Eligible Subject Matter at the Patent Office: An Empirical

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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

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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

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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.”).


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


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).


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.”).


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.


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).


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.


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).


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.


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).


§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)).


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/


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).


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.


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.


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.


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


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).


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.


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


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).


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).


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.


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).


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.


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.


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.


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).


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


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.


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])).


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

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Post-Alice Sec.101 rejections as a fraction of all office actions for patent applications filed after Alice

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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


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

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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.


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.


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).


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.


Figure4.TheVariation/TrendforMonthly§101RejectionsasaFrac-tionofAllOfficeActions

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Manufacturing

Software (in general)

Business M

ethodsB

io-Informatics (narrow

)

Decision

Date

Implem

entationD

ate


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).


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.


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.


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).


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).


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).


§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


bioinformaticsfiledbeforeAliceunder§101increased83%aftertheAlicedecision. It increasedslightlyto84.3%aftertheAlicedecisionwasimplementedbythePTO.Inotherwords,theAlicedecisionmadepatentapplicationsinnarrowlydefinedbioinformaticsfiledbeforeAl-icebutexaminedafterAliceaboutfourtimesmorelikelytoreceivea§101rejectionthannottoreceivea§101rejection.Thislikelihooddecreasedtotwotimeswhenweemployedthedataofartunit1630forbroadlydefinedbioinformatics.


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


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.


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


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.


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


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


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


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


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.


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).


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.


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

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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).


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.


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.


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.


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).


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.


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.


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


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.


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.


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).


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.


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.


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].


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://


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).


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.


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


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


BusinessMethods

136,286 54.57 249,73

8133,123 56.53 235,4

7842,193 46.99 89,792


9,176 57.71 15,900 9,717 60.84 15,972 1,095 59.25 1,848


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


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


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


9,869 40.61 24,303 12,787 66.36 19,26

9 3,917 70.03 5,593


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


4,594 28.89 15,900 5,328 33.36 15,972 622 33.66 1,848


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


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


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


2,261 9.3 24,303 4,349 22.57 19,269 1,119 20.01 5,593


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


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:


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


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


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



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


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)


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


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


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


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).


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)


(0.683) (0.680)


(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)


-2.275*** -1.591**

(0.696) (0.795)


-2.458*** -1.646**

(0.687) (0.806)


-1.866** -1.365

(0.739) (0.844)


-1.581** -1.802**

(0.771) (0.851)

MonthofAliceDecision×Technology

-2.440*** -2.106***

(0.653) (0.728)

0.255 1.021


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.

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Eligible Subject Matter at the Patent Office: An Empirical