanceandsimilarvalueasthecoefficientsfortheD-i-DeffectoftheAlicedecision.Theformercoef-ficientsare slightly stronger than the latter coefficients,which sug-geststhateffectsoftheAlicedecisionanditsimplementationonpa-tentexaminerswereconsistent,andthePTOimplementationoftheAlicedecisionhadaslightlylargereffectonexaminersthantheAlicedecisionitself.
ThecoefficientsfortheD-i-DeffectoftheAlicedecisionareposi-tiveandstatisticallysignificantinthemodelsthatestimatetheprob-abilityofissuing§101rejectionsforbioinformatics,someartunitsforthesub-categoriesinbusinessmethods,andtwoartunitswithrespecttosoftware(e.g.,computernetworksandtelemetryandcode-genera-tiontelemetry).ThepositivecoefficientssuggestthattheAlicedeci-sioncausedpatentapplicationsfiledpost-Aliceinthesetechnologyar-eas to be more likely to be rejected under § 101. Similar to theregressionswithrespecttoapplicationsfiledbeforetheAlicedecision,butexaminedpost-Alice,thecoefficientsfortheD-i-DeffectofthePTOimplementation ofAlice have a similar degree of statistical signifi-canceandvalueasthecoefficientsfortheD-i-DeffectoftheAlicede-cision.ThissimilaritysuggeststhatAlice’seffectwasconsistentastoits impact on examiners reviewing applications filedpost-Alice.WenowturntotheeffectsofAliceonpatentexaminersissuingofficeac-tionsineachtechnologyareaandhowAliceincreasedthelikelihoodofreceiving§101rejections.
a. BioinformaticsThisSubsectionfirstexploresartunits1631and1639withre-
specttobioinformatics,narrowlydefined.Amongalltypesoftechnol-ogieslistedinTable1,narrowlydefinedbioinformaticshasthehigh-estpositivecoefficientfortheinteractiontermbetweenthedatethatAlicewasdecidedandthetwogroupsofofficeactions,onegroupin-cludingtheofficeactionsgivenbeforetheAlicedecisionandtheothergroupincludingtheofficeactionsissuedaftertheAlicedecision,butonlyforapplicationsfiledbeforeAlice.Theprobabilityofinitiallyandfinally rejecting patent applications in narrowly defined
2020] IMPLICATIONSOFALICE 575
bioinformaticsfiledbeforeAliceunder§101increased83%aftertheAlicedecision. It increasedslightlyto84.3%aftertheAlicedecisionwasimplementedbythePTO.Inotherwords,theAlicedecisionmadepatentapplicationsinnarrowlydefinedbioinformaticsfiledbeforeAl-icebutexaminedafterAliceaboutfourtimesmorelikelytoreceivea§101rejectionthannottoreceivea§101rejection.Thislikelihooddecreasedtotwotimeswhenweemployedthedataofartunit1630forbroadlydefinedbioinformatics.
576 MINNESOTALAWREVIEW [105:527
Table5.D-i-DLogitRegressionson§101Rejectionsfor(Narrow)BioinformaticsThemodelsshownbelowarelogisticregressions.Thedependentvariableisthe§101rejec-tion.Itisbinary,soarejectionrefers1andanallowancerefers0.Intheindependentvariables,AliceisacategoricalvariablecontrollingforthetimeperiodbeforeandaftertheAlicedecisionorthetimeperiodbeforetheAlicedecisionandaftertheimplementationoftheAlicedecisionbytheUSTPO.Technologyisacategoricalvariablecontrollingforthecontrolgroupandthetreatedgroup.TimereferstothedecisiondateorimplementationdateofAlice.ThecoefficientontheinteractiontermsurrogatestheD-i-Deffect.Whethertheofficeactionalsogivesa§102,§103,or§112rejectionisindependentlycontrolledasfixedinthemodel.Time(month)iscontrolledasfixedinthemodel.Technologycenteriscontrolledasfixedinmodel1,3,5,to8.James Stock’s Heteroskedasticity-standard errors are shown in parentheses, *** p<0.01, **p<0.05,*p<0.1.
AllRejections
Panel1ApplicationsFiledAeforethe
AliceDecisionApplicationsFiledAftertheAl-
iceDecision
DecisionDate
ImplementationDate
DecisionDate
ImplementationDate
VARIABLES (1) (2) (3) (4)Time 0.0140 -0.0614 0.565* 0.560*
(0.255) (0.258) (0.303) (0.304)Technology -10.73*** 4.185*** 4.198*** 4.196***
(2.122) (0.0934) (0.0941) (0.0941)Time×Tech-nology 1.593*** 1.681*** 1.352*** 1.359***
(0.126) (0.130) (0.185) (0.186)Constant 8.806*** -6.129*** -6.345*** -6.344***
(2.089) (0.187) (0.190) (0.190)Observations 75,667 71,577 46,593 46,509PseudoR-squared 0.569 0.570 0.473 0.472
FinalRejectionsPanel2 ApplicationsFiledBeforethe
AliceDecisionApplicationsFiledAftertheAl-
iceDecision Decision Implementation Decision Implementation
VARIABLES (5) (6) (7) (8)Time -1.010 -1.404* -0.443 -0.443
(0.814) (0.835) (1.308) (1.308)Technology -15.45*** -14.77*** 1.724*** 1.724***
(1.169) (1.209) (0.503) (0.503)Time×Tech-nology 2.581*** 3.013*** 2.593** 2.593**
(0.612) (0.643) (1.031) (1.031)Constant 13.90*** 13.18*** -3.148*** -3.148***
(1.231) (1.284) (0.742) (0.742)
Observations 2,383 2,301 705 705PseudoR-squared 0.355 0.356 0.327 0.327
2020] IMPLICATIONSOFALICE 577
Table5introducestheD-i-Dmodeldesignandshowstheresultsof theD-i-Dregressions fornarrowlydefinedbioinformatics.232ThecoefficientfortheD-i-DeffectforpatentapplicationsfiledafterAliceisslightlysmallerthanthecoefficientwithrespecttothepatentappli-cationsfiledbeforeAlicebutexaminedpost-Alice.Thespecificcoeffi-cientssuggestthattheprobabilityofpatentapplicationsfiledaftertheAlice decision receiving an initial or final § 101 rejection increased79%aftertheAlicedecision,whichisabout16%lowerthanthein-creasedprobabilityof§101rejectionsforapplicationsfiledbeforeAl-icebutexaminedafterAlice.Inotherwords,whiletheAlicedecisionresultedintheprobabilityofinitiallyandfinallyrejectingapplicationsfiledbeforeAlicebutexaminedafterAliceunder§101tobeaboutfourtimeshigherthantheprobabilityofallowingpatentapplicationsun-der§101,theformerprobabilitydecreasedtoalowerdegreeamongapplicationsfiledandexaminedafterAlice.
Thelikelihoodofreceivingafinalrejectionunder§101innar-rowlydefinedbioinformaticsincreasedafterAlice.ThedegreeoftheincreasewassimilartotheincreaseafterthePTOimplementationoftheAlicedecision.Thepercentageofpatentapplicationsreceivingafinalrejectionunder§101increasedonetotwotimesafterAlice.Thepercentagerejectedunder§101inbioinformatics,narrowlydefined,washigherthanforpatentapplicationsinbusinessmethodsandotherartunitsrelatedtosoftware.BeforetheAlicedecision,31.22%ofthefinalofficeactionsinnarrowlydefinedbioinformaticswere§101re-jections.AftertheAlicedecision,75.12%ofthefinalofficeactions(i.e.,rejectionorallowance)forapplicationsinnarrowlydefinedbioinfor-maticsfiledbeforeAlicebutexaminedafterAlicewere§101rejectionsand68.15%offinalofficeactionsforapplicationsfiledafterAlicewere§101rejections.Bycontrast, thepercentageof§101rejections forpatentapplicationsinbroadlydefinedbioinformaticswasreducedbyhalfafterAlice.
Ifpatentapplicantsdidnotwithdrawtheirapplicationsaftertheyreceiveda§101rejection,theyeitherreceivedanother§101rejec-tionasafinalrejectionorovercametheinitiallyreceived§101rejec-tionsothattheirapplicationswerefinallyallowedorrejectedforrea-sonsotherthan§101.Thepercentageoffinalrejectionsunder§101forpatentapplicationsinnarrowlydefinedbioinformaticsincreasedonetotwotimesaftertheAlicedecision.Moreover,thedegreeofitsincreaseissimilartothedegreeofincreaseafterthePTOimplemen-tationofAlice.
232. ThespecificmodeldesignisdiscussedinAppendixCinfra.
578 MINNESOTALAWREVIEW [105:527
AmongnarrowlydefinedbioinformaticspatentapplicationsthatwerefiledbeforetheAlicedecision,examinedafterAlice,andrejectedonce under § 101,Alice caused the probability of them receiving a§101rejectionintheirfinaldecisiontobeincreasedbyabout93%.Inotherwords,theAlicedecisionmadethoseapplicationsabouttwelvetimesmore likelyto fail inovercomingtheir initial§101rejectionscompared to successfully overcoming their initial § 101 rejections.Narrowlydefinedbioinformaticspatentapplicationsfiledandexam-inedafterAliceandapplicationsfiledbeforeAlicebutexaminedafterAlicefacedasimilarchallengeinovercominganinitial§101rejection.Alicemadetheseapplicationsabouttwelvetimesmorelikelytofailinovercomingtheinitial§101rejections.Moreover,thecoefficientfortheinteractionterminthemodelwiththePTOimplementationdateastheeventdateislargerthanthecoefficientinthemodeldeployingtheAlicedecisiondate.ThissuggeststhatthePTOimplementationoftheAlice decisionmade the applications filedbeforeAlice nineteentimesmore likelyto fail inovercomingtheir initial§101rejectionsreceivedfromtheexaminers.
Bycontrast,theAlicedecisiondidnothaveastatisticallysignifi-cant effect on how applications in broadly defined bioinformaticsovercametheirinitial§101rejections.However,thePTOimplemen-tationofAlicehadanegative,statisticallysignificanteffectonhowthebroadlydefinedbioinformaticspatentapplicationsfiledbeforeAliceandexaminedafterAliceovercametheirinitial§101rejections.TheimplementationofAlicecausedpatentapplicationsinbroadlydefinedbioinformaticstobethreetimesmorelikelytofailinovercomingtheirinitial§101rejections—asmallereffectthanthenegativeeffectoftheAlice implementation on applications in narrowly defined bioinfor-matics.
b. BusinessMethodsTheD-i-Dmodels for patent applications in businessmethods
haveahighpositivecoefficientfortheD-i-DeffectoftheAlicedecision.Inotherwords,theAlicedecisionhadanegativeeffectonpatentap-plications inbusinessmethods.TheprobabilityofbusinessmethodapplicationsfiledbeforeAlice,butexaminedafterAlice,thatreceivedaninitialorfinal§101rejectionincreased82%becauseofAlice.Thatpercentageincreasedslightlyto83.79%afterweappliedtheinterac-tiontermwiththe implementationdateof theAlicedecisionbythePTO.Similartopatentapplicationsinnarrowlydefinedbioinformat-ics,theAlicedecisioncausedpatentapplicationsinbusinessmethodsfiledbeforeAlicebutexaminedafterAlicetobeaboutfourtimesmore
2020] IMPLICATIONSOFALICE 579
likelytoreceiveaninitialorfinal§101rejection.However,thecoeffi-cientfortheD-i-DeffectoftheAlicedecisionwasnegativeandstatis-ticallysignificantinthemodelswithrespecttobusinessmethodap-plicationsfiledaftertheAlicedecision.ThiscoefficientsuggeststhatAlicedidnotinduceanincreaseininitialandfinal§101rejectionsforbusiness method applications filed after Alice. These applications,whichwerefiledandexaminedafterAlice,werestill55%morelikelyto receive an initial or final § 101 rejection compared to businessmethod patent applications filed and examined before Alice. Thatnumberdecreasedto30%whenweappliedtheinteractiontermwiththeimplementationdateoftheAlicedecisionbythePTO.
580 MINNESOTALAWREVIEW [105:527
Table6.D-i-DLogitRegressionson§101RejectionsforBusinessMethodsThemodelsshownbelowarelogisticregressions.Thedependentvariableisthe§101rejec-tion.Itisbinary,soarejectionrefers1andanallowancerefers0.Intheindependentvaria-bles,AliceisacategoricalvariablecontrollingforthetimeperiodbeforeandaftertheAlicedecisionorthetimeperiodbeforetheAlicedecisionandaftertheimplementationoftheAlicebytheUSTPO.Technologyisacategoricalvariablecontrollingforthecontrolgroupandthetreatedgroup.ThecoefficientontheinteractiontermsurrogatestheD-i-Deffect.Whethertheofficeactionalsogivesa§102,§103,or§112rejectionisindependentlycontrolledasfixedinthemodel.Time(month)andtechnologycenterarecontrolledasfixedinthemodel.JamesStock’sHeteroskedasticity-standarderrorsareshowninparentheses,***p<0.01,**p<0.05,*p<0.1.
