Software Patents in the United States: Essential Considerations and Important Trends

• Publication year: 2023

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Edward J. Russavage ^*

In this article, the author explains that despite the U.S. Supreme Court's Alice decision and its lingering effects, the current state of software patents in the United States is thriving, and those who ignore opportunities relating to software patents may be left behind, as trends in the direction of the law are changing.

A common misperception in the software industry is whether aspects of software are patentable in the United States. Although it has been eight years since the U.S. Supreme Court's decision in Alice Corp. Pty. Ltd. v. CLS Bank Int'l, ¹ it is common to encounter people and even patent professionals who incorrectly assume that software cannot be protected. The present state of software patents in the United States is that they can be protected, and there are steps being taken and trends that will ensure valuable ideas relating to software may be protected in the future.

Background

Many practitioners who work in the software area are familiar with the 2014 Alice decision, which excludes any invention characterized as an abstract idea. Historically, Alice has resulted in many software patents being scrutinized, abandoned, and invalidated at both the United States Patent and Trademark Office ("USPTO") and in the courts. The Alice decision created a new test to determine whether an abstract idea in relation to software could be protected.

In short, the test determines (1) whether the patent claims are directed to an abstract idea and, if they are, (2) whether the claims recite significantly more than the abstract idea.

The Alice court did not define what an abstract idea was or what was significantly more, so many lower courts and the USPTO were left to determine the metes and bounds of this test. In response

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to Alice, the USPTO issued guidance for examining these types of ideas (referred to as the Mayo/Alice test). ² However, even with this guidance and new test, the Alice case had the effect of lowering allowance rates for certain types of subject matter (mostly software) and for frustrating applicants and practitioners in obtaining and defending these inventions.

Post-Alice

After Alice was decided, many patent applications were delayed or abandoned as the USPTO struggled to implement the test over the next several years. For example, in a report from the Office of the Chief Economist in April 2020, it was determined that the likelihood of receiving a first-office action with the rejection for patent-ineligible subject matter increased by 31% within 18 months following the U.S. Supreme Court decision in Alice in 33 "Alice-affected" technology areas. ³ For these technologies, uncertainty and patent examination measured as a variability in patent subject matter eligibility determinations across examiners in the first action stage of examination increased by 26% in 18 months following the Alice decision.

As indicated in the report, it was determined that change in Section 101 rejections was statistically significant and large in magnitude. This increase reflects at least two results of the Alice decision. First, expanding the application of the Alice standard to other technology areas likely led to more Section 101 rejections.

Second, and more importantly, professionally trained judges, lawyers, and examiners can apply reasonable but different interpretations of the Alice standard, and broader views of patent-ineligible subject matter led to an increase in Section 101 rejections.

One conclusion of the report includes that the increase in uncertainty reflects the interpretive latitude in the language of the Alice standard. The practical effect of the Alice decision was chilling: many technologies, predominately software and business methods, were affected, which resulted in applications becoming delayed, abandoned, and invalidated.

Since the Alice decision, several decisions by federal circuit courts of appeals have been decided that assisted practitioners arguing that particular software is patentable. For instance, decisions such as DDR Holdings, ⁴ Enfish, ⁵ TLI, ⁶ McRO, ⁷ and Bascom ⁸

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provided a road map for particular inventions to be protected. Many of these cases turned on the issue of whether there was a technical innovation, and how this technical innovation was described in the patent application. In many cases a successful prosecution strategy...