AllRejections
Panel1ApplicationsFiledBefore
theAliceDecisionApplicationsFiledAfterthe
AliceDecision Decision Implementation Decision Implementation
VARIABLES (1) (2) (3) (4)Time 0.584*** 0.464*** 0.595*** 0.571***
(0.125) (0.130) (0.161) (0.163)Technology 3.095*** 3.094*** 3.110*** 3.110***
(0.0876) (0.0876) (0.0875) (0.0875)Time×Technology 1.518*** 1.643*** -0.383** -0.359**
(0.117) (0.122) (0.154) (0.156)Constant -6.172*** -6.189*** -6.258*** -6.265***
(0.0937) (0.0938) (0.0940) (0.0940)Observations 550,136 504,181 380,488 379,363PseudoR-squared 0.181 0.191 0.0799 0.0795
FinalRejectionsPanel2 ApplicationsFiledBefore
theAliceDecisionApplicationsFiledAfterthe
AliceDecision Decision Implementation Decision Implementation
VARIABLES (5) (6) (7) (8)Time -0.289 -0.678 0.181 0.181
(1.746) (1.746) (1.806) (1.806)Technology 0.936** 0.938** 0.928** 0.928**
(0.433) (0.433) (0.431) (0.431)Time×Technology 2.700*** 3.093*** 1.231* 1.231*
(0.524) (0.538) (0.641) (0.641)Constant -3.204* -3.215* -3.168* -3.169*
(1.720) (1.715) (1.737) (1.738)
Observations 43,217 41,223 13,174 13,157PseudoR-squared 0.292 0.293 0.199 0.199
2020] IMPLICATIONSOFALICE 581
Table6introducestheD-i-Dmodeldesignandshowstheresultsof theD-i-Dregressions forbusinessmethods.The likelihoodofre-ceivingafinalrejectionunder§101increasedonetotwotimesbe-causeoftheAlicedecision.BeforeAlice,25.59%offinalofficeactionsforbusinessmethodpatentapplicationswere§101rejections.AfterAlice,74.26%ofthefinalofficeactionsforapplicationsfiledbeforetheAlicedecisionwere§101rejections,and49.62%offinalofficeactionsforapplicationsfiledafterAlicewere§101rejections.
Moreover,Aliceaffectedtheprobabilityoffailingtoovercometheinitiallyreceived§101rejectionsforbusinessmethodpatentapplica-tionstoincreasebyabout94%.Inotherwords,Alicemadebusinessmethod applications filed before Alice about fourteen times morelikelytofailinovercomingtheirinitial§101rejectionsreceivedfrompatentexaminers.ThecoefficientfortheinteractionbetweenthePTOimplementationdateandthetechnologytypesislargerthanthecoef-ficientfortheinteractionbetweentheAlicedecisiondateandthetech-nologytypes.ThisdifferencesuggeststhatthePTOimplementationofAlicehadastrongereffectonpatentapplicants’failuretoovercometheir initial § 101 rejections. Specifically, the PTO implementationmadebusinessmethodpatentapplicationsfiledbeforetheAlicedeci-sionbutexaminedafterAliceabouttwenty-onetimesmorelikelytofailinovercomingtheirinitial§101rejections.Althoughpatentappli-cationsfiledafterAlicewerealsolesslikelytoovercometheirinitial§101rejections,thoseapplicationswerelesslikelytofailinovercom-ingtheirinitial§101rejectionscomparedtotheapplicationsfiledbe-foreAliceandexaminedafterAlice.TheAlicedecisionmadetheappli-cations filed after Alice about two times more likely to fail inovercomingtheirinitial§101rejections.
In studying the three sub-categories in business methods, wefoundthattheircoefficientsfortheD-i-Deffectaremuchhighercom-paredtonarrowlydefinedbioinformaticsorbusinessmethodsingen-eral.Moreover,theeffectsoftheAlicedecisiononapplicationsfiledbeforeAlicebutexaminedafterAliceweresimilartotheeffectsonap-plicationsfiledandexaminedafterAlice.Amongthebusinessmethodsinfinance,theprobabilityofissuing§101rejectionstoapplicationsfiledbeforeAliceincreased98%becauseoftheAlicedecision.TheAl-icedecisionmadeapplicationsofbusinessmethodsinfinanceaboutfifty-onetimesmorelikelytoreceivea§101rejection.Theprobabilityofissuing§101rejectionstotheapplicationsinthebusinessmethodsoffinancefiledbeforeAliceincreased97%duetotheAlicedecision.TheAlicedecisionincreasedthislikelihoodofreceivinganinitialorfinal§101rejectionbyafactoroftwenty-eight,butthiseffectofAlice
582 MINNESOTALAWREVIEW [105:527
wasweakerthanitseffectonapplicationsfiledbeforetheAlicedeci-sion.ForpatentapplicationsfiledbeforetheAlicedecision,theAlicedecisioncausedthosepatentapplicationstobeaboutfifty-fourtimesmorelikelytofailinovercomingtheinitial§101rejections.Moreover,thePTOimplementationofAlicemadeit107timesmorelikelythatapatentapplicationwouldfailtoovercomeitsinitial§101rejection.
Amonge-commerceapplicationsfiledbeforeAlice,theprobabil-ityofreceivinga§101rejectioninaninitialorfinaldecisionincreased95%fortheAlicedecision.ThissuggeststhattheAlicedecisioncausedtheseapplicationstobeabouttwentytimesmorelikelytoreceivea§101rejectioncomparedtonotreceivingrejectionsunder§101intheirinitialandfinaldecisions(i.e.,receivinganallowanceoraninitialorfinalrejectionunder§§102,103,or112).Similartoapplicationsofe-commercefiledbeforetheAlicedecisionbutexaminedafterAlice,theprobabilityofreceivinga§101rejectioninaninitialorfinaldeci-sionalsoincreasedbyabout95%becauseoftheAlicedecisionamonge-commerceapplicationsfiledafterAlice.Thee-commercepatentap-plications filedafterAlice alsohadahigherprobabilityof failing inovercomingtheinitial§101rejectionsthanaveragebusinessmethodapplications.TheAlicedecisionmadee-commerceapplicationsfiledbeforetheAlicedecisionbutexaminedafterAliceabouttwenty-onetimesmorelikelytofailinovercomingtheirinitial§101rejections.Furthermore,thePTOimplementationoftheAlicedecisionincreasedthislikelihoodtothirty-eighttimesmorethanthelikelihoodofsuc-cessfullyovercomingtheinitial§101rejections.Additionally,theAl-icedecisionmadee-commerceapplicationsfiledafterAliceaboutthir-teen times more likely to fail in overcoming their initial §101rejections;thisissmallerthanthelikelihoodofthe§101rejectionsasafinalrejectionreceivedbythoseapplicationsinthebusinessmeth-odsine-commercefiledbeforetheAlicedecision.
Withine-commerce, thisstudy lookedat twospecificartunits:artunit3626withrespecttohealthcareandartunit3621withre-specttocryptography.Themodelsforthesetwoartunitshaverela-tivelyhighercoefficientsfortheD-i-Deffectcomparedtogeneralbusi-nessmethods.TheD-i-Dregressionresultssuggestthatthetwoartunitswereaffectedby theAlicedecision toaslightlyhigherdegreethantheeffectofAliceongeneralbusinessmethods.
Forbusinessmethodsinhealthcare,theprobabilityofpatentap-plicationsfiledbeforetheAlicedecisionthatreceivedaninitialorfinal§101rejectionincreased97%becauseoftheAlicedecision.Thissug-geststhattheAlicedecisionmadethehealthcareapplicationsaboutthirty-two times more likely to receive an initial or final §101
2020] IMPLICATIONSOFALICE 583
rejectioncomparedtonotreceivinga§101rejectionintheinitialorfinalPTOdecisions.TheprobabilityofapplicationsfiledandexaminedaftertheAlicedecisionthatreceivedaninitialorfinal§101rejectionincreasedabout97%becauseoftheAlicedecision,suggestingthattheAlicedecisionmadehealthcareapplicationsabout thirty-five timesmorelikelytoreceiveaninitialorfinal§101rejection.Moreover,theAlicedecisionmadehealthcareapplicationsfiledbeforetheAlicede-cisionaboutthirty-twotimesmorelikelytofailinovercomingtheirinitial§101rejections,whichishigherthanthelikelihoodoffailingtoovercome the initial § 101 rejections in general businessmethods.WhilethePTOimplementationofAlicehadastrongernegativeeffectonthelikelihoodthatanapplicationwouldovercomeitsinitial§101rejection,thelikelihoodoffailingtoovercometheirinitial§101rejec-tionsamongthehealthcareapplicationsfiledandexaminedafterAl-icewasslightlylowerthantheapplicationsfiledbeforeAlicebutex-aminedafterAlice.Specifically,theAlicedecisionmadethehealthcareapplications filedandexaminedafterAlice twenty-nine timesmorelikelytofailinovercomingtheirinitial§101rejections.
Inbusinessmethodsofcryptography,theprobabilityofapplica-tionsfiledbeforeAlicereceivinganinitialorfinal§101rejectionin-creased95%because of theAlice decision. This suggests thatAlicemadetheseapplicationsaboutseventeentimesmorelikelytoreceiveaninitialorfinal§101rejectionascomparedtonotreceivinga§101rejectionintheirinitialandfinaldecisionsfromthePTO(e.g.,receiv-inganallowanceoraninitialorfinalrejectionunder§§102,103,or112).Moreover,theprobabilityofapplicationsinbusinessmethodsofcryptographyfiledaftertheAlicedecisionreceivinga§101rejec-tionincreased95%becauseoftheAlicedecision.ThissuggeststhattheAlicedecisionmadetheseapplicationsabouteighteentimesmorelikelytoreceiveaninitialorfinal§101rejectionascomparedtonotreceivinganinitialorfinalrejectionunder§101(e.g.,receivinganal-lowanceoraninitialorfinalrejectionunder§§102,103,or112).TheAlicedecisionalsomadetheapplicationsinbusinessmethodsofcryp-tographyfiledaftertheAlicedecisionforty-twotimesmorelikelytofailinovercomingtheirinitial§101rejections.
Comparedtootherartunitsinbusinessmethods,thePTOimple-mentationofAlicehadarelativelyweakernegativeeffectonovercom-ingtheinitial§101rejectionsamongcryptographyapplications.ThePTOimplementationmadeapplicationsinbusinessmethodsofcryp-tographyfiledbeforetheAlicedecisionthirty-fivetimesmorelikelytofailinovercomingtheirinitial§101rejections.TheAlicedecisionhadanevenweakernegativeeffectontheapplicationsfiledaftertheAlice
584 MINNESOTALAWREVIEW [105:527
decisiontoovercometheirinitial§101rejections.Thelikelihoodoffailingtoovercometheinitiallyreceived§101rejectionsdecreasedfromthirty-fivetimesamongthecryptographyapplicationsthatwerefiledbeforeAlicetonineteentimesamongthecryptographyapplica-tionsthatwerefiledafterAlice.
c. SoftwareArtUnitsForsoftwareingeneral(e.g.,TC2100,TC2400,andTC2600),we
didnotfindstatisticallysignificantresultsfromtheD-i-Dregressions,asshowninAppendixC1.233ItsuggeststhatwecannotconcludethatAlicehadacausaleffectonreceiving§101rejectionsamongsoftwarepatentapplicationsingeneral.Wereviewedtwelvespecificsoftwareartunits,listedinTable1above,andfoundthatsomeartunitsshowstatisticallysignificantresultsintheD-i-Dregressions.
WhendeployingtheAlicedecisiondateastheeventdate,theco-efficientsfortheD-i-DeffectoftheAlicedecisionarepositiveandsta-tisticallysignificant inthemodels forartunits2688and2686withrespecttosub-categoriesinsoftwareoftelemetryandcodegenera-tion.Thevaluesofthecoefficientaremuchlowerthanthecoefficientsinbioinformaticsandbusinessmethods.Inthosespecifictwoartunitsinsoftware,theprobabilityofapplicationsfiledbeforetheAlicedeci-sionbutexaminedafterAlicereceivinganinitialorfinal§101rejec-tionincreasedaround63%(withrespecttoartunit2688)and68%(withrespecttoartunit2686)becauseoftheAlicedecision.Inotherwords,theAlicedecisioncausedtheapplicationsinthesetwoartunitsfiledbeforeAlicetobetwiceaslikelytoreceiveaninitialorfinal§101rejection;thisismuchlowerthanthelikelihoodofreceivinganinitialorfinal§101rejectionfromthePTOinbioinformaticsandbusinessmethods.
Inartunit2686withrespecttotelemetryandcodegeneration,applicationsfiledaftertheAlicedecisionweremorelikelytoreceiveaninitialorfinal§101rejectionascomparedtoapplicationsfiledbe-fore the Alice decision. The probability of applications receiving a§101 rejection in their initial or final decisions increased 70%be-causeoftheAlicedecision,about4%higherthantheincreasedprob-abilityofreceivinginitialorfinal§101rejectionsamongapplicationsfiledbeforetheAlicedecision.However,thecoefficientfortheD-i-DeffectortheparameteroftheAlicedecisionwasnegative,eventhoughtheD-i-DparameterispositiveforapplicationsfiledbeforetheAlicedecisionandsuggestsapositiveeffectfortheAlicedecisiononthese
233. SeeinfraAppendixCTableC1.
2020] IMPLICATIONSOFALICE 585
applications. In otherwords, among patent applications in art unit2686,thepossibilitythatapplicationsfiledandexaminedafterAlicewouldreceiveaninitialorfinal§101rejectionisslightlylowercom-paredto thatsamepossibility forapplications filedbefore theAlicedecisionbutexaminedafterAlice.
Moreover, the implementationofAlicehadastrongereffectonapplications in computernetworks filedbefore andexaminedaftertheAlicedecisionatastatisticallysignificantlevel.Notethatapplica-tionsincomputernetworkswerenotmorelikelytoberejectedunder§101intheirinitialandfinaldecisionsfromthePTOaftertheAlicedecision. Inotherwords,patentapplications incomputernetworksbecamemorelikelytobeinitiallyorfinallyrejectedunder§101afterthePTOimplementationoftheAlicedecision.However,thisincreasedlikelihoodisverysmall—about0.28timesmorelikelytobeinitiallyorfinallyrejectedunder§101thannotreceivinga§101rejectionintheirinitialandfinaldecisionsfromthePTO(e.g.,receivinganallow-anceoraninitialorfinalrejectionunder§§102,103,or112).Ontheotherhand,patentapplicationsincomputernetworksfiledaftertheAlicedecisionweremorelikelytoreceiveaninitialorfinal§101re-jectioncomparedtoapplicationsfiledbeforetheAlicedecisionbutex-aminedafterAlice.TheprobabilityofapplicationsfiledaftertheAlicedecisionreceivinganinitialorfinal§101rejectionincreased61%be-causeoftheAlicedecision;thisisabout6%higherthantheincreasedprobabilityofreceivinginitialorfinal§101rejectionsforapplicationsfiledbeforetheAlicedecision.
Asarobustnesscheck,wealsostudiedtheD-i-DeffectonlywiththedataafterJanuary2013becausesoftwareingeneralhadasharpdecreaseinthepercentagereceiving§101rejectionsoverallofficeactions received in January 2013.We cannot explain the sharp de-creasein2013,whichwasalsoignoredinthediscussionofAlice’sef-fectonsoftwarepatentapplicationsbyotherscholarsorprofession-als.234ItcouldbealaggedeffectoftheAmericaInventsAct(AIA)235orMayo,236oritusedtobehighallalong,perhapsaftertheBilskidecisionin2010,237andthe2013datawereonlyanaberration.
234. See,e.g.,ChristopherP.King,#ALICESTORM:August2018Update,BILSKIBLOG(Aug. 13, 2018), https://www.bilskiblog.com/2018/08/alicestorm-august-2018-update[https://perma.cc/A9FG-KJ3D]. 235. Sections102,103,and112wereamendedundertheAIA,andtheseamend-mentsweregraduallyimplementedbetweenSeptember16,2011andMarch16,2013.SeeU.S.PAT.&TRADEMARKOFF.,AMERICAINVENTSACT:EFFECTIVEDATES(2011);U.S.PAT.&TRADEMARKOFF.,supranote99,§2159.01–04. 236. MayoCollaborativeServs.v.PrometheusLab’ys,Inc.,566U.S.66(2012). 237. Bilskiv.Kappos,561U.S.593(2010).
586 MINNESOTALAWREVIEW [105:527
AftertheadjustmentofthetimeperiodbeforetheAlicedecision,softwareingeneralalsodidnothaveastatisticallysignificantD-i-DeffectoftheAlicedecision.Specifically,TC2100withrespecttocom-puterarchitectureandTC2600withrespecttocommunicationsdidnot showastatistically significantD-i-Deffectof theAlicedecision.However, some art units for sub-categories in software, includingcomputer networks, data bases and filemanagement, and cryptog-raphyandsecurity,showedsmallpositiveandstatisticallysignificantcoefficientsfortheD-i-DeffectoftheAlicedecision.Thecoefficientssuggest that the applications filed in those three areas weremorelikelythannottoreceiveaninitialor final§101rejectionaftertheAlicedecision.
Thepercentageofapplicationsreceivingafinalrejectionunder§101increasedafterAliceatdifferentlevelsinalltestedsub-catego-riesinsoftware,excludingGUIanddocumentprocessing.ThedegreeoftheincreasewasclosetotheincreaseafterthePTOimplementationofAlice.Therewasaminorincreaseinthreetechnologyareas,includ-ingcomputerarchitecture,databasesandfilemanagement,andre-cordingandcompression.
Figure5belowpresentsthecoefficientsoftheinteractiontermintheD-i-Dregressionsforthesub-categoriesofsoftwaretechnolo-gies to estimate the probability of receiving final rejections under§101.238ErrorbarsinFigure5refertothestandarderrorofthere-gressionsresults,representingthevariabilityofthedata.Longerrorbars indicate that a coefficient is not statistically significant, so itsvalueordirectionisnotsufficientlyreliabletoexplaintherelationshipintheregression.
Assuggestedbyfinalrejections,applicationsincryptographyandsecuritywerenegativelyaffectedbytheAlicedecisioninovercomingtheirinitial§101rejectionsatastatisticallysignificantlevel.Thisef-fectwassmallerthantheeffectonapplicationsinthebusinessmeth-odsofcryptography.Inotherwords,patentapplicationsinthebusi-nessmethodsofcryptographyfacedgreaterdifficultyinovercomingtheirinitial§101rejectionsthanpatentapplicationsinthesoftwareofcryptographyandsecurity.Moreover,eventhoughapplicationsinthesoftwareofcryptographyandsecurityweremorelikelytoreceiveinitialandfinal§101rejectionsthannottoberejectedunder§101(i.e., receiving an allowance or an initial or final rejection under§§102,103,or112)beforetheAlicedecision,thislikelihooddidnot
238. SpecificcoefficientsintheD-i-DregressionresultsarereportedinAppendixTablesC1andC2infra.
2020] IMPLICATIONSOFALICE 587
reachastatisticallysignificantdegreeaftertheAlicedecision.TheAl-icedecisionmadeapplicationsinthesoftwareofcryptographyandse-curityfiledbeforeAliceabouttwotimesmorelikelytofailinovercom-ing their initial § 101 rejections, and this increased to three timesundertheeffectofthePTOimplementationofAlice.Patentapplica-tionsinthesoftwareofcryptographyandsecurityfiledaftertheAlicedecisionwerenotinfluencedbyeithertheAlicedecisionoritsimple-mentationatastatisticallysignificantlevel.
Figure5.Coefficientsof the InteractionBetweenAliceDecisionandTechnologytoEstimateFinal§101RejectionswithErrorBarsintheLogitD-i-DRegressions
Bycontrast,theimplementationoftheAlicedecisionmadedigitalandopticalcommunicationapplicationsfiledbeforeAlice twotimesmorelikelytofailinovercomingtheirinitial§101rejections,whiletheAlicedecisiondidnothaveastatisticallysignificanteffectonhowapplicationsindigitalandopticalcommunicationovercametheinitial§101 rejections. Similarly, in telemetry and code generation, eventhoughapplicationsfiledbeforetheAlicedecisionbutexaminedafterAlicedidnotexperiencemoredifficultyinovercomingtheinitial§101rejectionsatastatisticallysignificantlevelduetotheAlicedecision,thePTOimplementationofAlicemadethoseapplicationsthreetimesmorelikelytofailinovercomingtheirinitial§101rejections.Further-more, the Alice decision made telemetry and code generation
-1.50
-1.00
-0.50
0.00
0.50
1.00
1.50
2.00
2.50
softw
are (i
n gen
eral) AI
graph
ical u
ser in
terfac
e and
docu
ment p
roces
sing
data
bases
and f
ile m
anag
emen
t
crypto
graph
y and
secu
rity
compu
ter ar
chite
cture
digita
l and
optic
al co
mmunica
tion
compu
ter ne
twork
s
telec
ommun
icatio
ns
digita
l cam
eras
recor
ding a
nd co
mpressi
on
compu
ter gr
aphic
proc
essing
telem
etry a
nd co
de ge
nerat
ion
After Alice for Applications Filed Before Alice After Alice for Applications Filed After Alice
588 MINNESOTALAWREVIEW [105:527
applicationsfiledaftertheAlicedecisionfivetimesmorelikelytofailinovercomingtheirinitial§101rejections,astatisticallysignificantlevel. Besides the applications in the above three sub-categories insoftware(i.e.,cryptographyandsecurity,digitalandopticalcommu-nication,andtelemetryandcodegeneration),theD-i-Dregressionre-sultsinPartIIforothersub-categoriesinsoftwarelistedinTable1donotshowanystatisticallysignificanteffectsoftheAlicedecisionoritsimplementationonapplicationseitherfiledbeforetheAlicedecisionbutexaminedafterAliceorfiledafterthedecision.Inotherwords,ourempiricalevidencedoesnotsuggestthatAliceincreasedthebarrierofpatentabilityforthosetechnologyareasinsoftware.
III.IMPLICATIONSThisPartaddressestheimplicationsofourempiricalanalysis.In-
creaseduncertainties,includinguncertaintiesinpatentapplicational-lowancesandrespondingtopatentofficeactionrejections,imposead-ditional costs on patent applicants during patent prosecution. 239When patent applicants cannot successfully overcome these rejec-tions,thecostsaretransformedintoexpensesinaccountingterms.240Theincreasedcostsorexpensesareadirectresultoftheuncertaintiesand increased transaction costs.241This Part presents an efficiencyanalysisbasedontheempiricalresultsandthenanalyzeswhetherthedesignoftheRevisedGuidance242canimproveefficiencywhenimple-mentingAlice.
A. INCREASED§101REJECTIONSBYUSPTOPATENTEXAMINERSThissectiondiscussesthediscrete§101rejectionsissuedbypa-
tentexaminersinvarioustechnologyareasthatwereaffectedbyAlice.Patentapplicationsinbioinformaticsreceivedthemostinitialorfinal§101rejections compared tobusinessmethodsandsoftware.Alicecausedtheincreasedinitialorfinal§101rejectionsforbusinessmeth-ods,butitisnotclearwhetheritwasareasonfortheincreasedinitialorfinal§101rejectionsformanysub-categoriesinsoftware.
239. Seesupranote82andaccompanyingtext. 240. Seesupranote82andaccompanyingtext. 241. Seesupranote82andaccompanyingtext. 242. 2019RevisedPatentSubjectMatterEligibilityGuidance,84Fed.Reg.50(Jan.7,2019).
2020] IMPLICATIONSOFALICE 589
1. BioinformaticsBioinformatics,narrowlydefined,hadbeentheareamostlikely
tobeinitiallyandfinallyrejectedunder§101comparedtoothertech-nologyareasbeforeAlice.AfterAlice,abouttwo-thirdsofallofficeac-tionsforapplicantsinbioinformaticswereinitialorfinal§101rejec-tions.Theproportionoffinal§101rejectionsinfinalofficeactionsforbioinformaticsalsobecame largerafterAlice.Our findingregardingnarrowlydefinedbioinformaticsisconsistentwiththeobservationbyGaudryandHayim,whoonlytrackedtherejectionsandallowanceforbioinformaticsinartunits1631,whichisnarrowerthanourdatase-lection.243Thetimeperiodfortheirdataislongerthanours—itcoversofficeactionsbetween2013and2019.244Theirdatashowthatbioin-formatics inartunits1631sufferedan increaseof§101rejectionssinceAlice,buttheyareoptimisticregardingpatentapplicationsinbi-oinformaticsbecause theirdata suggest that since2018, the allow-ancerateofpatentapplicationsinartunit1631increasedbacktothedegreebeforeAlice.245However,areversaltothepreviousallowanceratesdoesnotremovetheproblemscreatedbyAlice.
TheAlicedecisionisthereasonfortheincreased§101rejectionsissuedtonarrowlydefinedbioinformaticsapplicationsintheirinitialorfinalexaminationrounds,andthatisprovenbytheD-i-DregressionresultsinPartII.246Theincreasedinitialandfinal§101rejectionsduetoAlicesuggestincreaseduncertaintiesinpatenteligibility.247Appli-cants innarrowlydefinedbioinformaticsneed tospendmoneyandtimetoovercometherejectionsthattheyreceivedfromthePTOintheinitialroundofpatentexamination.Moreover,thePTOimplementa-tionoftheAlicedecisionstrengthenedthiseffectoftheAlicedecisionfurtherandresulted ina larger likelihoodof initiallyandfinallyre-ceiving§101rejectionsforapplicationsinnarrowlydefinedbioinfor-matics. In other words, the PTO further increased the applicationand/or prosecution costs in narrowly defined bioinformaticswhenimplementing the Alice decision. Compared to bioinformatics, nar-rowlydefined,Aliceanditsimplementationhadasmallereffectonthetechnologieswithinthescopeofbroadlydefinedbioinformaticsinart
243. KateGaudry&SamuelHayim,BioinformaticsInnovationsThriveDespite101Chaos, IPWATCHDOG (Feb. 6, 2019), https://www.ipwatchdog.com/2019/02/06/bioinformatics-innovations-thrive-despite-101-chaos[https://perma.cc/7EJW-QLAY]. 244. Id. 245. Id. 246. SeesupraPartII. 247. SeesupraPartI.B.
590 MINNESOTALAWREVIEW [105:527
unit1630.Thus,withinartunit1630,artunits1631and1639boretheconsequencesoftheAlicedecisionanditsimplementationbythePTOthemost.
2. BusinessMethodsIn business methods, the data suggest that the Alice decision
clearlycausedanincreaseinpatentapplicationrejections.Patentap-plicationsinbusinessmethodsreceivedbothmore§101rejectionsandmoreAlicerejectionsintheirinitialandfinaldecisionsfromthePTObecauseoftheAlicedecision.Inotherwords,Aliceinducedanin-creaseinuncertaintiesrelatedtopatenteligibilityinbusinessmeth-ods.Theincreaseduncertaintiesandincreasedprobabilityofreceiv-ing initial or final rejections under § 101 and Alice increasedprosecutioncostswhenpatentapplicantstriedtoovercomethosere-jections.248However,forapplicantswhoaddressedtheirinitiallyre-ceived§101rejectionsorAlicerejectionswhenrespondingtopatentexaminers, an increasedproportionof them failed toovercome the§101rejectionsorAlicerejections.AccordingtotheD-i-DregressionresultsinPartII,theAliceeffectthatpatentapplicationsofbusinessmethodsreceivedmoreinitialorfinal§101rejectionsduetoAlicewasstrengthenedwhenthePTOpubliclydecidedto implement itsdeci-sion.249ThisfindingisconsistentwithwhatChienandWuobservedwith PTOoffice actions during a period of time that is longer thanours.250 Even though Chien andWu did not observe howAlice in-structedapplicantstoadjusttheirapplications,251ourresearchdesignallowsustoprovethatpatenteesweresuccessfulinovercomingAlice-basedrejectionsforapplicationsfiledaftertheAlicedecision,butnotforapplicationsfiledbeforetheAlicedecision.252
WhengeneralbusinessmethodsinTC3600receivedmoreinitialorfinal§101rejectionsbasedontheAlicedecisionanditsimplemen-tation,theeffectsofAliceonthesub-categoriesinthetechnologyar-easwithinbusinessmethodsinTC3600weredifferent.Specifically,businessmethodsinfinanceandbusinessmethodsinthee-commerceof health care or cryptography faced stronger Alice effects than
248. Seesupranote82andaccompanyingtext. 249. See2014InterimGuidanceonPatentSubjectMatterEligibility,79Fed.Reg.74,618(proposedDec.16,2014)(tobecodifiedat37C.F.R.pt.1). 250. SeeChien&Wu,supranote39,at1(applyingthedataofofficeactionstakenbetween2008andmid-July2017). 251. Id.at14. 252. EmpiricalresultsarepresentedinTables5and6anddiscussedinPartIII.B.1infra.
2020] IMPLICATIONSOFALICE 591
businessmethodsingeneral.Alicecausedpatentapplicationsinthesetechnologyareastobemore likelytoberejectedbythePTOunder§101intheirinitialorfinaldecisionscomparedtopatentapplicationsinallofbusinessmethods.
3. SoftwareArtUnitsPatentapplicationsforsoftwareingeneralwerenotheavilyre-
jectedunder§101intheirinitialorfinaldecisionsreceivedfromthePTObeforeAliceascomparedtobioinformaticsandbusinessmeth-ods,whereinpatentapplicantsreceivedafargreaterpercentageofre-jectionsunderAliceorthePTO’simplementationofAlice.Thepropor-tionofofficeactionsinsoftwarewithinitialandfinal§101rejectionsdidnotincreasemuchaftertheAlicedecisionoritsimplementationbythePTO.D-i-DregressionresultsinPartIIdonotshowthateithertheAlicedecisionorthePTO’simplementationofAliceincreasedtheinitialandfinal§101rejectionsforpatentapplicationsforsoftwareingeneral.Wefindthattherejectionrateunder§101forsoftwarepa-tentapplicationswasrelativelyconsistent(around12%)intheperiodbetween2012and2016,exceptforasmall,inexplicabledropinthe§101rejectionrateduring2013(toaround8%).The§101rejectionrateforsoftwareinventions,however,wasmuchhigherthanthere-jection rate formechanical inventions in the control group (below1%).Thissuggeststhattheincreasein§101rejectionsforsoftwareinventionsmayhaveoccurredatatimepriortotheAlicedecision,per-hapsas a result of theBilski v.Kappos decision in2010253or someotherdevelopmentspriorto2012.Thispointmaybeexploredfurtherinfutureempiricalwork.
Insomesub-categoriesofsoftware,suchastheartunitsforcom-puternetworksandGUI,anincreasedproportionoftheapplicationswereinitiallyorfinallyrejectedunder§101aftertheAlicedecision.In addition to the increased initial and final §101 rejections, somesoftwareartunitsalsoreceivedincreasinglymoreAlicerejectionsintheirinitialandfinaldecisionsfromthePTO.UncertaintiesinpatenteligibilityincreasedafterAlice,andtheapplicantsinthoseareasspentmoretimeandmoneyonovercoming§101rejectionsafterAlice.254
Thetwotechnologyareasthatborethegreatestincreaseincostsarecomputernetworks(artunits2440and2450)andcryptographyandsecurity(artunits2430and2490).Notonlydidtheyreceivemoreinitial§101rejectionsaftertheAlicedecision,buttheyalsoreceived
253. 561U.S.593(2010). 254. SeesupraPartI.B.
592 MINNESOTALAWREVIEW [105:527
anincreaseoffinalrejectionsunder§101aftertheAlicedecision.Thissuggeststhatapplicantsfaceddifficulties inovercomingtheir initial§101rejections.
Thissuperficialoverviewofthe§101rejectionsandAlicerejec-tions, however, does not necessarily mean that the Alice decisioncaused the increase in the rejections, even though theirAlice rejec-tionswerecorrelatedtotheir§101rejections.Ontheonehand,theD-i-DregressionresultscanonlyprovethattheAlicedecisiondirectlyresultedinanincreaseininitialandfinal§101rejectionsforapplica-tionsintelemetryandcodegeneration(onlyartunits2686and2688).Ontheotherhand,basedontheD-i-Dregressionresults,wecannotconcludethattheAlicedecisionhadadirecteffectontheinitialandfinalrejections intheareaofcomputernetworks.Wedofind,how-ever,thatthePTO’simplementationoftheAlicedecisiondirectlyre-sultedinmoreinitialandfinal§101rejectionsforpatentapplicationsincomputernetworks.Inotherwords,regardlessofthedirecteffectoftheAlicedecisionfromtheSupremeCourt,thePTO’simplementa-tionofAliceincreasedtheapplicationand/orprosecutioncostsforap-plicationsdirectedatcomputernetworks.255
Inadditiontotheincreasedcostsofpatentprosecutionforsoft-ware inventionsthatreceivedan increasingnumberof§101rejec-tionsandAlicerejectionsintheirinitialandfinaldecisionsreceivedfromthePTO,thesoftwareindustrymayhavelimitedaccesstocapitalfrominvestorsasaresultoftheseeligibilityrejections.InDavidTay-lor’ssurveyof475venturecapitalistsandprivateequityinvestorsbe-tween2009and2017,hefoundthatinvestorsingeneralconsiderpa-tenteligibilitywhenmakinginvestmentdecisions.256Eventhoughtheinability toobtainpatentprotectionmaynotdirectlydrive themtoreduceinvestmentinsoftwareandInternetinventions,257onceinves-torsareawareof casessuchasAlice,258Myriad,259andBilski260thataddress patent eligibility issues, they become overwhelmingly
255. Seesupranote82andaccompanyingtext. 256. DavidO.Taylor,PatentEligibilityand Investment,41CARDOZOL.REV.2019,2027(2019)(“[O]verall,74%oftheinvestorsagreedthatpatenteligibilityisanim-portant consideration in firmdecisionswhether to invest in companiesdevelopingtechnology....”). 257. See id.at2028(“Investorsoverwhelmingly indicated, forexample, that theeliminationofpatentswouldeithernotimpacttheirfirm’s’decisionswhethertoinvestincompaniesoronlyslightlydecreaseinvestmentsincompaniesdevelopingtechnol-ogyinthe...softwareandInternet(80%)...industr[y].”). 258. AliceCorp.Pty.Ltd.v.CLSBankInt’l,134S.Ct.2347(2014). 259. Ass’nforMolecularPathologyv.MyriadGenetics,Inc.,569U.S.576(2013). 260. Bilskiv.Kappos,561U.S.593(2010).
2020] IMPLICATIONSOFALICE 593
negativeabout investing in the industriesof software, the Internet,andbiotechnology.261Inotherwords,Taylor’sfindingthattheuncer-tainties inpatent eligibilityharm investment and innovation in thesoftwareindustry262issupportedbyourgeneralempiricalevidenceshowinghigherrejectionsratesforapplicationsdirectedatsoftwareinventions.
B. THEABILITYOFPATENTAPPLICANTSTOOVERCOME§101REJECTIONSInthissection,wefocusondiscussingtheeffectofAliceonthe
industriesofbioinformaticsandbusinessmethods.Theapplicantsinthesetwo industries facedgreateruncertainties inpatenteligibilityandasaresultboremorecostsorexpensesinpatentprosecutionduetoAlice.263ThiscouldbeaninevitableresultofAliceseekingtopre-ventpeoplefrompatentingsomethingthatraisesanissueofpreemp-tion and thereby to benefit the public interest. 264 Alternatively, itcouldmerelyshowthattheincreasedtransactioncosts,resultingfromtheuncertaintiescreatedbyAlice,265harminvestmentincentivesandinnovationincentivesinthosetechnologyareas.
1. DifficultiesinOvercoming§101RejectionsinBioinformaticsThisempiricalstudyfindstwoindicatorsthatsuggestanincrease
inthedifficultyofovercominginitial§101rejectionsinbioinformat-ics,bothnarrowlyandbroadlydefined.First,applicants filed fewerpatentapplicationsinbioinformatics,narrowlyandbroadlydefined,aftertheAlicedecision.Second,anincreasingnumberofthesepatentapplicationswerefinallyrejectedunder§101aftertheAlicedecision.Withinthoseapplicationsdirectedatthenarrowlydefinedbioinfor-maticssectorthatwerefinallyrejectedunder§101,alargerpropor-tionoftheapplicationshadalsoreceivedinitial§101rejections.
Patent applicants in bioinformatics, narrowly and broadly de-fined,becamepessimisticaboutfilingmorepatentapplicationsafterAlice.Theaveragenumberofpatentapplicationsfiledinbioinformat-ics, narrowly defined, decreased by 74.21% per month during the
261. See Taylor, supra note 256, at 2082–83 (showing that 63% of eligibilityknowledgeableinvestorsreportednegativeimpactswithinthesoftwareandInternetindustry and86%of eligibility knowledgeable investors reportednegative impactswithinthebiotechnologyindustry). 262. Seeid.at2083–85(suggestinganegativeimpactoftheSupremeCourt’sdeci-sionsoninnovativecompanies’value). 263. Seesupranote82andaccompanyingtext. 264. SeeAliceCorp.Pty.Ltd.V.CLSBankInt’l,134S.Ct.2347,2360(2014). 265. SeesupraPartI.A.1.c.
594 MINNESOTALAWREVIEW [105:527
nineteen months after the Alice decision (June 2014 to December2015)comparedtothesamelengthoftimebeforetheAlicedecision(January2013toMay2014).266Themediannumberofpatentappli-cationfilingspermonthwas144beforetheAlicedecision.Thisnum-berdecreased to thirty-oneafter theAlicedecision.267ThesharpestdecreaseoccurredinJune2014,whentheAlicedecisionwasdeliveredbytheSupremeCourt.ApplicationsfiledinJune2014were48.56%lower than the average patent applications in bioinformatics, nar-rowlydefined,filedinthenineteenmonthsbeforetheAlicedecisionandcontinuedtodecreaseovertime.InJanuary2015,thefirstmonthafterthePTOimplementedtheAlicedecision,thisnumberfurtherde-creasedby63.07%ascomparedtobeforetheAlicedecision.Theap-plicants in narrowly defined bioinformatics made cautious adjust-mentsbymodifyingthedisclosuresandclaimsaftertheAlicedecision,andapplicantsinbroadlydefinedbioinformaticsdidthesame.Thepa-tentapplicantsinbroadlydefinedbioinformaticsalsofiledfewerpa-tent applications after Alice. The number of applications filed permonthonaveragedecreasedby51.06%aftertheAlicedecision.Themedianforthenumberofpatentapplicationswas638beforetheAlicedecision,andthisnumberdecreasedto307afterAlice.
Fromtheexaminers’perspective,Alice causedexaminers tobemorelikelyinitiallyandfinallytorejectapplicationsfiledafterAliceunder§101,eventhoughapplicantsfiledincreasinglyfewerpatentapplicationsfornarrowlydefinedbioinformatics.Inotherwords,forthosedecreasedapplicationsself-selectedbytheapplicants,theAlicedecisionalsoaddedsomeexpensesfortheseapplicants.Ourdataalsoshowthatthedecreasednumberofapplicationsinnarrowlydefinedbioinformaticswereneverthelessmorelikelytobefinallyrejectedbyexaminersunder§101.Examinersgaveincreasinglymorefinalrejec-tionstopatentapplicationsinnarrowlydefinedbioinformaticsunder§101.Forpatentapplicationsthathadinitiallyreceiveda§101rejec-tion,theD-i-DmodeldesigninthisstudyshowsacausaleffectoftheAlice decision; specifically, applicants in narrowly defined bioinfor-maticswerelesslikelytoovercometheirinitial§101rejectionsandmorelikelytoreceiveafinalrejectionunder§101.
Moreover,applicationsinnarrowlydefinedbioinformaticsfiledafter the Alice decision had greater difficulty in overcoming their
266. Theaverageinitialactionpendencyintechnologycenter1600is12.1months,soourdataderivedfromReedTechmayreducethefilingnumberswhichareinthenineteenmonthsaftertheAlicedecisionforbothnarrowbioinformaticsandbroadbi-oinformatics.ThespecificstatisticsaredisclosedinAppendixTableA1infra. 267. RCEiscountedamongindependentfilings.
2020] IMPLICATIONSOFALICE 595
initiallyreceived§101rejectionscomparedtoapplicationsfiledbe-foretheAlicedecision.IntheD-i-DregressionresultsshowninTable5,thecoefficientinthemodelforapplicationsfiledaftertheAlicede-cisionislargerthanthecoefficientinthemodelforapplicationsfiledbeforetheAlicedecision.Accordingly,applicantsinnarrowlydefinedbioinformaticswerenotclearlyinstructedbytheSupremeCourtinitsAlicedecision,eventhoughtheyreactedtothelawandadjustedtheirpatentpreparationandfilingstrategies.Theadjustedfilingstrategiesor modified disclosures and claims failed to work, and applicantsmerelyspentmoremoneyonpatentapplicationsthatwouldnotbeapproved.WhatisworseisthatAlicemayhavenotonlyaddedmoreapplicationorprosecutioncostsinthebusinessofbioinformatics,butthecasemayhavealsorestrictedapplicants’accesstoinvestorsandcapitalthroughthemarket.
Bioscience,whichisbroaderthanbioinformatics,however,facesvariouslayersofuncertainties,suchastheuncertaintiesinresearch,infindinganapplicationoftheresearchtohumanhealth,andinpa-tentapplications.PatentsincentivizescientistsandfirmstoengageinbioscienceR&Ddespite theseuncertainties.268Even though innova-tioninbiosciencemayharmorbenefitmankind,theSupremeCourthasnotedthatitdoesnotmeantodeterordisincentivizeinnovationinbioscience,especiallygeneticresearch,byrequiringanarrowscopeofpatentablesubjectmatterinbioscience.269Theutilitybarexcludessomebioscienceresearchfrompatentabilityiftheapplicationoftheresearchisuncertain,regardlessoftheeffortsmadetoobtainthoseresearchfindings.270
Whentheutilityrequirementcannotbesatisfiedduetouncer-taintiesintheresearchresults,inventorsmayattempttobringmorespecificityorclaritybyengaginginfurtherR&D.However,whentheAlicedecisioninducedmore§101rejections,thepreviousutilityre-jectionsunder§101wereexpandedtoincluderejectionsforineligiblesubject matter, also under § 101, further compounding the uncer-taintyinprosecutionoutcomesandincreasingtheoverallcostofpa-tentprosecution.AsDavidTaylor’ssurveyregardinginvestorsshows,notreceivingpatentprotectiondirectlyresultsinlesserinvestmentinbiotechnologybyventurecapitalistsandprivateequityinvestors.271
268. SeeRebeccaS.Eisenberg,AnalyzeThis:ALawandEconomicsAgendaforthePatentSystem,53VAND.L.REV.2083,2090(2000). 269. Diamondv.Chakrabarty,447U.S.303,316–18(1980). 270. Brennerv.Manson,383U.S.519,530(1966). 271. SeeTaylor, supranote256,at9 (“[I]nvestors ... overwhelmingly indicatedthattheeliminationofpatentswouldeithersomewhatdecreaseorstronglydecrease
596 MINNESOTALAWREVIEW [105:527
ThereisacontinuingconcernthattheAlicedecisionobfuscatesthedistinctionbetweeneligibilityunder§101andnon-obviousnessunder§103byfocusingonwhatisgenerallyknownintheart.Thisconcernisalsoaddressedinthetextoftheproposedeligibilitylegis-lationintroducedintheHouse.272Nevertheless,wefindthattheasso-ciationbetween§101rejectionsand§§102,103,or112(b)rejectionsdecreasedafterAliceamongpatentapplicationsinnarrowlydefinedbioinformatics(e.g.,artunits1631and1639).Bycontrast,theassoci-ationbetween§101rejectionsand§112(a)rejectionsforpatentap-plications in narrowly defined bioinformatics increased afterAlice.Thatstrengthenedassociationmaysuggestthatovercomingtheprob-lemsofwrittendescriptionandenablementmayhelpwithovercom-ing§101eligibilityrejectionsinbioinformatics.
2. DiverseReactionsinBusinessMethodsandSoftwarePatent applicants filed fewer patent applications in business
methods afterAlice. In TC 3600 for general businessmethods, thenumberofpatentapplicationfilingspermonthonaveragedecreasedby38.16%inthetwelvemonthsaftertheAlicedecision(June2014–June2015)comparedtothesamelengthoftimebeforetheAlicedeci-sion(May2013–May2014).273Themedianforthepatentfilingnum-berspermonthwas9,018beforetheAlicedecision,anditdecreasedto5,445aftertheAlicedecision.Thedegreeofthedecreasewashigherforpatentapplicationsinthebusinessmethodsoffinanceande-com-merce.Infinance,theaveragenumberofpatentapplicationfilingspermonthdecreasedby57.63%inthethirteenmonthsaftertheAlicede-cision.Ine-commerce,theaveragenumberofpatentapplicationfil-ingspermonthdecreasedby79.11%aftertheAlicedecision.Withine-commerce,aftertheAlicedecision,theaveragenumberofpatentap-plicationfilingsincryptographypermonthdecreasedby67.41%,andthe averagenumber of patent application filings in health care permonthdecreasedby86.41%.
IncontrasttotheimmediateandsharpdecreaseinthenumberofpatentapplicationsinbioinformaticsaftertheAlicedecision,patent
theirfirm’sinvestmentsinthebiotechnology(77%).”). 272. SeeRestoringAmerica’sLeadershipinInnovationAct,H.R.6264,115thCong.§7(2018)(draftingas“[t]heeligibilityofaclaimedinventionundersubsections(a)and(b)shallbedeterminedwithoutregardastotherequirementsorconditionsofsections102,103,and112ofthistitle,ortheclaimedinvention’sinventiveconcept”). 273. Theaverageinitialactionpendencyintechnologycenter1600is18.2months,soourdataderived fromReedTechmaydeduce the filingnumbers in the thirteenmonthsaftertheAlicedecisionforbusinessmethodsandtheartunitswithinbusinessmethods.
2020] IMPLICATIONSOFALICE 597
applicationsinbusinessmethodsstarteddecreasinginJuly2014,onemonthaftertheAlicedecision.Theaveragenumberofpatentapplica-tions decreased 24.03% in July 2014, compared to the thirteenmonthsbeforetheAlicedecision.Thedecreaseinpatentapplicationsforbusinessmethodswasincremental,andasharpdecreaseoccurredwhenthePTOdecidedtoimplementtheAlicedecision.274InJanuary2015, the firstmonthafterAlicewas implementedby thePTO, thisnumber furtherdecreasedby48.33%compared tobefore theAlicedecision.Patentapplicationsinthebusinessmethodsofhealthcare,whichistheartunitthatdecreasedthemostinthesub-categoriesinbusinessmethodsaftertheAlicedecision,decreasedtotwenty-seven,comparedto237,themediannumberforpatentapplicationsinthethirteen-monthperiodbeforetheAlicedecision.
Overall,thisstudyfindsthatpatentapplicantsinbusinessmeth-odsweregraduallyadjustingtheirapplicationstrategies:applicantsfiled fewer applications after theAlice decision, especially those inhealthcarebusinessmethods. Inaddition toapplicants’ reaction tothelaw,theyalsofiledfarfewerpatentapplicationsaftertheimple-mentationofthelawbythePTO.ThehighdegreeofthedecreaseaftertheAlicedecisionanditsimplementationbythePTOmayalsoshowthattheapplicantsarepessimisticabouttheallowanceprospectsfortheirpatentapplications.However,thedecreaseinpatentallowancedoesnotnecessarilymeanthatAliceimpedesinnovationinbusinessmethods.Whileanarrowerscopeofpatenteligibilitymaynotincen-tivizeinnovationinparticulartechnologies,itdoesnotnecessarilyde-ter innovation in those technology areas. 275 Innovative companiespracticingbusinessmethodsinthoseareasmayusetradesecrets,ra-ther than patents, if they are barred from receiving patent protec-tion.276
Moreover,thepatentapplicationsinbusinessmethodsfiledaftertheAlicedecisionwerenotmorelikelytobeinitiallyorfinallyrejectedbypatentexaminersunder§101,assuggestedbythenegativeesti-matoroftheinteractiontermintheD-i-DregressionsinTable6.277TheabilitytoadjusttotheAlicedecisionismostclearlyseeninthebusiness methods of cryptography, wherein Alice did not increase
274. 2014 Interim Guidance on Patent Subject Matter Eligibility, 79 Fed. Reg.76,418(proposedDec.16,2014)(tobecodifiedin37C.F.R.pt.1). 275. Diamondv.Chakrabarty,447U.S.303,317(1980). 276. Id. 277. SeesupraTable6.Duetothelimitationofthetimeperiodforthedata,wedonothavethedataformanyfinaldecisionsonpatentapplicationsfiledafterAlice. InourdiscussioninthisSubsection,wedonotseparateinitialandfinaldecisions.
598 MINNESOTALAWREVIEW [105:527
initialandfinal§101rejectionsfortheapplicationsfiledafterAlicecomparedtoapplicationsfiledbeforeAlice.Bycontrast,thepatentap-plicationsfiledafterAliceinfinanceore-commerceweremorelikelytobeinitiallyorfinallyrejectedunder§101comparedtopatentap-plicationsfiledbeforetheAlicedecision.Thus,Aliceimposedcostsonbothexaminersandapplicants in the fieldsofbusinessmethods inhealthcare,finance,ande-commerce.
Examinersgavemorefinalrejectionstoapplicationsinbusinessmethodsunder§101aftertheAlicedecision.Inotherwords,aftertheAlicedecision,applicantsfaceddifficultiesinsuccessfullyovercoming§101rejections.Forapplicationsthatinitiallyreceiveda§101rejec-tion,Alicemade itmoredifficult for them to overcome their initial§101rejections.TheimplementationofthelawbythePTOincreasedtheuncertaintiesinpatenteligibilityandthedifficultiesinovercom-ingtheseuncertaintiestoahigherdegree.
Alicealsoincreasedtheprosecutioncostsforpatentapplicationsin businessmethods,which could be absorbedby applicantswhentheymodifiedtheirdisclosuresandclaimstorenderthemlesslikelytobefinallyrejectedunder§101(i.e.,receiveanallowanceorafinalrejectionunder§§102,103,or112).However, forthoseapplicantswhofailedtomodifysuccessfullytheirdisclosuresandclaimsintheirpatent applications and overcome these § 101 rejections, Alice in-creasedoverallpatentprosecutioncosts.Inthebusinessmethodsoffinanceande-commerce,applicantswerenotclearlyguidedbytheAl-icedecision,andtheydidnotsuccessfullyadjusttheirpatentingstrat-egies,despitefilingfewerpatentapplications.TheseapplicantsfacedhigherpatentprosecutionexpensesbecauseofAliceandthePTO’sim-plementationof it.The increase in theexpenses forpatentapplica-tionsinthebusinessmethodsoffinancewashigherthantheincreaseintheexpensesforpatentapplicationsinthebusinessmethodsofe-commerce.
The goal of the Supreme Court in Alice was to exclude thoseclaimsthatconstitutethe“buildingblocksofhumaningenuity,”whichcreaterisksofpreemption.278Therefore, increasedrejectionsunder§101 afterAlice might serve as evidence showing that the risk ofpreemptioncreatedbypatentshasalsobeenreducedbypatentexam-iners.Additionalevidenceconcerningthisriskofpreemption is theincreasedassociationbetweenthefrequencyofreceiving§101and§112(a)rejectionsinbothinitialandfinalofficeactionsfromthePTOafterAlice.
278. AliceCorp.Pty.Ltd.v.CLSBankInt’l,134S.Ct.2347,2355(2014).
2020] IMPLICATIONSOFALICE 599
Analternativeexplanationfortheincreased§101rejectionsinthe three sub-categories inbusinessmethods is that the law is notclearenoughtoinstructexaminersandpatentapplicantsandmerelycreatescostlyuncertainties.Thisstudyobservedthattheassociationbetween§101and§103rejectionsamongthepatentapplicationsinbusinessmethodswasheavilystrengthenedafterAlice.ThisresultistheclearestsupportforthewidespreadcriticismthattheteachingsinAlicethatfocusonwhatis“generallyknown”bothnecessarilyandin-correctlydrawthepriorart intotheeligibility inquiry.Therelationbetween§§101and103forbusinessmethodpatentapplicationsistheoppositeofwhatwehaveseenearlierinbioinformatics.
WecannotprovethatAlicecausedmore§101rejectionsingen-eral software andmost sub-categories of software technologies.279However,weobservethattheAlicedecisionresultedinfewer§101rejectionsinsomesoftwaretechnologies(e.g.,databasesandfileman-agement,cryptographyandsecurity,GUIanddocumentprocessing,andcomputerarchitecture).Inthesefourtechnologyareas,theasso-ciationbetween§101rejectionsand§112(a)rejectionswasweak-enedafterAlice.Incontrast,theassociationbetween§101and§102or§103rejectionswasstrengthenedafterAliceforsoftwareapplica-tionsinthesetechnologyareas.
C. THEFUTUREOFSHIFTINGTRANSACTIONCOSTSTOTHEPTOThisSectiondiscusseshowthe2019RevisedGuidancefromthe
PTOtriestomitigatetheincreasedcostsofpatentprosecutionfacedbypatentees.TheD-i-DempiricalresultsinPartIIshowtheeffectoftheAlicedecisionand its implementationby thePTOonexaminersandpatentapplicants.280Insometechnologyareas,suchasbioinfor-matics,businessmethods,andsoftwareoftelemetryandcodegener-ation,we find that theAlice decision inducedmore initial and final§101rejectionsissuedbypatentexaminerstoapplications,especiallyforapplicationsfiledbeforetheAlicedecision.Thedirectionoftheef-fectofthePTOimplementationisconsistentwiththeAlicedecision,butthePTO’simplementationhadastrongereffectthanAlice itself.After thePTOpublished itsspecific InterimGuidance to implementtheAlicedecision,applicantsreceivedmore§101rejectionsinthein-itialroundofpatentexamination,anditbecamemoredifficulttoover-cometheserejections.Therefore,thePTOimplementationofAlicefur-therincreasedthecostofpatentprosecutionforpatentees.
279. TheimplementationofAlicebythePTOcausedmore§101rejectionsforpa-tentapplicationsincomputernetworks.SeesupraPartIII.A.1. 280. SeesupraPartII.B.2.
600 MINNESOTALAWREVIEW [105:527
InJanuary2019,thePTOissuedRevisedPatentSubjectMatterEligibilityGuidance.281ThePTOaddedmoredetailed instruction inthisRevisedGuidanceinordertodecreasetheuncertaintyofpatent-ing and the transaction costs created byAlice and its implementa-tion.282BesidestheadditionalStep2AandStep2B,comparedtotheInterimGuidance,thereisonemorestepaddedafterthetwo-prongtestforcarefullyexploringtheeligibilityofpatentapplications.283
ThePTOdouble-checksbeforerejectingapatentapplicationun-der§101basedonAliceorMayo.284Ifapatentclaiminvolvesan“ab-stractidea,”anditdoesnothaveanadditionalelementorcombinationofadditionalelementsthatprovideaninventiveconcept,itisrejectedinStep2B.However,thisdoesnotmeanthatthePTOrejectsthatclaimunder§101basedonAliceorMayo.TheRevisedGuidancerequiresthatiftherejectedabstractideafitsintotheenumeratedcategoriesofabstractideas,examinersshouldbringsuchanapplicationtotheat-tentionoftheTechnologyCenterDirector.285
TheRevisedGuidanceenumeratesthreetypesofabstractideasinaccordancewithseveralprecedentsfromtheSupremeCourtortheFederalCircuit.286Thethreetypesofabstractideasaremathematicalconcepts, 287 certain methods of organizing human activity, 288 andmentalprocesses.289Anyrejectionsforrecitingan“abstractidea”thatisnotenumeratedintheRevisedGuidancemustbeapprovedbytheTechnology CenterDirector andmust provide justification forwhysuchclaimlimitation(s)aretreatedasrecitinganabstractidea.290
281. 2019RevisedPatentSubjectMatterEligibilityGuidance,84Fed.Reg.50(Jan.7,2019). 282. SeesupraPartI.B.3. 283. 2019RevisedPatentSubjectMatterEligibilityGuidance,84Fed.Reg.at57. 284. AliceCorp.Pty.Ltd.v.CLSBankInt’l,134S.Ct.2347,2355(2014);MayoCol-laborativeServs.v.PrometheusLab’ys,Inc.,566U.S.66(2012). 285. 2019RevisedPatentSubjectMatterEligibilityGuidance,84Fed.Reg.at50,52,57. 286. Id.at52. 287. Mathematical concepts include mathematical relationships, mathematicalformulasorequations,andmathematicalcalculations.Id. 288. Themethodsincludefundamentaleconomicprinciplesorpractices(includ-inghedging,insurance,andmitigatingrisk);commercialorlegalinteractions(includ-ingagreementsintheformofcontracts; legalobligations;advertising,marketingorsalesactivitiesorbehaviors;andbusinessrelations);managingpersonalbehavior,re-lationships,orinteractionsbetweenpeople(includingsocialactivities,teaching,andfollowingrulesorinstructions).Id. 289. Mentalprocessesincludeconceptsperformedinthehumanmind(includinganobservation,evaluation,judgment,oropinion).Id. 290. Id.at57.
2020] IMPLICATIONSOFALICE 601
Both the additional procedure and the additional indicationabout reciting “abstract ideas” in the justification add transactioncoststothePTO.FouryearsafterthePTOformallyimplementedtheAlicedecisionundertheInterimGuidance,thePTOputforthfurthereffortstoclarifytheboundarybetween“abstractideas”andnon-ab-stract, patent-eligible subjectmatter.291This additional analysis re-sultsinanincreaseinadministrativetransactioncostsatthePTO.292
Thisincreasecouldbearesultofshiftingtheincreasedtransac-tioncostsinthemarketthatarebornebypatentapplicantsandinves-torstothePTO.Forexample,ourempiricalresultsinPartIIshowthatboth theAlicedecisionand its implementationby thePTO increasepatentprosecutioncostsorexpensesonapplicantsinsometechnol-ogyareas,suchasbioinformatics,businessmethodsofe-commerce,businessmethodsoffinance,andsoftwareofcryptographyandsecu-rity. Even though applicants adjusted their application strategies,modifiedthedisclosuresandclaims intheirapplications,andspentmoremoneyonpatentingbecauseofthechangesinthelaw,therewasstillsignificantdifficultyinovercoming§101rejections.TheRevisedGuidancesuggeststhatthePTOdecidedtotakeontheburdentoclar-ifythelawthroughtherevisedStep2andtheaddedsecondreviewprocedurespertainingtotheelementsthatarenot listed intheRe-visedGuidance.293
TheefficiencywithwhichtheRevisedGuidancereducestheun-certaintiesregardingpatenteligibilitycouldbelimitedbythePTOit-self.Inotherwords,itishardtopredictwhethertransactioncostswillbesuccessfullyshiftedfromthemarkettothePTOorwhetheritendsupincreasingthecostsbornebyboththemarketandthePTO.First,theInterimGuidance,whichhadprovidedamoredetailedtestthantheAlicetestitself,increasedthetransactioncostsinthemarket,asshowninourempiricalresults.294PTOeconomistsAndrewTooleandNicholasPairoleroanalyzedpatentapplicationsinthetechnologycen-tersaffectedbyAlice.295Whiletheyshowedthatpatentapplications
291. Id. 292. 2014 Interim Guidance on Patent Subject Matter Eligibility, 79 Fed. Reg.76,418(proposedDec.16,2014)(tobecodifiedin37C.F.R.pt.1). 293. 2019RevisedPatentSubjectMatterEligibilityGuidance,84Fed.Reg.at52.ItdoesnotsuggestthattheRevisedGuidanceisbindingonthefederalcourts. 294. 2014 Interim Guidance on Patent Subject Matter Eligibility, 79 Fed. Reg.76,418. 295. ANDREWA.TOOLE&NICHOLASA.PAIROLERO,OFF.OFTHECHIEFECONOMIST,U.S.PAT.&TRADEMARKOFF.,ADJUSTINGTOALICE:USPTOPATENTEXAMINATIONOUTCOMESAF-TERALICECORP.V.CLSBANKINT’L1(2020),https://www.uspto.gov/sites/default/files/documents/OCE-DH_AdjustingtoAlice.pdf[https://perma.cc/F8JT-2NKK].
602 MINNESOTALAWREVIEW [105:527
filed before and examined after the implementation of theRevisedGuidancewerelesslikelytoreceiveafirstofficeactionwitha§101rejectioncomparedtothosefiledandexaminedbeforetheimplemen-tationoftheRevisedGuidance,theprobabilityofreceivingafirstof-ficeactionwitha§101rejectionaftertheimplementationoftheRe-visedGuidancedecreasedlessthanbeforetheAlicedecision.296TooleandPairoleroalsoshowedthatpatentexaminersservingtheTCsaf-fectedbyAlicewerelesslikelytoissueafirstofficeactionwith§101rejectionsaftertheimplementationoftheRevisedGuidance.297How-ever,onceagain, theprobabilityof thoseexaminers issuinga§101rejection decreased to a lower degree than before the Alice deci-sion.298Inaddition,thetwopairsofcomparisonsdonotconsiderthevariationinthetotalnumberofpatentapplicationsfiledbeforeandafterAlice.299Thus,theseresultsmayconfirmthePTO’seffortstode-creasetheuncertainties inpatenteligibility,300buttheycannotesti-mateboth the transactioncostsbornebyapplicantswhomayhaveadjustedtheirapplicationbehaviorsafterAliceandtheimpactonin-novationthroughapplicantsforegoingallpatentprotectionfortheirinventions. Second, the Revised Guidance may not affect how thecourtsdeterminepatenteligibilityorhowtheyapplyAlice301becausethejudicialsystemisalsoacriticalplayerincontinuouslycreatingun-certaintiesinpatenteligibility.302Itishard,however,topredicthowthe PTO’s justification addressing the uncertainties of patentabilitywillbeperceivedonreviewbythejudicialsystem.303
296. Seeid.at3,5. 297. Id. 298. Seeid.at4,6. 299. Id.at1. 300. Seegenerallyid. 301. See,e.g.,InreSmith,815F.3d816,819(Fed.Cir.2016);seealsoStevenSwan,PluggingtheRabbitHole:TheSupremeCourt’sDecisioninAlice,2016UTAHL.REV.891,898(arguingthatthePTOinternalmemoisnotbindinginfederalcourtand“cannotserveasaproperbasisforappealsorpetitionsofreview”). 302. SeegenerallyGugliuzza&Lemley,supranote36,at783.ButseeJasperL.Tran&J.SeanBenevento,AliceatFive,2019PATENTLY-OPAT.L.J.25,25(notingadecreaseinthe“AliceinvalidationrateattheFederalCircuitanddistrictcourts”inthepastfiveyears). 303. WhendeterminingthepatentabilityofnewtechnologyintheFederalCircuit,JudgeMoorereliedonthePTO’sevaluation,butJudgeBrysondidnotgivecredittothePTOinhisdissent.JudgeBrysonsaidthat“thePTOlackssubstantiverulemakingau-thorityastoissuessuchaspatentability.”Ass’nforMolecularPathologyv.MyriadGe-netics,Inc.,569U.S.576,587–89(2013).ButseeRaymondMillien,SixYearsAfterAlice:61.8%ofU.S.PatentsIssuedin2019Were‘Software-Related’—Up21.6%from2018,IP-WATCHDOG (Feb. 17, 2020), https://www.ipwatchdog.com/2020/02/17/six-years-alice-61-8-u-s-patents-issued-2019-software-related-21-6-2018[https://
2020] IMPLICATIONSOFALICE 603
ThePTABprovidesamechanismbywhichwecanexaminethepossible efficiencies gained at thePTO through the judicial system.TheFederalCircuitreviewsthePTO’stestsregardingpatenteligibilityasappliedinPGRsorCBMsatthePTABthatemploytheRevisedGuid-ance.304Therefore,notonlywilltheenumeratedspecifictypesofab-stractideasbepresentedtotheFederalCircuit,butothernewtypesofabstractideasoutsidethescopeofpatentprotectiondynamicallyaddedbytheTCdirectorswillalsobereviewedbytheFederalCircuit.
AftertheRevisedGuidancefor§101cameoutin2019,thePTOrevisedtheGuidancefor§112becauseaclaimdraftedbroadlyisnotanissueunder§101(i.e.,patentablesubjectmatterorutility),butitisan issueunder§112(i.e.,writtendescriptionorenablement).305Thiscouldbemoreimportantinsomeparticularsoftwaretechnolo-gies,suchasdatabasesandfilemanagement,cryptographyandsecu-rity, computer architecture, GUI and document, and computergraphicsprocessing.Thedataanalyzedinthisstudyshowthattheas-sociationbetween§101rejectionsand§112(a)rejections inthosetechnologyareasdecreasedafterAlice.AliceandtheRevisedGuidancefor§101maynotbesufficienttodealwiththepreemptionprobleminthosetechnologyareas.
Wealsofindthatwhenanapplicantinbioinformatics,businessmethods,orsoftwarereceiveda§101rejection,theywereverylikelytosimultaneouslyreceivea§112(b)rejection.Thismaysuggestthatifanapplicantcanovercomea§101rejection,italsoeffectivelyhelpstoovercome§112rejections.Ingeneral,thepositiveassociationbe-tween§101rejectionsand§112(a)or(b)rejectionsincreasedafterAliceinbioinformatics,businessmethods,andsoftwareofdigitalandoptical communication, computer networks, telecommunications,digitalcameras,recordingandcompression,telemetryandcodegen-eration,andsoftware.Therefore,inthoseareas,thepreemptionissuewasbetteraddressedbythePTOafterAlice,notwithstandingthein-creasedcostsimposedonapplicants.
perma.cc/4Q7W-KT57](showingthattheUSTPOissued21.6%moreofsoftware-re-latedpatentsin2019comparedto2018). 304. SeeJayP.Kesan&CarolM.Hayes,PatentEligibleSubjectMatterAfterAlice,inRESEARCHHANDBOOKONELECTRONICCOMMERCELAW 235, 253 (JohnA. Rothchild ed.,2016)(applyingtheexampleofVersatatoshowthattheFederalCircuitreviewspa-tentablesubjectmatterissuesraisedatthePTAB);VersataDev.Grp.,Inc.v.SAPAm.,Inc.,793F.3d1306(Fed.Cir.2015);seealsoGugliuzza&Lemley,supranote36,at794(findingthattheFederalCircuitmerelydeferstothePTABonAliceissues). 305. InterviewbyGrantlandDrutchaswithAndreiIancu,UnderSec’yofCom.forIntell.Prop.andDir.ofU.S.Pat.&TrademarkOff.,atChi.-KentColl.ofL.(Feb.19,2019).
604 MINNESOTALAWREVIEW [105:527
CONCLUSIONWestudiedthenatureandextentoftheuncertaintiescausedby
Alice’stwo-parttestatthePTO,focusingonthreetechnologyareas—software,bioinformaticsandbusinessmethods.OurcausalempiricalstudyoftheAlicedecisionrevealshowthatcaseimpactedbothpatentexaminersandpatentapplicants,increasingthetransactioncostsas-sociatedwithpatentprosecutionandcreatinguncertainoutcomesinpatent allowance. Patent applicants employed different strategies(e.g.,filingamendedpatentclaims,filingnewpatentapplications,orchoosingtoabandonorneverpursuepatentprotection)toattempttocomplywithAlice.
Patentapplicantsinallthreetechnologyareasdecreasedtheirre-liance on the patent system and filed fewer patent applications ascomparedtothetimeperiodbeforeAlice,withthegreatestreductionoccurringinbioinformatics.Patenteesinsometechnologyareas(e.g.,businessmethodsingeneral)weresuccessfulinovercoming§101re-jectionsafterAlice,butpatenteesinotherareas(e.g.,bioinformaticsandfinanceore-commercebusinessmethods)werenotassuccessfulinovercomingAlice-basedrejections.Applications inbioinformaticsreceivedmanymore§101rejectionsbasedonAlice,buttheseappli-cants also faced difficulties in overcoming those rejections. Mean-while,patentapplicationsbasedonbusinessmethodsalsoreceivedmore§101rejectionsbasedonAlice.ButpatentapplicantsinbusinessmethodslearnedfromAliceandreceivedfewer§101rejectionswhenthey filedpatentapplicationsafterAlice.Alicealso imposedvariousdegreesofpatentingcostsfordifferenttypesofsoftwareinnovation.
InadditiontothePTO,otherpatentinstitutions,suchastheFed-eralCircuit,havestruggledtooperationalizeAliceandtherebymiti-gate its uncertain application. Indeed, the Federal Circuit has ex-pressed futility at staying within the Alice framework. Since theSupremeCourthasnotshownadesiretore-visititsAlicedecision,wearenowleftwiththehopethatCongressionallegislationoneligibilitymightbringsomemuch-neededclaritytothisthresholdrequirementinpatentlaw.
2020] IMPLICATIONSOFALICE 605
APPENDICES
APPENDIXA
TableA1.AllRejectionsforMechanicaland§§102,103,and112RejectionsbyTechnologies(Frequency,Percentage,andTotalOf-
ficeActions(TOA))
Pre-Alice Post-AliceRejectionsforAp-plicationsFiledBeforeAlice
Post-AliceRejectionsforAp-plicationsFiledAfterAlice
Freq. Pct.(%) TOA Freq. Pct.(%) TOA Freq. Pct.
(%) TOA
Panel1-Mechanical’s§101RejectionsandAliceRejections
§101 0 0 32,056 2 0.01 32,864 5 0.06 8,902
Alice 132 0.41 32,056 170 0.52 32,864 64 0.72 8,902
Panel2-All§102Rejections
Mechanical 10,443 32.58 32,056 11,318 34.44 32,86
4 3,579 40.2 8,902
Bioinformatics 1,253 25.69 4,877 1,531 26.06 5,875 248 32.59 761
Bioinformatics(broad) 8,584 27.29 31,450 6,767 29.31 23,08
6 2,302 35.67 6,454
BusinessMethods 76,087 30.47 249,73
875,517 32.07 235,4
7831,982 35.62 89,792
BusinessMethodsofFi-nance
2,803 17.63 15,900 3,699 23.16 15,972 439 23.76 1,848
BusinessMethodsofE-Commerce
12,469 24.61 50,675 16,613 27.06 61,39
3 1,430 31.67 4,515
Software(gen-eral)
151,309 24.28 623,24
5143,588 25.12 571,5
2355,575 26.14 212,60
9AI 2,144 32.79 6,539 1,629 28.55 5,706 300 28.36 1,058GraphicalUserInterfaceandDocumentProcessing
8,178 27.39 29,858 10,978 28.57 38,42
6 1,754 38.63 4,541
DataBasesandFileMan-agement
13,214 29.01 45,552 10,891 25.69 42,39
7 2,399 29.4 8,159
CryptographyandSecurity 9,895 21.84 45,315 8,464 25.04 33,80
4 3,800 22.93 16,574
ComputerNet-works 10,355 23.01 45,001 12,16
9 24 50,713 2,680 25.2 10,637
DigitalCam-eras 9,534 28.43 33,539 8,332 28.06 29,68
9 4,826 26.84 17,981
ComputerGraphicsPro-cessing
3,573 14.7 24,303 4,072 21.13 19,269 1,201 21.47 5,593
Panel3-All§103Rejections
Mechanical 14,991 46.77 32,056 17,115 52.08 32,86
4 4,469 50.2 8,902
Bioinformatics 2,832 58.07 4,877 3,072 52.29 5,875 406 53.35 761
Bioinformatics(broad) 13,038 41.46 31,450 11,44
7 49.58 23,086 3,208 49.71 6,454
606 MINNESOTALAWREVIEW [105:527
BusinessMethods
136,286 54.57 249,73
8133,123 56.53 235,4
7842,193 46.99 89,792
BusinessMethodsofFi-nance
9,176 57.71 15,900 9,717 60.84 15,972 1,095 59.25 1,848
BusinessMethodsofE-Commerce
35,646 70.34 50,675 45,715 74.46 61,39
3 3,096 68.57 4,515
Software(gen-eral)
342,693 54.99 623,24
5329,849 57.71 571,5
23109,377 51.45 212,60
9
AI 2,831 43.29 6,539 2,808 49.21 5,706 410 38.75 1,058
GraphicalUserInterfaceandDocumentProcessing
21,583 72.29 29,858 28,119 73.18 38,42
6 3,199 70.45 4,541
DataBasesandFileMan-agement
26,551 58.29 45,552 26,156 61.69 42,39
7 4,334 53.12 8,159
CryptographyandSecurity 25,581 56.45 45,315 18,74
8 55.46 33,804 9,359 56.47 16,574
ComputerNet-works 25,350 56.33 45,001 30,91
0 60.95 50,713 5,621 52.84 10,637
DigitalCam-eras 15,879 47.34 33,539 13,41
6 45.19 29,689 7,056 39.24 17,981
ComputerGraphicsPro-cessing
9,869 40.61 24,303 12,787 66.36 19,26
9 3,917 70.03 5,593
Panel4-All§112Rejections
Mechanical 24,395 76.1 32,056 10,463 31.84 32,86
4 3,049 34.25 8,902
Bioinformatics 2,165 44.39 4,877 2,677 45.57 5,875 348 45.73 761
Bioinformatics(broad) 14,045 44.66 31,450 10,81
8 46.86 23,086 3,343 51.8 6,454
BusinessMethods 69,784 27.94 249,73
875,612 32.11 235,4
7828,594 31.84 89,792
BusinessMethodsofFi-nance
4,594 28.89 15,900 5,328 33.36 15,972 622 33.66 1,848
BusinessMethodsofE-Commerce
14,343 28.3 50,675 22,780 37.11 61,39
3 1,569 34.75 4,515
Software(gen-eral) 85,503 13.72 623,24
5104,926 18.36 571,5
2338,043 17.89 212,60
9AI 1,049 16.04 6,539 1,080 18.93 5,706 181 17.11 1,058GraphicalUserInterfaceandDocumentProcessing
4,233 14.18 29,858 7,613 19.81 38,426 884 19.47 4,541
DataBasesandFileMan-agement
5,204 11.42 45,552 6,432 15.17 42,397 1,167 14.3 8,159
CryptographyandSecurity 7,282 16.07 45,315 7,129 21.09 33,80
4 3,411 20.58 16,574
ComputerNet-works 6,945 15.43 45,001 10,08
3 19.88 50,713 2,029 19.07 10,637
DigitalCam-eras 4,666 13.91 33,539 6,101 20.55 29,68
9 3,258 18.12 17,981
ComputerGraphicsPro-cessing
2,261 9.3 24,303 4,349 22.57 19,269 1,119 20.01 5,593
2020] IMPLICATIONSOFALICE 607
FigureA1.Monthly§101RejectionsasaFractionofAllOfficeActionsBetween2012and2016
0% 5%
10%
15%
20%
25%
30%
35%20122013
20142015
20162017
Time
(monthly)
Manufacturing
Computer A
rchitectureD
igital & O
ptical Com
munication
Computer N
etworks
Telecomm
unicationsD
igital Cam
erasRecording &
Com
pressionCom
puter Graphic Processing
Telemetry &
Code G
enerationG
raphical User Interface
Data Bases &
File Managem
entCryptography &
Security
Decision
Date
Implem
entationD
ate
608 MINNESOTALAWREVIEW [105:527
APPENDIXB
TableB1.LogisticRegressionstoEstimateRejectionsBasedonAlice
Panel1.
Varia-bles
Bioinfor-matics
BusinessMethods B.M.ofFinance
B.M.ofE-Com-merce
Software(general)
§101 6.000*** 5.292*** 4.591*** 4.341*** 5.143***
(0.581) (0.0842) (0.224) (0.0896) (0.0542)
§102 0.148*-
0.148*** -0.0843**-
0.145*** -0.0217
(0.0822) (0.0178) (0.0412) (0.0225) (0.0245)
§103 -0.457***
0.0386** 0.142***
0.0566**
-0.0669**
(0.0680) (0.0182) (0.0356) (0.0243) (0.0277)
Obj. 6,636 205,006 17,820 54,523 711,048
R-square 0.284 0.476 0.163 0.192 0.473
Panel2.
DataBa-ses&FileManage-ment
Cryptog-raphy&Security
Telemetry&CodeGeneration
DigitalCameras
ComputerNetworks
Digital&Optical
Communi-cation
§101 7.181*** 5.363*** 5.341*** 3.440*** 5.218*** 7.550***
(0.454) (0.173) (0.263) (0.131) (0.129) (0.999)
§102 0.0705-
0.227*** 0.0646-
0.312*** -0.0701 -0.556*
(0.0732) (0.0610) (0.142) (0.110) (0.0534) (0.322)
§103 0.338*** 0.377*** 0.316** 0.523***-
0.607*** -0.265
(0.0908) (0.0821) (0.151) (0.120) (0.0585) (0.256)Obj. 47,999 49,478 55,357 47,025 60,697 20,457R-square 0.473 0.438 0.462 0.382 0.429 0.500Note:Month,artunit,and§112rejectionsarealsocontrolledasfixed.***p<0.01,**p<0.05,*p<0.1.
APPENDIXCPatent applications in manufacturing are the control group,
whichiscomparedtothetreatedgroups.Thespecifictechnologiesofbusinessmethods,bioinformatics,andsoftwareareconsideredindi-vidualtreatedgroups.Thus,eachtechnologytypeisindividuallyap-pliedwiththesameD-i-Ddesigns,whichareestimatedasfollows:
2020] IMPLICATIONSOFALICE 609
logit(E[𝑅𝑒𝑗101!"#"$|𝑋!"#"$]) = ln 4𝑝!"#"$
1 − 𝑝!"#"$7 =
∝ +𝛽$𝐴𝑙𝑖𝑐𝑒"$ + 𝛽%𝑇𝑒𝑐ℎ# + 𝛽&(𝐴𝑙𝑖𝑐𝑒"$ ∗ 𝑇𝑒𝑐ℎ#)+ 𝜆𝐶𝑜𝑛𝑡𝑟𝑜𝑙𝑠!" + 𝛾" + 𝜀(1)𝑝!"#"$ = E[𝑅𝑒𝑗101!"#"$|𝑋!"#"$](2)
where𝑖 ∈ 𝐼 = {1,… , 𝑛} ,𝑡1 ∈ 𝑇$ = {1, 2} , c∈ 𝐶 = {1,2} , 0<𝑝<1,
and𝑡 ∈ 𝑇 = {201201,… ,201612} .𝐼 represents office actions. n do-natesthetotalnumberofofficeactionsgiventoindividualtechnologyareas.𝑡$denotestheintervention(i.e.,AlicedecisionorthePTOim-plementation).𝜀 denotes an idiosyncratic error term uncorrelatedwithotherindependentvariablesorcontrols.
𝑅𝑒𝑗101indicateswhether examiners gave a § 101 rejection. Itequals0whentheofficeactionwasanallowanceandequals1whenthe office action was a rejection.𝑝!"#"$ denotes the probability of𝑅𝑒𝑗101=1.TheD-i-DmodelsestimatetheaveragedegreeofR&Din-tensity.𝑇𝑒𝑐ℎ# and𝐴𝑙𝑖𝑐𝑒"$ absorb category- and event-fixed effects.Thecoefficientontheinteraction,𝛽&,surrogatesfortheD-i-Deffect.𝛾"denotesthemonth-fixedvariable.Thecontrolvariables forotherstatutoryrejections(e.g.,§§102,103,and112rejections), industrycategory(e.g.,technologycentersorartunits)arealsoincluded.
-2.00
-1.50
-1.00
-0.50
0.00
0.50
1.00
1.50
softw
are (i
n gen
eral) AI
graphic
al us
er inter
face a
nd do
cumen
t pro
cessi
ng
data base
s and
file
manag
emen
t
cryptogra
phy an
d sec
urity
compute
r arch
itectu
re
digital a
nd opti
cal c
ommunica
tion
compute
r netw
orks
telec
ommunic
ation
s
digital c
amera
s
record
ing and
compres
sion
compute
r grap
hic proc
essin
g
telem
etry an
d code
genera
tion
telem
etry an
d code
genera
tion-26
88
telem
etry an
d code
genera
tion-26
86
After Alice for Applications Filed Before Alice After Alice for Applications Filed After Alice
610 MINNESOTALAWREVIEW [105:527
FigureC1.CoefficientsoftheInteractionBetweenAliceDecisionandTechnology toEstimateAll§101RejectionswithErrorBars in theLogitD-i-DRegressions
TableC1.CoefficientfortheInteractionTerminD-i-DLogitRegressionsonAll§101Rejections
Industry ApplicationsfiledBeforeAlice
ApplicationsfiledAfterAlice
Decision Implemen-tation Decision Implementa-
tion
Bioinformat-ics(broad)
Coeff. 1.096*** 1.185*** 0.298* 0.339**S.E. (0.119) (0.124) (0.158) (0.160)N. 119,456 113,626 78,855 78,704
BusinessMethodsofFinance
Coeff. 3.956*** 4.098*** 3.364*** 3.356***S.E. (0.127) (0.132) (0.189) (0.190)N. 96,792 90,486 58,705 58,562
BusinessMethodsofE-Commerce
Coeff. 3.032*** 3.068*** 2.448*** 2.478***S.E. (0.119) (0.124) (0.163) (0.165)N. 176,988 167,351 96,146 95,900
E-CommerceinHealthCare
Coeff. 3.482*** 3.587*** 3.402*** 3.382***S.E. (0.132) (0.136) (0.264) (0.264)N. 80,764 76,430 48,964 48,868
E-commerceinCryptog-raphy
Coeff. 2.899*** 2.897*** 2.934*** 2.911***S.E. (0.152) (0.155) (0.311) (0.311)N. 69,489 65,600 43,123 43,046
Software(general)
Coeff. -0.210* -0.161 -0.145 -0.169S.E. (0.117) (0.122) (0.154) (0.156)N. 1,259,686 1,169,402 876,807 874,155
AI
Coeff. -0.248* -0.195 -0.474** -0.429**S.E. (0.131) (0.137) (0.192) (0.195)N. 77,165 72,770 48,536 48,458
GraphicalUserInterfaceandDocu-mentPro-cessing
Coeff.-0.492*** -0.518***
-0.426*** -0.387**
S.E. (0.119) (0.124) (0.158) (0.161)N. 133,204 126,542 75,352 75,218
2020] IMPLICATIONSOFALICE 611
DataBasesandFileMan-agement
Coeff. -0.169 -0.140 0.0669 0.108S.E. (0.118) (0.123) (0.157) (0.160)N. 152,869 143,014 94,669 94,510
CryptographyandSecurity
Coeff. 0.00513 0.0478 0.217 0.256S.E. (0.119) (0.124) (0.156) (0.158)N. 144,039 133,192 102,847 102,664
ComputerAr-chitecture
Coeff. -0.514*** -0.535***-0.425*** -0.397**
S.E. (0.121) (0.127) (0.159) (0.162)N. 143,504 134,346 98,047 97,846
DigitalandOpticalCom-munication
Coeff. -0.510*** -0.536*** -0.412** -0.381**S.E. (0.132) (0.142) (0.164) (0.167)N. 99,760 91,887 74,117 73,909
ComputerNetworks
Coeff. 0.175 0.243* 0.456*** 0.498***S.E. (0.119) (0.124) (0.158) (0.160)N. 160,634 151,302 96,596 96,431
Telecommu-nications
Coeff. -0.105 -0.141 -0.0969 -0.0677S.E. (0.121) (0.127) (0.159) (0.162)N. 151,713 141,161 106,893 106,595
DigitalCam-eras
Coeff. -0.490*** -0.514***-0.444*** -0.411**
S.E. (0.121) (0.128) (0.159) (0.161)N. 128,148 118,533 92,473 92,117
RecordingandCompres-sion
Coeff. -0.572*** -0.553***-0.547*** -0.510***
S.E. (0.122) (0.127) (0.162) (0.165)N. 116,345 110,758 69,840 69,685
ComputerGraphicsPro-cessing
Coeff. -0.205* -0.212* 0.109 0.143S.E. (0.123) (0.129) (0.160) (0.163)N. 108,492 102,587 70,853 70,726
TelemetryandCodeGeneration
Coeff. 0.0350 0.0841 0.110 0.152S.E. (0.132) (0.138) (0.169) (0.172)N. 111,465 103,237 76,811 76,452
TelemetryandCode
Coeff. 0.537*** 0.626*** 0.257 0.285S.E. (0.197) (0.208) (0.232) (0.235)
612 MINNESOTALAWREVIEW [105:527
Generation-2688
N.72,039 67,241 47,342 47,178
TelemetryandCodeGeneration-2686
Coeff. 0.740*** 0.986*** 0.854*** 0.934***S.E. (0.224) (0.227) (0.263) (0.262)N. 69,456 65,161 45,386 45,322
Note:JamesStock’sHeteroskedasticity-standarderrorsareinparentheses.ThecoefficientontheinteractiontermsurrogatestheD-i-Deffect.Whethertheofficeactionalsoincludesa§102,§103,or§112rejectionisindependentlycontrolledasfixedinthemodel.Time(month)isafixedcontrolinthemodel.Technologycenteriscontrolledasfixedinsoftware(general),graphicaluserinterfaceanddocumentprocessing,databasesandfilemanage-ment,andcryptographyandsecurity.Othermodelscontrolartunitsasfixed.***p<0.01,**p<0.05,*p<0.1.
TableC2.D-i-DLogitRegressionsonFinal§101Rejections
Industry ApplicationsfiledBeforeAlice
ApplicationsfiledAfterAlice
Decision Implemen-tation Decision Implementa-
tionBioinfor-matics(broad)
Coeff. 2.581*** 3.013*** 2.593** 2.593**
S.E. (0.612) (0.643) (1.031) (1.031) N. 2,383 2,301 705 705BusinessMethodsofFinance
Coeff. 4.014*** 4.687*** 4.084*** 4.084***
S.E. (0.636) (0.633) (0.939) (0.939) N. 7,683 7,331 2,175 2,175BusinessMethodsofE-Com-merce
Coeff. 3.025*** 3.651*** 2.667*** 2.603***
S.E. (0.588) (0.545) (0.721) (0.653)
N. 26,971 26,250 6,918 6,937E-Com-merceinHealthCare
Coeff. 3.482*** 3.587*** 3.402*** 3.382***
S.E. (0.132) (0.136) (0.264) (0.264) N. 80,764 76,430 48,964 48,868E-com-merceinCryptog-raphy
Coeff. 3.760*** 3.597*** 3.006* 3.006*
S.E. (0.887) (0.898) (1.659) (1.659)
N. 1,252 1,173 268 268Software(general) Coeff. 0.568 0.843 0.312 0.311
S.E. (0.519) (0.541) (0.660) (0.660) N. 119,408 111,349 58,131 58,110
2020] IMPLICATIONSOFALICE 613
AI Coeff. 0.706 0.974 0.412 0.412 S.E. (0.597) (0.630) (0.866) (0.866) N. 1,553 1,426 695 695
GraphicalUserInter-faceandDocumentProcessing
Coeff. 0.0510 0.223 0.0603 0.0605
S.E. (0.515) (0.540) (0.861) (0.861)
N. 8,782 8,374 3,084 3,084DataBasesandFileManage-ment
Coeff. 0.199 0.457 -0.0986 -0.0986
S.E. (0.517) (0.541) (0.671) (0.671)
N. 13,164 12,231 5,297 5,298Cryptog-raphyandSecurity
Coeff. 0.998* 1.325** 0.814 0.814
S.E. (0.550) (0.572) (0.667) (0.667) N. 12,388 11,384 6,712 6,712ComputerArchitec-ture
Coeff. 0.00697 0.352 0.200 0.200
S.E. (0.562) (0.604) (0.773) (0.773) N. 6,487 5,939 3,329 3,329DigitalandOpticalCommuni-cation
Coeff. 0.780 1.184* 0.784 0.784
S.E. (0.665) (0.702) (0.841) (0.841)
N. 2,098 1,803 1,544 1,544ComputerNetworks Coeff. 0.560 0.865 0.634 0.634
S.E. (0.556) (0.613) (0.760) (0.760) N. 12,994 12,232 4,615 4,615Telecom-munica-tions
Coeff. -0.0546 0.283 -0.410 -0.410
S.E. (0.596) (0.655) (0.850) (0.850) N. 5,786 5,303 2,912 2,912DigitalCameras Coeff. 0.194 0.550 0.0836 0.0843
S.E. (0.616) (0.672) (0.853) (0.854) N. 6,841 6,293 4,246 4,242
RecordingandCom-pression
Coeff. 0.226 0.545 0.574 0.574
S.E. (0.570) (0.619) (0.829) (0.829) N. 4,847 4,652 1,967 1,967
614 MINNESOTALAWREVIEW [105:527
ComputerGraphicsProcessing
Coeff. 0.239 0.627 0.162 0.162
S.E. (0.625) (0.670) (0.840) (0.840) N. 5,090 4,713 2,094 2,094
TelemetryandCodeGeneration
Coeff. 0.942 1.374** 1.798* 1.798*
S.E. (0.584) (0.645) (1.064) (1.064) N. 1,604 1,382 705 705Note:JamesStock’sHeteroskedasticity-standarderrorsareinparentheses.TheCoeff.ontheinteractiontermsurrogatestheD-i-Deffect.Whethertheofficeactionalsoincludesa§102,§103,or§112rejectionisindependentlycontrolledasfixedinthemodel.Time(month)isafixedcontrolinthemodel.Technologycenteriscontrolledasfixedinbioinformatics(broad),software(general),graphicaluserinterfaceanddocumentprocessing,databasesandfilemanagement,cryptographyandsecurity,andAI.Othermodelscontrolartunitsasfixed.***p<0.01,**p<0.05,*p<0.1.***p<0.01,**p<0.05,*p<0.1
2020] IMPLICATIONSOFALICE 615
APPENDIXDItisnotenoughtoconstituteastaticD-i-Deffectasanobsolete
effectofthetreatment,whichisAliceinthisstudy.Inventors,patentexaminers,orpatentattorneyswhohelpwithdraftingpatentsandpa-tentprosecutionwerereasonablychangingtheirbehaviorsbeforethedecisionwasdeliveredbytheSupremeCourt.“Anticipationisarea-sonablediagnosisifindividualsareforward-looking[][and]haveac-cesstoinformationonfuturetreatment....”306Therefore,itiscriticaltochecknotonlythepointoftreatmentbutalsothetimebeforethetreatmentwasadopted,whichitleads.Besidestheimportanceoftheleads,lagsofthetreatmentarealsosuitableinstrumentstocontrolforpeople’sunobservableforecastofthetreatmentortheanticipation.307Accordingly,equation1shouldbereformedasfollowsforanticipationeffects:
𝑦"$ = 𝜆'𝑑"$ +∑ 𝜆(𝐸"$[𝑑"$)(]*)"$
(+$ +∑ 𝜆(𝐸"$[𝑑"$,(]"$(+$ + 𝑒"$(3)
𝑑"$ = logit(𝐸[𝑅𝑒𝑗101!"#"$|𝑋!"#"$])(4)where𝑡1 ∈ 𝑇$ = {1, 2}, and𝑡 ∈ 𝑇 = {201201,… ,201612}.𝑡$ de-
notestheintervention(i.e.,Alicedecisionortheimplementation).𝑑"$denotesthestaticD-i-Dequation.𝑑"$,( areasequenceoffutureval-ues.𝑑"$,( are a sequenceof exantevalues.𝐸"$ denotesexpectationtakenwithrespecttoatreatmentattheAlicedecision.𝑒"$isanidio-syncraticerrortermuncorrelatedwithotherindependentvariables.
TheregressionresultsinTableD1showthatpatentapplicationsforbusinessmethodsandnarrowlydefinedbioinformaticsweremorelikelytoreceivea§101rejectionatastatisticallysignificantlevel,fourmonthspriortotheSupremeCourtdecisioninAlice.ThatwasFebru-ary2016,abouttwomonthsaftertheSupremeCourtgrantedthepe-titionforawritofcertiorarifromtheUnitedStatesCourtofAppealsfortheFederalCircuitonDecember6,2016.Therefore,thestatisti-callysignificanteffectpriortoAlicemaybeexplainedbytheanticipa-tioneffect—theUSPTOexaminersdynamicallyadjustedtheirexami-nationstrategiesduetoSupremeCourtdecisions.
306. AnupMalani&JulianReif,InterpretingPre-TrendsasAnticipation:ImpactonEstimatedTreatmentEffectsfromTortReform,124J.PUB.ECON.1,1–2(2015). 307. AnupMalani&JulianReif,AccountingforAnticipationEffects:AnApplicationtoMedicalMalpracticeTortReform5(JohnM.OlinL.&Econ.WorkingPaperNo.578,2011),https://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?article=1027&context=law_and_economics [https://perma.cc/7CLY-62MN]; see also Gregory C.Chow,RationalVersusAdaptiveExpectationsinPresentValueModels,71REV.ECON.&STAT.376(1989)(examiningrationalexpectationsandadaptiveexpectations).
616 MINNESOTALAWREVIEW [105:527
TableD1.LogisticRegressionstoEstimate§101RejectionsVARIABLES BusinessMethods Bioinformatics
(Note:Omitted:>5monthspriortoAlicedecision&>2monthsafterAlicedecision)
5-MonthPriortoAliceDecision 1.409 1.346
(0.916) (0.917)
4-MonthPriortoAliceDecision 2.497*** 2.429***
(0.693) (0.690)
3-MonthPriortoAliceDecision 2.513*** 2.466***
(0.683) (0.680)
2-MonthPriortoAliceDecision 2.018*** 1.985***
(0.736) (0.736)
1-MonthPriortoAliceDecision 1.685** 1.659**
(0.768) (0.766)
MonthofAliceDecision 2.549*** 2.486***
(0.650) (0.650)
1-MonthPostAliceDecision 0.613 0.582
(0.915) (0.917)
2-MonthPostAliceDecision 1.210 1.112
(0.765) (0.766)
5-MonthPriortoAliceDecision×Technology
-1.034 -0.915
(0.919) (0.984)
4-MonthPriortoAliceDecision×Technology
-2.275*** -1.591**
(0.696) (0.795)
3-MonthPriortoAliceDecision×Technology
-2.458*** -1.646**
(0.687) (0.806)
2-MonthPriortoAliceDecision×Technology
-1.866** -1.365
(0.739) (0.844)
1-MonthPriortoAliceDecision×Technology
-1.581** -1.802**
(0.771) (0.851)
MonthofAliceDecision×Technology
-2.440*** -2.106***
(0.653) (0.728)
0.255 1.021
2020] IMPLICATIONSOFALICE 617
1-MonthPostAliceDecision×Technology (0.917) (0.978)
2-MonthPostAliceDecision×Technology
-0.215 0.459
(0.767) (0.846)
Constant -6.881*** 8.317
(0.577) -
Observations 513,954 71,355
PseudoR-squared 0.1761 0.5665Note:Whethertheofficeactionalsoincludesa§102,§103,or§112rejectionisinde-pendentlycontrolledasfixedinthemodel.Time(month)isafixedcontrolinthemodel.Technologycenteriscontrolledasfixed.JamesStock’sHeteroskedasticity-standarderrorsareshowninparentheses,***p<0.01,**p<0.05,*p<0.1.,***p<0.01,**p<0.05,*p<0.1.